Tax Advantaged Benefits For Sailors

[GoingWalkabout]

Hi All,

First I want to wish everyone a wonderful 2016 full of success and wonderful boating pleasure.

So I've been thinking about how best to utilize my investment in my sailboat in respect of United States taxation.

I am lucky to be the owner (founder and majority shareholder) of a high value publicly traded company. I intend to pull the trigger on a purchase this year that will be between $US1.5 to $US2 million. I'm particularly interested in either the Lagoon 560, 620 and now the to be released this year the Lagoon 77. I am particular to the Lagoon range because of their layout which for me in my opinion has the best layout for entertaining. But I digress.

And before I get jumped on for posting in CF rather than going to one of my highly paid corporate attorneys I am posting her in the chance that other boaters have already looked at this question. Of course whatever direction tax wise I decide to go in will be done with some pretty sound legal and accounting advice as well. But as a start I think it prudent to brain storm some ideas amongst other boaters who may have I am sure, some great ideas to consider.

My first thought is having seen how a well known corporate chief who is an ardent sailor gas his boats spinnaker advertising his company. I would think that he has an advertising agreement with his company for the advertising on his sailboat. What would be a reasonable charge for such name advertising placement? I suppose I could ask a national big advertising agency for a written opinion and as I type I think this will be a good idea anyway. Having an independent cost basis would be a good insurance in case of IRS questions.

So I think I have one tax benefit that I could utilize. There could be some push back in saying that for it to be legitimate advertising it needs to get reasonable exposure. Such as sailing around Manhattan for part of the summer with company name on the Asymmetrical and possibly the mainsail. Also look at getting some photos of the branded sailboat in some trade journals as part of the public company branding strategy. Seems to work for Rolex.

Along the same lines of developing exposure to justify corporate expenditure, perhaps look at developing a web channel for corporate sponsored production vessels races. Executed properly this could be packaged for crossover into a cable channel show.

I know of the second home write offs but somehow I don't think they will be as good as the corporate sponsorship approach. I could of course be wrong on this.

Then there is the corporate office. If I set the sailboat cruising catamaran up as an office with all the high tech comma gear along with meeting space and I sail it to New York for meetings and also parts of the med and the UK for meetings I think this could qualify as an office expense much like a physical office. I am sure I would gave to stay away from the Caribbean but if I do sail there I would have to write it in a log as for pleasure and percentage wise take that off my overall expenditure. Not a bad idea in itself to show that I am being honest in separating business from pleasure.

I would really appreciate some feedback or further suggestions. Not criticism for looking at legal ways of managing my affairs.

Regards,
Chaya

[LPAS]

You commented:
"I would think that he has an advertising agreement with his company for the advertising on his sailboat".

Used to work for CAMPBELL SOUP COMPANY.
One of the Directors of CSC decided to put the CAMPBELL CAN/LOGO on his spinnaker with the words "Noodle sloop".

CSC wasn't amuzed and LEGAL DEPT asked him to REMOVE the CAN/LOGO...regardless of the "Noodle sloop" moniker.

So...be advised (as you already know) that BIG CORPORATIONS (and their LEGAL departments) carefully guard their valuable INTANGIBLE ASSETS.

Just sayin'.

[LLCoolDave]

Originally Posted by LPAS

You commented:
"I would think that he has an advertising agreement with his company for the advertising on his sailboat".

Used to work for CAMPBELL SOUP COMPANY.
One of the Directors of CSC decided to put the CAMPBELL CAN/LOGO on his spinnaker with the words "Noodle sloop".

CSC wasn't amuzed and LEGAL DEPT asked him to REMOVE the CAN/LOGO...regardless of the "Noodle sloop" moniker.

So...be advised (as you already know) that BIG CORPORATIONS (and their LEGAL departments) carefully guard their valuable INTANGIBLE ASSETS.

Just sayin'.

The OP is the founder and majority shareholder so I think they will be ok with the legal dept. lol

To the OP, if stock holders caught wind of a highly paid CEO and they are using the company to subsidize a $1.5 mil yacht they might be a little miffed. Would there be any backlash from stockholders/board of directors? No idea about the tax issues.

[GoingWalkabout]

Originally Posted by LPAS

You commented:
"I would think that he has an advertising agreement with his company for the advertising on his sailboat".

