Reply
 
Thread Tools Display Modes
 
Old 11-08-2015, 08:10 PM   #1
Veteran Member
 
City: Western MD
Country: USA
Join Date: Feb 2015
Posts: 32
considering purchasing

Thank you for all the great info on this forum! I am very close to owning a new-to-me, 1987 32' boat but have some concerns and hope to get some advice.

The owner (through the broker) wants to donate the boat to a non-profit at a much higher valued amount than the price the non-profit would agree to sell it to me for. Owner gets a big tax write off, non-prof. get a chunk and I get a good price. The IRS frowns on this so the (experienced in this) org. has a "charter agreement" of three years with me to make this legal (which they assure me it is.) Has anyone heard of this or done this?

Any info or light you can shed on all of this would be greatly appreciated.

Linda
__________________
Advertisement

Herderings is offline   Reply With Quote
Old 11-08-2015, 08:19 PM   #2
Guru
 
koliver's Avatar
 
City: Saltspring Island
Country: BC, canada
Vessel Name: Retreat
Vessel Model: C&L 44
Join Date: Nov 2007
Posts: 2,170
Linda


If you can smell a rat, so can the IRS. No matter how you dress it up, it is still fraud against the IRS. You don't want to be part of that deal.
__________________

koliver is offline   Reply With Quote
Old 11-08-2015, 08:45 PM   #3
Guru
 
Capt.Bill11's Avatar
 
City: Sarasota/Ft. Lauderdale
Country: USA
Join Date: Apr 2014
Posts: 5,422
Yes, I've not only heard of it but in fact that is how the owner of the boat I'm currently running purchased it. It's not a scam.
Capt.Bill11 is offline   Reply With Quote
Old 11-08-2015, 09:16 PM   #4
Veteran Member
 
City: Western MD
Country: USA
Join Date: Feb 2015
Posts: 32
Thanks to you both. They talk of it technically as not "fraud" --more like a legal loophole. The boat DOES have the higher value that the owner can write off... but the non-profit doesn't want to pay expenses to fix and store the boat for perhaps sometime waiting for a buyer...hence the lower sales price. But to sort of avoid this the IRS mandates some sort of three year waiting time... similar to divesting of assets three years before being eligible for medicaid nursing home benefits.
Herderings is offline   Reply With Quote
Old 11-08-2015, 09:28 PM   #5
Art
Guru
 
Art's Avatar
 
City: SF Bay Area
Country: USA
Vessel Model: Tollycraft 34' Tri Cabin
Join Date: Feb 2011
Posts: 7,980
I was offered similar once. Found that during the first three years I could not sell the boat. I would not want to be financially tied to nearly any movable, fun item... for three years mandatory... a boat is near top of my list.

Ended up I did not like the boat well enough for purchase anyway.

Read the fine print carefully!
Art is offline   Reply With Quote
Old 11-08-2015, 09:37 PM   #6
Guru
 
cappy208's Avatar
 
City: Cape Cod
Country: USA
Vessel Name: Slip Aweigh
Vessel Model: Prairie 29
Join Date: Oct 2013
Posts: 1,131
Do it backwards. Buy the boat for the lower amount, pay a cash payment of the difference to the charity, and get immediate title. The only one who suffers is the broker (via the lower agreed on price). BUT, you take the increased contribution as a write off for charity. a win/ win.
cappy208 is offline   Reply With Quote
Old 11-08-2015, 09:55 PM   #7
Veteran Member
 
City: Western MD
Country: USA
Join Date: Feb 2015
Posts: 32
Thank you Art & Cappy.

Yikes--hadn't really thought about wanting to sell her during the next three years. That would make a huge difference... as I was thinking if she turned out to really be too small for comfort (one of my concerns) I could sell her easily. Not so!

And Cappy... wish that were possible. It is the owner who would lose his tax write off for the big amount--and who insists to donate it for that reason as the lower purchase price, should he outright sell it, would be less valuable to him (he must be in a super high tax bracket!) The broker gets commission on the lower price no matter who would sell it to me...
Herderings is offline   Reply With Quote
Old 11-08-2015, 11:52 PM   #8
Art
Guru
 
Art's Avatar
 
City: SF Bay Area
Country: USA
Vessel Model: Tollycraft 34' Tri Cabin
Join Date: Feb 2011
Posts: 7,980
Quote:
Originally Posted by Herderings View Post
Thank you Art & Cappy.

