 Marine Industry Accounting Services Deductions Not Allowed for Yacht Charter |
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Deductions Not Allowed for Yacht Charter
In 1980, Diane Wolf and her then-husband, Morris, found it difficult to charter a boat in France. They then explored the possiblity of entering the chartering business by talking with various attorneys and others already working in the field. The Wolfs acquired a yacht in 1981, hired a captain, displayed the boat to boat brokers, and informed a travel agency of the boats availability. They were successful in renting the boat during the summer of 1981, earning $7,000, but they also sustained substantial losses, which they claimed as business expense deductions, carrying part of the loss back to 1979. The IRS disallowed the loss deductions for lack of profit motive. Wolf petitioned the Tax Court. The Tax Court concluded that she and Morris had entered into the chartering business for personal, rather than business reasons. Wolf appealed the decision, arguing that the Tax Court erred in holding that Wolf lacked a profit motive. The appeals court refused to disturb the lower court's conclusion that the Wolfs had not entered into the yachting business intending to make a profit. The court rejected Wolf's assertion that the Tax Court had outlined in the regulations," such as the Wolf's lack of expertise and willingness to sustain large losses from the activity. |