Used to work for CAMPBELL SOUP COMPANY.
One of the Directors of CSC decided to put the CAMPBELL CAN/LOGO on his spinnaker with the words "Noodle sloop".

CSC wasn't amuzed and LEGAL DEPT asked him to REMOVE the CAN/LOGO...regardless of the "Noodle sloop" moniker.

So...be advised (as you already know) that BIG CORPORATIONS (and their LEGAL departments) carefully guard their valuable INTANGIBLE ASSETS.

Just sayin'.

So funny. By the way. I'm not talking about using another company logo. I'm talking about an advertising contract with my own public company. With proper legal agreements between myself and the company. Thanks thiugh. Funny story.

[GoingWalkabout]

Originally Posted by LLCoolDave

The OP is the founder and majority shareholder so I think they will be ok with the legal dept. lol

To the OP, if stock holders caught wind of a highly paid CEO and they are using the company to subsidize a $1.5 mil yacht they might be a little miffed. Would there be any backlash from stockholders/board of directors? No idea about the tax issues.

I agree and a very good point. The optics of course need to be well managed. But Ellison seemed to do it OK. Also some NASCAR racing teams have inter related corporate ownership sponsorship.

On the shareholder side it could be sold as a mutual trade off benefit in exchange for less income. Instead of taking $1 million a tear salary I take less with the corporate sponsorship thrown in. On the business office use I am not just going to say that I would be using it for business and using it as a moveable global work base. My company does business around the world with very high target value businesses. All in all there would be equitable commercial benefits for the public company while structuring for the best tax arrangement. Also I am an unashamed workaholic so what I'm talking about fits with my demented way of living.

Your warnings about shareholders is valid but in the end of the day a matter of perception. Perception gas to meet reality and the benefits need to be mutual for all concerned. I can see huge savings on using the very large catamaran as a corporate operations base for our business in Europe and the Middle East. Berthed in France or Spain fir instance for a few months and used as my accommodation as well as office and business meeting place could work well. I think.

[hellosailor]

How brave are you, and how willing to spend days with your accountant and attorney debating things with the IRS, in their offices?


The common way to get a 100% business deduction for a yacht or a plane (you haven't gotten a Learjet yet?) is to set up a separate arms-length charter corporation, with a hired professional manager, and put the Learjet out for charter use, available to the general public. That's a business, so all the expenses and profits go to the business, like any other.
And when you personally want to use the jet (excuse me, yacht) you charter it just like anyone else does, at the same price everyone else does. You "get back" your money in the form of business profits, so even though you are paying retail, you're still not "just" paying retail. Now, you and your charter manager can also discuss priority for your own reservations, or cancellation of public ones if there are conflicts with the paying customers.

But this is how many people have kept the IRS totally satisfied for decades now. Anything else that involves commingled personal and business use, will also require careful documentation and logs and debates over how costs and values are being set. And, it will be a red flag asking for an audit. Separate charter company and management? No red flag, business as usual. Your accountant will be much happier.


Now, of course, I'm not allowed to practice tax law, let alone math, across interstate borders. So this advice is restricted to "how to bring peace of mind and happiness to accountants", and my zen master tells that that's perfectly legal, requires no license (happiness enhancement doesn't have to be licensed in this state), and the 10% fee you'll give me is a tax-deductible voluntary donation, not taxable income.(G)

[GoingWalkabout]

Originally Posted by hellosailor

How brave are you, and how willing to spend days with your accountant and attorney debating things with the IRS, in their offices?


The common way to get a 100% business deduction for a yacht or a plane (you haven't gotten a Learjet yet?) is to set up a separate arms-length charter corporation, with a hired professional manager, and put the Learjet out for charter use, available to the general public. That's a business, so all the expenses and profits go to the business, like any other.
And when you personally want to use the jet (excuse me, yacht) you charter it just like anyone else does, at the same price everyone else does. You "get back" your money in the form of business profits, so even though you are paying retail, you're still not "just" paying retail. Now, you and your charter manager can also discuss priority for your own reservations, or cancellation of public ones if there are conflicts with the paying customers.

But this is how many people have kept the IRS totally satisfied for decades now. Anything else that involves commingled personal and business use, will also require careful documentation and logs and debates over how costs and values are being set. And, it will be a red flag asking for an audit. Separate charter company and management? No red flag, business as usual. Your accountant will be much happier.