Yikes--hadn't really thought about wanting to sell her during the next three years. That would make a huge difference... as I was thinking if she turned out to really be too small for comfort (one of my concerns) I could sell her easily. Not so!

And Cappy... wish that were possible. It is the owner who would lose his tax write off for the big amount--and who insists to donate it for that reason as the lower purchase price, should he outright sell it, would be less valuable to him (he must be in a super high tax bracket!) The broker gets commission on the lower price no matter who would sell it to me...
Herderings... My dealings with what seems to be similar procedure was several years ago. Like I said - read the fine print. Maybe in your instance the boat could be resold by you whenever desired. However, there nearly must be some sort of stipulations; especially due to the convoluted finance manner for your initial purchase.
Art is offline   Reply With Quote
Old 11-09-2015, 12:53 AM   #9
keb
Senior Member
 
keb's Avatar
 
City: Portland, OR
Join Date: Nov 2013
Posts: 129
Ask them both to provide you with a written legal opinion from the IRS, or tax attorney who they vetted it through. The non profit certainly would have done that if they are legit. My guess is you will get some kind of excuse as to why they can't provide it. Run...
keb is offline   Reply With Quote
Old 11-09-2015, 08:07 AM   #10
Senior Member
 
oscar's Avatar
 
City: Bethlehem, PA
Country: United States
Vessel Name: Lady Kay V
Vessel Model: Don't know yet.....
Join Date: Oct 2015
Posts: 420
Quote:
Originally Posted by cappy208 View Post
Do it backwards. Buy the boat for the lower amount, pay a cash payment of the difference to the charity, and get immediate title. The only one who suffers is the broker (via the lower agreed on price). BUT, you take the increased contribution as a write off for charity. a win/ win.
This.
__________________
Currently boatless but looking. Avatar is my first boat....Holland, 1965 ish.....
oscar is offline   Reply With Quote
Old 11-09-2015, 08:22 AM   #11
Enigma
 
RT Firefly's Avatar
 
City: Slicker?
Country: Bumpkin?
Join Date: Oct 2007
Posts: 9,996
Greetings,
Mr. H. Screw him! If the seller is playing games trying to save a few bucks AND he's in that higher tax bracket he sounds like a cheap conniving SOB that should be looking for another sucker. I wouldn't play his games. It may come back to bite you and YOU would be the loser not the "charity" or the cheap seller. Just my $0.1.5 (after taxes).
__________________
RTF
RT Firefly is offline   Reply With Quote
Old 11-09-2015, 08:55 AM   #12
TF Site Team
 
Peter B's Avatar
 
City: Brisbane
Country: Australia
Vessel Name: Lotus
Vessel Model: Clipper (CHB) 34 Sedan/Europa style
Join Date: Jun 2008
Posts: 6,669
Send a message via Skype™ to Peter B
Like he said. Sounds dodgy. There are a lot of other boats out there.
__________________
Pete
Peter B is offline   Reply With Quote
Old 11-09-2015, 09:03 AM   #13
Guru
 
Capt.Bill11's Avatar
 
City: Sarasota/Ft. Lauderdale
Country: USA
Join Date: Apr 2014
Posts: 5,422
If you really think you might buy the boat let me know. I can ask my current boss how/who he used to vet the process. He is a very fiscally conservative CPA and a bank owner among other things. The likely hood of him buying into a tax scam is zero.

As mentioned, one of the negatives is you are basically locked into the boat for the term of the charter.

http://www.yachtworld.com/boat-conte...an-great-deal/
Capt.Bill11 is offline   Reply With Quote
Old 11-09-2015, 09:28 AM   #14
Senior Member
 
Blissboat's Avatar
 
City: Jacksonville Beach, FL
Country: USA
Vessel Name: Shallow Minded
Vessel Model: Shoal Cat
Join Date: May 2015
Posts: 411
The arrangement that "Herderings" describes (donate / three year hold / interim charter ) with a tax advantage to the initial seller, revenue to the non-profit, and eventually solid title for the end buyer, is not unusual. On its face, it is not a scam. However, it's tempting for some people to cut corners and game the system, getting themselves and others in trouble. So, yeah, read everything closely, ask lots of questions, and know who you are dealing with.

