NEW ENGLAND YACHT & SHIP NAHANT MA

NEW ENGLAND YACHT & SHIP DONATION CONSULTING ~ LEASING ~ FINANCING ~ MANAGEMENT CORPORATE & PRIVATE YACHTS ~ PLEASURE & COMMERCIAL SHIPS~TUGS~BARGES~SCHOONERS~AMPHIBIOUS CRAFT DONATING YOUR BOAT, YACHT OR SHIP The Latest News February 27, 2005 You undoubtedly have heard in the media that as of January 1, 2005 the tax laws have changed regarding the charitable donation of vehicles. Because I have had numerous inquiries regarding the impact the new law will have on yacht and boat donations, I would like to take this opportunity to explain the changes. Ultimately, I anticipate minimal impact on the tax deductibility of boats being donated to the 501- C3 foundations. The new law, which was aimed primarily at automobile donations, affects cars, boats, yachts and airplanes, which are grouped together in the tax code. It states that the deduction value of a donated vehicle is limited to the amount for which the charity sells that vehicle on the open market. Most individuals donating cars have valued their donation based on Blue Book or similar listings while the true street sales value might be a fraction of the book value of the car. The reputable 501-C3 charities accepting boat and yacht donations, have always held title to these vessels for a minimum of two years before selling them outright. The IRS has not written any new regulations as to how long a charity must hold title to a donated asset before this deduction limitation no longer applies, I feel, based on direct conversations with the IRS, that the current two year holding rule will continue to apply. Currently, the donor of a vessel with an appraised value in excess of $5000 submits an 8283 tax form to the IRS showing the appraised value verified by an Accredited & Certified Marine Surveyor. I have these forms and the charity receiving the vessel, must sign off on the acceptance and certify that if it sells the vessel within two years, it will report the sale price to the IRS. After two years there is no reporting requirement as the donated asset is considered depreciated to a point where the appraised value is no longer meaningful. If for some reason the IRS should take the gigantic step of completely changing their existing procedures and tax forms for charitable donations of boats, I would be notified immediately. Donating your boat, yacht or commercial vessel is still a very viable financial alternative to an actual sale with many tax deduction advantages. Please call me if you have any questions about the new tax law and how it might relate to donating your boat or yacht. To date I have appraised 1,475 yachts and ships nation wide. The Federal Government encourages donations of property to public, nonprofit charities. The same tax deductions are permitted for donations of property as for cash donations. This is not a tax loophole, but a definite recognition on the part of Congress of the importance of such a gift to a qualified, IRS approved organization. The Internal Revenue Service distributes several publications to guide the public and their tax advisors in determining the best way to handle property contributions including Publication #526 - Charitable Contributions and #561 - Determining the Value of Donated Property. I have these forms as well as the form 8283 for donating boats, yachts and ships. If you donate your boat to a qualified organization, you may generally deduct the fair market value at the time of the contribution. The value of your boat is determined by an appraisal from an expert in a field related to your property. The IRS, in their publication #561, suggests using a marine surveyor who is accredited & certified. Once you have decided to donate the vessel, you must decide which method is the quickest and most financially rewarding, an outright sale or a donation. In looking at a sale, you must take into consideration all of the expenses entailed; dockage, insurance, maintenance, storage, repairs, interest and sale commission are just a few. After you have signed a sale contract and the purchaser surveys the boat, you probably will be met with more expenses. There are always unforeseen repair items that need to be corrected after a potential buyer's marine survey. In most cases, the buyer expects the owner to adjust the sale price downward or have the owner pay for these repairs. Another problem in trying to sell your boat is the time factor. The time of the year in most areas of the country has a great deal to do with the availability of ready buyers. The cold winter months seem to drive prices down and buyers indoors. By donating your boat, yacht or ship, you avoid these costly expenses. There are no sale commissions to pay and the entire transaction is complete by me in a few days. You do not have to wait six months or a year to find out that your net return is far less than you expected. If you or your CPA/Tax Advisor needs any questions answered on donating your boat, yacht or ship, I can be reached at my office below. NEW ENGLAND YACHT & SHIP P.O. BOX 6; ON BROAD SOUND NAHANT, MA. 01908 (USA) 781-581-0495 (24-HOUR) EMAIL: yacht1ship@aol.com