Maryline Bossar: you Hello everyone and welcome back to Full Displacement, the podcast by Current Yachts. We are here today to talk again about tax planning and smart boat buying. like to introduce you to Tideline and our guests today are business consultants, experts that specialize in boat and yacht acquisition with, as they call it, focus on integrating tax efficient strategies. So what does that mean and what does that look like? you ⁓ you That is what we're going to discover today with Doug and Joe Doug and Joe, welcome to the show. How are you?

Doug Benefield, CPA: Hi Marilyn, thanks for having us. Good morning. ⁓

Maryline Bossar: Good morning.

Joe: Doing great, happy to be here.

Maryline Bossar: So let's start with Doug then. You are a licensed CPA and you practice nationwide, right? You counsel clients all over the country. Tell me a little bit about the specialty that you offer to your clients.

Doug Benefield, CPA: Sure, so we're small business focused ⁓ typically our specialization is US tax law. We also work with boat owners. Boat owners with boats in a charter program are small businesses and that's our bread and butter. That's where we live. ⁓

Maryline Bossar: And are you a boater yourself, Doug? Are you a catamaran owner somewhere in BVI or that's not you?

Doug Benefield, CPA: I'm not a catamaran owner in the BVI yet. I will tell you that I grew up with a ski boat, a Mastercraft and wasn't to wakeboard.

Maryline Bossar: Why's that?

Doug Benefield, CPA: Well, my grandfather, was a ski boat. So it was like, you know, got very little draft. And when wakeboarding became popular, they wanted to put these sacks of water in the back of the ski boat so that the wake would be bigger and you could have bigger jumps. And my grandfather was like, we're not doing that.

Maryline Bossar: All right. Gotcha, yeah, you were trying to trick the wake to make it work for your purpose.

Doug Benefield, CPA: Correct. ⁓ they've got like flaps that go down. They've got good friends that put 80 pound bags of concrete in the back of their boat. Like anything.

AMANDA: Don't they actually make those things that stick on the side that actually do build up the way? Yep.

Maryline Bossar: So I want to know, did your family end up buying a wakeboard boat properly or no?

Doug Benefield, CPA: No, no, we stuck with a ski boat, like just old school, slalom skiing. I had dreams of Callaway Gardens. They have like a professional slalom team.

AMANDA: Yeah, do.

Maryline Bossar: Let me introduce you to Joe McKinley next and Joe is a fiduciary licensed registered investment advisor. And that's important because not all advisors have that fiduciary responsibility. Joe, Tell us about you and your boating background as well.

Doug Benefield, CPA: This is okay.

Joe: Yes, I'm an investment advisor. We specifically work clients who generally are looking for tax strategies in the asset management space. And Boats is a asset that provides a lot of tax advantages. But we work in the fiduciary kind financial planning ⁓ and allocation and retirement planning. And so ⁓ between Doug the tax compliance side and ⁓ kind of asset management side, we have a great team. When it comes to boating, I was allowed to wakeboard. So that was my boating experience growing up. I fortunate enough to live very close to the beach, so I liked to surf, was always in the water, paddle boarding everything. I'm not sure sailing ⁓ is in future, I feel like sometimes nice to know that your advisor on the financial side not necessarily a huge boating fan. because we're probably gonna shoot you straight. We're not gonna tell you which boat to buy because we simply don't know enough about sailboats to provide that advice. That's why we partner with you guys because that is your bread and butter and you're the experts in that field.

Maryline Bossar: Be careful before the end of this episode Amanda will have you booked on a charter in Belize. So stand by.

AMANDA: Yes, that might be true.

Joe: I think the real reason is I'm gonna love it too much and it is gonna send my life on a trajectory that maybe is not in the plans currently. Don't tell my wife that.

AMANDA: Well, with Starlink now, you can actually work from your boat. So it is a possibility. ⁓

Maryline Bossar: That's it. You're leaving money on the table if you're working in an office. So as we've come to realize working with Tideline and with the many clients that we've served, you have this specialty for yacht and boat acquisition. You also want to make sure that your clients structure this business properly and that your tax benefits are legitimate. Super important. We're not trying to find loopholes and things that aren't there to begin with. They have to be absolutely compliant with the

AMANDA: Yeah, that's true.

Maryline Bossar: IRS regulations. So the big question that everybody's got on their mind is, can I actually write off my yacht if I put it in charter?

Doug Benefield, CPA: It depends. ⁓ It's important structure the deal correctly. But if you've got a legitimate small business, which could be a charter boat, and you have a profit motive, this stands up scrutiny under the IRS.

AMANDA: That's great. And what constitutes a profit motive?

Doug Benefield, CPA: we walk through this from start to finish. It typically starts with tax planning and cash flow planning. And we're going to build a business plan eventually, but we want to document how we're going to make money before we buy the boat. If you buy the boat and don't do any of this stuff, the risk is the IRS comes back and says, hey, you just bought a boat and wrote it off. Did you do any planning? Did you build a website? Did you set up the right LLC? Did you do tax filings? Did you have an accounting system?