As for handcuffing a short term sale, the kinds of boats that most of us on this Forum own or are considering are frankly not highly liquid investments anyway. IOW, if you seriously think you need to evaluate a boat with the flexibility to sell it within a short time frame, maybe you should consider chartering instead of buying.

In mandating a three-year hold, I think the IRS's motive is to discourage insider-trading situations, where a well-connected "friend" of the non-profit organization swoops in and skims off fast profits by flipping donated boats.
Blissboat is offline   Reply With Quote
Old 11-09-2015, 09:40 AM   #15
Guru
 
City: gulf coast
Country: pinellas
Join Date: Jun 2014
Posts: 2,199
Do I understand correctly that during the three years the charity holds title to the boat? If so they would have to insure it and retain all sorts of legal obligation. Surprising they would do that.
bayview is offline   Reply With Quote
Old 11-09-2015, 09:59 AM   #16
Guru
 
djmarchand's Avatar
 
City: East Greenwich, RI
Country: USA
Vessel Name: Bella
Vessel Model: Mainship Pilot 34
Join Date: Aug 2012
Posts: 2,879
In principle this scheme is no different from the "offshore delivery" scheme that high end new boat purchasers use to avoid California sales tax. It is technically legal, but it puts a big burden on the buyer who cannot sell it for three years. I would expect a substantial discount off of market pricing if I was going to do this deal.

I would also seek legal/tax counsel to make sure that you are not participating in anything illegal. Also have legal counsel review the charter/purchase agreement.

David
djmarchand is online now   Reply With Quote
Old 11-09-2015, 10:08 AM   #17
Senior Member
 
Blissboat's Avatar
 
City: Jacksonville Beach, FL
Country: USA
Vessel Name: Shallow Minded
Vessel Model: Shoal Cat
Join Date: May 2015
Posts: 411
Bayview wrote: "If so they would have to insure it and retain all sorts of legal obligation."

Correct. NPOs who enter into these deals are typically cautious about who they "charter" or lease their donated boats to. The contract lays in liability protections for the owner and passes as much responsibility as possible through to the user of the boat. E.g., the insurance policy names the charterer plus the NPO as insured parties, similar to the way a bank requires auto-loan customers to buy insurance, adding the bank as an additional named insured.

Even with that, it's sometimes just not possible for the NPO to find a new boat user who is sufficiently financially responsible to make the NPO's administrators comfortable. In those cases, the donated boats lay at the NPO's docks or in a marina, slowly deteriorating while the three-year clock ticks. I have seen this happen several times. It's sad to watch, but I get why it happens.
Blissboat is offline   Reply With Quote
Old 11-09-2015, 10:16 AM   #18
Guru
 
City: Northport
Country: USA
Join Date: Aug 2015
Posts: 813
And .... hopefully the tax laws and legal considerations do not change within the 3 years waiting period leaving a situation which is less advantageous. I just watched a couple planning to use the SS rules of 'file and suspend' as they begin their retirement next year see them being reversed last week.
These 'rules' can change quite swiftly during these political times.
smitty477 is offline   Reply With Quote
Old 11-09-2015, 10:27 AM   #19
Guru
 
hfoster's Avatar
 
City: Cleveland
Country: USA
Join Date: Mar 2012
Posts: 515
Herderings.

A wise fella here on T.F. has said this about buying a vessel when things are in question.

"There is always another deal around the corner!"

This same Fella has given you some great input thus far. Art!

So I would look at the whole deal and think about it as well and see if it is really worth it.

Remember, There is always another deal around the corner!


Happy cruising to you.

Cheers.

H. Foster
hfoster is offline   Reply With Quote
Old 11-09-2015, 10:34 AM   #20
Art
Guru
 
Art's Avatar
 
City: SF Bay Area
Country: USA
Vessel Model: Tollycraft 34' Tri Cabin
Join Date: Feb 2011
Posts: 7,980
H - Irish is as Irish does!
__________________

Art is offline   Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off





All times are GMT -5. The time now is 07:20 AM.


Powered by vBulletin® Version 3.8.8 Beta 4
Copyright ©2000 - 2017, vBulletin Solutions, Inc.
Search Engine Optimization by vBSEO 3.6.0
Copyright 2006 - 2012