Beating the Tax Man - East Coast

[Mule]

J Ells is on to something, form an llc in the name of the current owner, the current owner transfers the boat into the corporations name he owns, he sells the corporation to the one that wants to own the boat for the agreed purchase price of the boat. There is no tax for funding a corporation and there is no tax for the sale of a corporation from one individual to another. I just got off the phone with my tax guy.

There is another advantage, if something terrible happens, after the liability insurance is used up the injured party can only go after the assets of the corporation and not the assets of the owner of the corporation.

Makes ya want to say, hummmmm.

[Jonathan Eells]

Wow, so the boat broker maybe wasn't nuts. Nice work, Mule.

[Hud3]

One potential problem with the LLC approach is that when the subsequent owner wants to sell the LLC/boat, it may turn out more difficult than simply selling a boat. Buyers will wonder if the LLC has liabilities that might not be immediately apparent. I, for one, wouldn't consider buying a LLC in order to acquire a boat unless I personally knew the owner and trusted him completely.

[Endojoe]

Originally Posted by Hud3

One potential problem with the LLC approach is that when the subsequent owner wants to sell the LLC/boat, it may turn out more difficult than simply selling a boat. Buyers will wonder if the LLC has liabilities that might not be immediately apparent. I, for one, wouldn't consider buying a LLC in order to acquire a boat unless I personally knew the owner and trusted him completely.

It would stand to reason that along with a survey of the boat by a well qualified surveyor, an investigation/assessment of the LLC by a well qualified attorney would uncover any liabilities, and the purchase contract could be written to cover the prospective buyer's liability as well. Now, at what point the bureaucracy and expense of all this exceeds the bureaucracy and expense of taxes...would obviously depend greatly on the value/tax liability of the boat. Sounds like a pretty grand idea to me. And hey, when you go to sell the LLC/Boat, if someone balks at the potential liability hazard of buying the LLC, then they could just 'buy' the boat from the LLC and they can deal with all the tax headaches they want.

[Mule]

Or form another llc and move the assset to the new llc.

[roverhi]

Buying a corporation is a truly risky business. Two boat owning corporations were sold locally that ended up with the buyer losing everything they invested. Lawsuits came out of the weeds after the corporations changed hands. May be able to transfer the corp. assets to another corp. but I would only do it with the advice of a good lawyer. Liability is such a can of worms with devastating consequences.

The advice I've heard on buying a corporation or incorporated business is to buy the assets and the name, if that is important, and leave the gutted corporation to die.

Aloha
Peter O.

[Jonathan Eells]

True enough, that it's nearly impossible to know what's lying in wait for an existing corporation. That's why I was impressed to discover that a boat could be transferred to a newly formed LLC for shares alone (of no real value) and then those shares bought from the brand-spanking new shareholder for, coincidentally, the value of his "contribution" to the LLC with no taxable event for the contributor or for the LLC (in the form of gains for the boat contributor, or as sales & use for the LLC).

Obviously, the idea's more complicated than I thought at first, but it keeps bearing up under the strain. Maybe worth it to spend a little on a lawyer and save a lot in taxes.

[hellosailor]

Mule?
Y'all the kind of folks the tax men just LOVE to drag into court. You've apparently got opinions that run 100% contrary to the long-established laws of most states and governments and no grasp of just how tasty a meal they will find you to be.

"I do not see how it is any of Texas business as to how I spend MY money,"
Y'all citizen of Texas? Or a legal resident? Or domiciled there? In any of those cases, then they OWN YOU. Unless you are a sovereign, you are the property of one, and it really doesn't matter who or where, someone OWNS YOU. That makes everything you do, their business, subject to their control. If you have a problem with that concept, eventually you will wind up in the pokey, unless you strike off to some unclaimed shallow water and start up your own state on it. You might get a good deal from some of the Pacific mini-nations that are being submerged by rising waters.

"I see no reason to declare it like" Well, there's more of the same problem. The reasons you or I do or don't see, don't matter. The tax man works for the sovereign who owns you--and if they say declare it and pay it, your choice is to do so, or do so plsu paying penalties and interest in tax court. It really IS that simple.

"but I bet there is so I am trying to do a work around." Usually "work around" translates into "tax evasion" and you'll find yourself in tax court. I know of someone who was having an issue with 20+ years of penalties and interest when he got caught up for never paying use tax in his home state. And that's on top of the use tax.