AMANDA: understood. So there are some key compliance that need to happen. Can you walk us through ⁓ those are, especially to qualify for, ⁓ depreciation? What are the key things that need to be addressed?

Doug Benefield, CPA: Sure. ⁓ Bonus depreciation is the goal. And more specifically, we want active losses from bonus depreciation. What does active mean? Well, the IRS has defined it as a materially participating partner. You are actively involved in the management of the business. And there's one piece that's really important. You have risk. If there was no risk in a situation, it's not a real loss. can't go to offset your W-2 or your 1099 income, your K-1 income. We want there to be risk to the owner, which there typically would be when you put a boat into charter. we want you to document your time and your participation.

Maryline Bossar: So let's pause right here for a second because we've heard of programs that offered guaranteed income and depending on where you look and whom you ask, you'll have different answers as to whether or not this constitutes a active participation structure. that a for you as soon as the income is guaranteed or can you qualify this for us?

Doug Benefield, CPA: Thank you. It's not a no-go for my end. So guaranteed income is a term. Our first stop when we look at guaranteed income is, it really guaranteed? Guaranteed by who? Guaranteed by the charter company, guaranteed by the US government as bonds. Two different things. I'll say the important piece with guaranteed income is, are you actively participating? Are you still involved in the management of this business? It would be great to get a 5 % to 8 % return guaranteed. But can we also document that you are participating in the management of the business? If the charter broker is doing everything and you're not even allowed to step foot on your boat in a guaranteed income program, I would say the battle with the IRS if we were audited would be uphill.

AMANDA: That's a fair statement.

Joe: And I would say that at times, this is how Doug puts it, we're necessarily here to tell you or no. We're here to ⁓ point at lines in the sand in ⁓ our opinion law and court and IRS audits, Can go different ways maybe not based on what's written down but based on who you're arguing with What's the mood of the agent that day? What's the mood of the judge that day? and so we're you know, does a really good job of painting the opinion ⁓ and try to the risk ⁓ as it it exists and as we view it, but he does not tell you whether not, know, if you want to take that risk, that's a whole different conversation.

Doug Benefield, CPA: it's not job to determine what your appetite for risk is. It's our job to show you where the risks and rewards exist. You determine where you want to live.

Maryline Bossar: in a way, it's very similar to our jobs as Yacht brokers because when Amanda takes a client through a survey, they will discover things that were perhaps unexpected. And it's up to that buyer to then determine, ⁓ I wanting and willing to deal with this? And we're just here to guide and it's up to the buyer to decide, yes, I will take on this project and I will offer a lower offer. Right? Amanda, you want to speak to that for a second?

AMANDA: Absolutely. That's a perfect example of risk. Same when it comes to choosing what kind of boat they want to get into. One may say, hey, well, a power cat won't hold its value as long as a sale cat, but that could in ⁓ way the market is structured. It just really depends. And there is always risk when we are playing in this type of business with a ⁓ asset that is floating. ⁓

Maryline Bossar: and depreciating rapidly, generally. Have to say this, it's true.

AMANDA: Yeah, this is true. You have to go in eyes wide open on these understandings.

Maryline Bossar: Okay, so back then to the compliance components. What was next on our list?

AMANDA: So you say, Doug, that bonus depreciation is the goal. ⁓ Is Section 179 still thing? Are people still qualifying under that?

Doug Benefield, CPA: Section 179 is a thing. The trouble comes when you look at the laws behind Section 179. The rules say that it cannot create a loss inside of the activity that produces it. So let's say we go out and buy a boat, we use Section 179, we have $100,000 of revenue. Section 179 can only take us to zero. Our goal is bonus depreciation, which is back with the one big beautiful bill. back to 100 % of the purchase price of the boat. We want a deduction for 100 % of the purchase price of the boat in the year that we buy it and we want those losses to offset ordinary income. Bonus depreciation section 168 is much better than section 179. But everybody talks 179, 179. ⁓

AMANDA: hear you. Okay. So it's good to understand the terms behind each one of these. and correct me if I'm wrong, bonus depreciation, you can actually take over a series of years, correct?

Doug Benefield, CPA: It's possible to spread the bonus depreciation out over a few years.

AMANDA: Yeah. Okay. And in section 179, it has to be all done in one year, correct?

Doug Benefield, CPA: It's an election that you take in the first year. But keep in mind, you can only go down to net income of zero in that business activity.

AMANDA: Got it. Right. OK.

Doug Benefield, CPA: Bonus depreciation a million dollar boat, take a million dollars of bonus depreciation, a million dollar loss comes to your personal tax return to offset all other types of income.

