Riverboat

[Harvey Lucas]

My client is buying a big Riverboat for 3 million dollars.

The boat will primarily sit at a dock as a tourist attraction.

There is roughly 20,000 total square feet of usable space on the the ship spread out among 3 seperate decks.

He will rent out the various spaces to tenants for small retail shops, restaurants, etc.

What would the depreciable life be on the boat?

And, as a rental activity, I am guessing that any losses he incurs would be suspended until a year that he has income.

And because it is not "real estate", he is not allowed the special $25,000 loss for rental real estate.

Comments?

Thanks,

Harvey Lucas

[veritas]

Taking a stab at it

My client is buying a big Riverboat for 3 million dollars.

The boat will primarily sit at a dock as a tourist attraction.

There is roughly 20,000 total square feet of usable space on the the ship spread out among 3 seperate decks.

He will rent out the various spaces to tenants for small retail shops, restaurants, etc.

What would the depreciable life be on the boat?

And, as a rental activity, I am guessing that any losses he incurs would be suspended until a year that he has income.

And because it is not "real estate", he is not allowed the special $25,000 loss for rental real estate.

Comments?

Thanks,

Harvey Lucas

You said primarily sit at a dock? Does that mean sometimes it would be under sail?
.

[Kram BergGold]

TTB page 9-9

10 years says TTB page 9-9, the way I read it.

[ChEAr$]

10 years says TTB page 9-9, the way I read it.

Why would the boat not be business property?

With proper maintenance it will last 39 years at least.

[Nashville]

It is Business Property

Clearly it is business property. I believe the question is, "Real Property or Personal Property?" The property tax authorities probably consider it personal property unless it is dry-docked via some permanence. And the local tax authorities do not establish relevance under IRC. Except that in absence of any definition in the Code, state or local law would prevail. Personal Property? 10 years. Real Property? 39 years. Real Property also opens the door for active participation and losses under certain income levels.

Case in point might be the so-called casino "boat" at Metropolis, IL. After years and years of floating up and down the Ohio River, the boat finally docked for good. Then it was purchased by Harrah's Casinos. Harrah's proceeded to make renovations so extensive that nothing short of an earthquake of New Madrid proportions could launch this structure into the river again.

[Harvey Lucas]

Thanks for feedback

Yes Kram, 10 year property is how I see it too.

Yes Veritas, it could sail but probably never will, other than to move it into place, however, it will probably maintain a state of readiness so they could take her out if they wanted too.

It is cleary not real estate, even tho the use of it is similar to how commercial real estate would be used, but, regardless, it is still a boat, so I think 10 year is correct.

Because it is a primarily a rental activity, it appears to me that passive loss rules automatically apply, ie, the rental of the spaces will be primarily month to month or year to year, etc.

As such, the way I see it, any net losses from the activity will be suspended until such time as the activlty produces a profit, or is sold.

And because it is "not real estate", they are not allowed the special $25,000/year loss feature.

The scenario would be diferent if they were to primarily operate a business from the ship, say a retail store that they operated, or a restaurant that they operated, but they would have to operate "most" of the business's on the ship to avoid being classified as "primarily" a rental activity..

If they set up an LLC to own the boat, and the tenants pay the LLC rent, then the LLC is considered a passive rental activity, and losses are suspended.

Anyway, that's how I see it.

Thanks everybody,

Harvey Lucas

[ChEAr$]

So then, I reckon an ocean liner, NOT being real estate, is depreciated over 10 years.

And also the Delta Queen riverboat that takes tourists up and down the river.

[JohnH]

An ocean liner - hmm. Harlan, you just got me thinking about something.

I wonder if the cruise lines are as meticulous about their tax accounting as they are about their on-board charges. After all, when you leave the ship they can give you a detailed bill for every penny you spent, right down to every t-shirt, every tip, every minute of internet usage, every bingo game, every drink, even every paper umbrella in the drinks. Think their tax records are just as accurate?