Originally Posted by fryewe
Your family member(s) would then have interest income, and such an arrangement might simply move tax liability from you to the family member. The amounts, and whether a net advantage was gained, would depend on tax brackets and filing status and other factors.
I said payment to a family member that doesn't have an income. In other words the money
they receive from the loan documents is the only income they receive. If you have say two or three non earning relatives you could make them members of an LLC that can distribute the interest income so as to keep it under the individual taxable threshold.
Under IRS rules you can also gift the original money
your using to purchase
the boat to say your non earning children
. Or for a cheeky twist you loan it to them or their LLC with a lion say over the LLc.
For the loan from say the LLc to be valid the LLc needs to have a lien over the boat. But you can make a loan to the LLc with the original money and in your loan document you can have a lien over all the assets of the LLc.
Now if this arrangement run afoul of the IRS because the loans are not arms length transactions I would think you could put trusts and other structures in place. Though I haven't found any arms length rulings or rules regarding third party loans for valid tax deductible interest. Could be the loan has to be made by a non related person or entity. But as I said you can use trusts or other entities if needed.
$100,000 boat loan paying an annual interest of say 25% would give a $25,000 tax deduction. It would be income for those receiving the $25,000 so you may need to have two or three as the lenders and receivers of the interest. If you loan the lenders the original money at say 30% and they don't pay you back you could get a tax write off if you made available the original money from a company. Of course this is all about shifting money around to gain a tax deduction. It could be seen as a scheme to defraud the IRS so I'm not going to do it. But it's kind of fun to think these things up.