Now, of course, I'm not allowed to practice tax law, let alone math, across interstate borders. So this advice is restricted to "how to bring peace of mind and happiness to accountants", and my zen master tells that that's perfectly legal, requires no license (happiness enhancement doesn't have to be licensed in this state), and the 10% fee you'll give me is a tax-deductible voluntary donation, not taxable income.(G)

Thanks Hellosailor. I have read that what you are suggesting is not as straightforward as you say. However if it does work then of course I would love to look at doing it. I could gave a pro charter management company manage an arms length ownership through a separate holding company. Big problem is that it may work well for the IRS but I could have serious disclosure problems with the SEC. And that is one body that I don't want to run afoul of.

Full and open disclosure is always the safest path and the only way to keep ones liberty. So if I set up a company to hold the ownership of my boat and then sign it up with a charter company under a charter management agreement it will all look OK for the IRS. But then even if my shareholding in my boat ownership company is done through a trust which will work for the IRS I will still have to disclose my effective corporate involvement with the SEC. And that is where I could get unstuck with the IRS.

But on the other hand if I'm being overly cautious I would love being able to have the public company charter the boat from the charter company and obtain the right offs I'm looking for. The public company could even pay advertising fees for running advertising on the asymmetric.

However if it is problematic from a disclosure perspective I still would think the straightforward sponsorship of company's such as Oracle or those sponsors in the auto racing world as something that could work.

I'm going to buy my large cat irrespective. The bigger the tax benefit the bigger the cat.

[Training Wheels]

I'd like to have a problem like that!

[GoingWalkabout]

Originally Posted by Training Wheels

I'd like to have a problem like that!

Life is tuff. If our tax system wasn't so egregious I wouldn't be wasting my time on such things. They take way too much from people who risk the most and create the most jobs and wealth for others. It is their greed that has people like me looking at ways to get back some of the hard earned money out of the clenched hands.

I remember years ago an old businessman saying to me the more you have the more you have to worry about. But you know I've been "relatively" poor and I've been rich. I can tell you with certainty I much prefer being rich. Even with the associated problems.

[LLCoolDave]

Originally Posted by GoingWalkabout

I'm going to buy my large cat irrespective. The bigger the tax benefit the bigger the cat.

Let me know when you buy the cat. You will need crew and a couple captains. I'm looking to crew.

[tomfl]

Originally Posted by GoingWalkabout

SNIP

I remember years ago an old businessman saying to me

You are not really rich till you have a good tax lawyer and a good tax account.

There fixed that for you.

[GoingWalkabout]

Originally Posted by tomfl

You are not really rich till you have a good tax lawyer and a good tax account.

There fixed that for you.

I have two CPA's and three lawyers if you take into account my private lawyer, my SEC corporate lawyer, international tax lawyer and oh lets not forget my patent drafting lawyer who also handles my patent infringement litigation. But I have found that doing the leg work saves time and dollars. I'm also a little anal and not one to follow blindly any professionals advice without getting my head into the subject. It drives my Doctor nuts. As for my lawyers it hasn't been the first time that I have come up with strategies they didn't consider. But at the end of the day I do put my final decisions in their hands after doing my research. It is never good to follow even the best of professionals advise only. Nor is it a defense at law if things dont work out as planned.

[Jman]

Not sure how paying yourself sponsor ship dollars, reduces your taxes. Corporate taxes reduced because net revenue is reduced, but now you must declare the personal income.


Sent from my iPhone using Cruisers Sailing Forum

[GoingWalkabout]

Originally Posted by Jman

Not sure how paying yourself sponsor ship dollars, reduces your taxes. Corporate taxes reduced because net revenue is reduced, but now you must declare the personal income.


Sent from my iPhone using Cruisers Sailing Forum

Your right of course. I think it must be done in conjunction with a corporate ownership of the boat. And to qualify as a true business it most likely will need to be tied up with a charter company agreement. How it is all structured is the difficult stuff. As they say the devil is in the details.

Thanks,
Chaya

[jackheape]

Instead of trying to structure the best tax situation through ownership, why don't you just borrow the money to purchase it and write it off as a second home? That is perfectly legal and straightforward. Another way to write it off is to get your Coast Guard 6 pack license, start a charter business, and then the whole shebang becomes a deduction.