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Tidbits & Humor
Internal Revenue Code (IRC) section 163 (h)(2) states that a taxpayer may deduct any qualified interest on a qualified residence. Qualified residences are defined as a principal residence (e.g., a primary home) and one other residence (including second homes) owned by the taxpayer for the purpose of deductibility for the tax year. IRC section 163(h)(3) defines qualified residence interest as any interest paid or accrued during the tax year on acquisition or home equity indebtedness with respect to any qualified residence of the taxpayer. According to IRC section 163(h)(4), a boat will be considered a qualified residence if it is one of the two residences chosen by the taxpayer for purposes of deductibility in the tax year. A qualified residence must have basic living accommodations including sleeping space (berth), a toilet (head), and cooking facilities (galley). If the boat is also chartered, the taxpayer will have to use the boat for personal purposes for either more than 14 days or 10% of the number of days during the year the boat was actually rented, to qualify for the interest deduction in accordance with IRC section 280A(d)(1). Form 1098, issued by lenders, is not necessary in order to claim the qualified interest deduction. In accordance with IRS instructions for Schedule A, form 1040, if the taxpayer does not receive form 1098, deductible mortgage interest should be reported in line 11 instead of line 10 on Schedule A. Interest paid on a home equity loan to buy a boat also may not be deductible. Home mortgage interest deduction is limited to interest paid on home equity loans up to $100,000. By using a home equity loan, you may limit the amount of interest that is deductible, if a boat loan balance exceeds $100,000. Borrowing against a stock portfolio to purchase a boat creates complications in regard to interest deductibility. Second home mortgage interest deduction is limited to interest paid on second homes that are secured by that second home. A written collateral agreement (security agreement) from a broker indicating the boat as collateral is something brokers are not inclined to provide.
For the courtesy of others and to prevent rushing, prepare your boat for launching away from the ramp. ~ Check the boat to ensure that no damage was caused by the trip ~ Raise the lower unit (remove supports) to proper height for launching so that it will not hit bottom. ~ Remove tie downs and make sure that the winch is properly attached to the bow eye and locked in position. ~ Attach a line to the bow and the stern of the boat so that the boat cannot drift away after launching and it can be easily maneuvered to a docking area. ~ Visually inspect the launch ramp for hazards such as a steep drop off, grease and sharp objects. When everything has been double checked, proceed slowly to the ramp remembering that your boat is just resting on the trailer and attached only at the bow. The ideal situation is to have one person in the boat and one observer at the water's edge to help guide the driver of the tow vehicle. When launching: ~ Keep the rear wheels of the tow vehicle out of the water. This will generally keep the exhaust pipes out of the water. If the exhaust pipes become immersed in the water, the engine may stall. ~ Set the parking brake and place tire chocks behind rear wheels. ~ Make sure someone on shore is holding the lines attached to the boat. ~ Lower the outdrive and prepare to start the engine (after running blowers and checking for fuel leaks). ~ Start the boat motor and make sure that water is passing through the engine cooling system. ~ Release the winch and disconnect the winch line from the bow when the boat operator is ready. At this point the boat should be ale to be launched with a light shove or by b backing off the trailer under power. Finish loading your boat at a sufficient distance from the ramp so that others may use it.
A marine survey is an appraisal similar to that performed on real estate or other items. The survey normally provides a complete report on the subject vessel, and references complete identification of the boat (including year, make, model, hull identification numbers, engine information and so on). The report also gives detailed information about the vessel including description of the superstructure, fittings and equipment, electronics and safety equipment, galley (if applicable), engines, electrical system, fire fighting equipment, and fuel systems. An engine survey is a separate report that specifically reviews the boat's power and analyzes such areas as general detailed description, filters (fuel and oil), fuel and oil lines, exhausts systems, cooling systems, fresh and raw water systems, emergency stop and alarm systems and transmission data. This report should also include compression testing and oil analysis. What should I expect in a marine survey report? You are hiring the surveyor for his or her objective opinion of the condition of the boat and its value. You may not agree with their final findings in either regard, but you have benefited from their professional opinion. The surveyor you hire should complete a thorough visual inspection of the boat you intend to purchase. You should have the bottom inspected, so if the boat is in the water, you will need to arrange for it to be hauled at the time of survey. You may request engine testing and sea trials; these services may command additional fees. The survey report will cover the areas inspected and include recommendations regarding problem areas. It will also include a current market value and/or replacement value estimate. You should be aware of the guidelines a surveyor uses for his comparisons, such as: "The mandatory standards promulgated by the United States Coast Guard (USCG), under the authority of Title 46 United States Code (USC); Title 33 and Title 46, Code of Federal Regulations (CFR), and the Voluntary Standards and Recommended Practices developed by the American Boat and Yacht Council (ABYC) and the National Fire Protection Association (NFPA) have been used as guidelines in the conducting of this survey. " This tells you the exact information the surveyor used as a baseline for his comments and recommendations. Also be sure you understand how the surveyor determined the market value and/or replacement value for the boat and what those values mean. Do I really need a marine survey? If you are intending to invest several thousand of your hard-earned dollars in purchasing a boat, a marine survey may be the least expensive and most valuable tool you have to assist you in that purchase. A boat operator who knows the condition of his vessel is better prepared to handle adversity than one who isn't. The surveyor you hire to inspect the boat should have the knowledge and expertise to determine if it has been properly maintained and in safe condition. A prudent buyer should make his final acceptance of the boat subject to the findings of a marine surveyor. How do I find a marine surveyor? Ask for a referral from your marine dealer or broker, your marine lender, other boaters, and do your diligence to ascertain you are hiring the right surveyor for your situation. In the recreational boating community a marine surveyor's services are sought out to provide you with a comfort level about the safety and value of the boat being purchased. National Association of Marine Surveyors, Inc. (NAMS) at 800-822-NAMS or visit their Web site at www.nams-cms.org
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South Mountain Yachts
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