"There is no other way without the state doing a appraisal as to whether I bought a fixer upper or a pristine 26 year old boat is there?" Yeah, there is. Every tax authority goes by the book value of the boat (car, motor vehicle, etc.) and allows a certain range around that based on condition and circumstances. If your bill of sale says "$1000" and the book value is $20,000...they're going to ask you for the bill of sale, signed by you and the seller both. And if they find that more money changed hands...you both go to jail for tax fraud.

The guys you are trying to beat are the equivalent of full-time pro ball players who've played in a SuperBowl every week for ten years: You really think you can beat them in that league? They play for keeps, they don't forgive, and they have the legal right to SEIZE and then let you appeal it afterwards.

Like I said--THEY OWN YOU. That's the concept of sovereignty, no matter how gently or ungently it is done. If you think you can beat them, just be Real Damn Sure that you've done your homework, dotted every i and crossed every t, and that your "work around" can't come back to bite you twenty years down the line.

I'm rooting for the underdog--but wouldn't bet on one versus the tax men.

[Pblais]

Just a reminder. We are a boating forum not a politics forum. With the broad international diversity we have here it's not something we care to get into. We have everybody here and it is not going to work. More to the point the politics need to be minimized. People are free to think what they like but if you need to broadcast your politics then GO SOME PLACE ELSE!

There are many political discussion forums. More than there are boating foums. We can't be everything nor do we aim to try. So pay them a visit and make those moderators deal with you.

Just between you an me I belong to other groups - because you can find different things in other places. Do it - it's OK. Just check in here on a regular basis for all your boating discussions.

Some boating issues get into international politics and we can't escape the subject - but it's not the main idea. A little restraint by members is all we ask.

[Mule]

Some boating get into national, state and local politics also. Laws on taxation of boats are political and germane to this foreum, would you not agree? The reference to mansions earlier explains why no one should have any concience about tax avoidance.

[Pblais]

Just because boating gets into legal issues is not an excuse for a political excursion. We do draw the line arbitrarily I will admit, but the need is real to draw the line and end political discussions. It's refereed to internally as the "thread ending badly". This one is headed there - so the warning.

It's not negotiable. We don't want political based discussions. We are about boating. It's what moderation means.

[Mule]

point taken and noted.

[Mule]

OK boys, I woke up with what I think is the answer, Under no cirmstances should you pull this one w/o advice from a lawyer that specializes in these issues in the state you want to pull this on.

YOU form an llc, you form it in the state the attorney advises, (NC for instance charges no sales tax for sale of used boats) but follow the attorneys advice on state to create llc in. You buy the boat, from the owner and immedeately transfer title into the llc YOU own. No room for games from previous claims as was said "hiding in the weeds".

In my case, I think I would like to buy in any state but Texas, while out of state transfer into my Texas llc then bring her home. If the tax man coms knocking, I just say, "True, I owned the boat about 20 minutes, out of state, I no longer own the boat and both transactions took place out of state, therefore I owe no state sales tax. Is that all sir?" This is a theory, and I would never act on it w/o legal advice , and accountant advice, to be sure it would stand up. My accountant said yes in priciple but the liens, claims and clearing a title from anothers llc brought forth legitimate concerns, I just bet this is the work around I was talking about.

[Endojoe]

Originally Posted by Mule

OK boys, I woke up with what I think is the answer,

Every time that happens to me...I quickly discover that she is most certainly not the answer... And that, is why I am not married.

Your answer, however, sounds like a well thought out plan.

[YOGAO]

Originally Posted by sck5

Doesnt anyone just pay the tax and live relaxed without having to move the boat all the time? I am happier knowing I am legal than I would be obsessing about whether some tax guy was going to catch me next week.

I get beat up for this attitude a lot, but here it is:

When we bought our boat, we lived in the state of Maryland. Maryland had a 5% sales tax on the boat and the law is pretty black and white. Yes, we could have looked for the somewhat shady loopholes, but I view it thusly.

We live in a democracy ("...of by and for the people...") with legally elected representatives who pass laws. They also pass tax laws to fund the operation of the government and provide services to citizens. If I do not agree with the tax laws, I can campaign to have them changed. I could even campaign to have my taxes refunded to me retroactively if I felt like the original collection was illegal/unconstitutional. In the meantime, I will be a law-abiding citizen (aka "tax-fool") and pay the tax.