AMANDA: Yeah, okay,

Doug Benefield, CPA: Because in Florida and we don't have a state income tax in Florida, ⁓ our is bonus depreciation for any business. Sometimes if you're in a state that doesn't allow bonus depreciation, ⁓ we choose section 179 over the bonus depreciation. Specifically, if you're selling your old boat and buying a new boat, the 179 can act as an offset similar to a like kind exchange, except you have two transactions. You have a gain from sale and you have new section 179 depreciation. Inside of the same activity, they offset each other.

AMANDA: Okay, understood. Thank you.

Joe: And it didn't. maybe any real estate professionals who are ⁓ watching and the way I think about it as an investment professional is 1031 which is ⁓ allowing the of an investment property to take those proceeds without paying ⁓ the tax on gain and those proceeds into a light kind property using the 1031 exchange laws and rules. allows you to defer that tax consequence hopefully until death ⁓ if can. With the boat, it's the ⁓ same outcome. You're selling boat, there's going to be some sort of recapture if you depreciated the boat, there's going to be some sort of tax consequence on the sale. And by buying, ⁓ your goal to get the next boat, the next, you know, your life is upgraded, you're ready to upgrade the boat, you're in the position to buy it. you can buy that boat in the same year that you sold your previous one. And the 179 almost makes it identical to a 1031, but it is two separate transactions with a very similar outcome.

Doug Benefield, CPA: Historically you could do a like-kind exchange with assets like a boat but the IRS came back and further further defined that like-kind exchanges section 1031 can only be done with real property

AMANDA: meal property.

Doug Benefield, CPA: still possible to get the same effect of a like kind of exchange, but on our end on the tax side, it's two transactions. It's a sale and a purchase.

AMANDA: so what are some of the most essential business documentation and operations that our listeners should be aware of?

Doug Benefield, CPA: Thank you. our standpoint, as the experts, we a full network of attorneys, ⁓ other maritime folks. We want to be a formal operating agreement for the business. ⁓ We want partners involved to have a document that allows for asset protection. This becomes increasingly important when you have a $2 million boat that was paid for with cash, husband and wife, married couple buys the boat. We want an operating agreement that says, hey, if this person gets sued, the other partner can buy out the partner being sued. It works really well because Florida is not a community property state. Husband and wife, spouse and spouse can be. separate people inside of a business.

AMANDA: So that's a level of protection.

Doug Benefield, CPA: ⁓ second. ⁓ that's almost specifically asset protection. But ⁓ you mentioned earlier, you've got an expensive rubber ducky floating around the ocean with saltwater. There's all you've got credit card captains that are going to potentially borrow your boat and run in on a reef. We want all of these protections. It's easier to build the protections in from the front end than to try and recoup after someone breaks or burns your boat up. piece we mentioned earlier ⁓ is business. Typically the business plan is the ultimate product that starts where Joe and I sit down with a client and specifically look at these are the tax implications of buying my boat. You know what boat you want, you know what purchase price it is, we build a full financial and tax plan that will show you just how cash flow wise and tax wise this boat is going to happen. All of this work in the business plan has been done on the front end to argue that we do have a profit motive. We know we can make money. We know we want 20 charters a year, X dollars per week charter. We know the boat insurance costs X. We know that dockage, mooring, all of these other ancillary things cost money. We want to be able to prove from the front end with a document, the business plan, that we think we can make money and here's how we're going to do it. And this is a living breathing document. We have plenty of clients that have come back and said, hey, we want to update the business plan. We're buying a new boat. It's a six cabin, not a five cabin. moving from the BVI to Bahamas or Belize. We have this happen all the time. It's a living document. That's part of documenting your participation in the business. Hey, we're making managerial decisions that are the best for us. Maybe you want to move the boat, maybe you think somewhere will make the boat will make better money.

Maryline Bossar: question on this Doug then a lot of the time our clients will receive pro forma from the charter operator or charter management company that they're considering do you weigh in on that at all because you have the chance to compare different programs you are in a unique position a little bit like we are but then the numbers are way more important and they can feed directly into that business plan so can you speak to that

Doug Benefield, CPA: Sure, so our business plan does have a foundation. The foundation of the business plan is typically a charter broker's pro forma. Not necessarily the folks selling you the boat, but the people managing the charter boats in fleet. are the experts on how many weeks a year your boat can be rented, and we don't necessarily advise one way or the other. We have an idea of base level, this is how many. but we don't advise specifically on the proforma. We do want to see it.

Joe: ⁓ and just to add to that, our prior knowledge because we've seen many different results for types of boats, different charter companies. What we do is really set a range when we're doing an analysis because as you guys know, every year is different with charter demand, with what's going on in the economy, that the idea that you're going to hit a ⁓ digit or double digit percent return net of everything. every year ⁓ a straight line, it's not true. And so we make sure that we bring in some of that knowledge and communicate that and start to say, hey, there may be a bad year and maybe it's on this low end of the range and that's how that year looks versus maybe it's a high year so that we ⁓ can realistic scenarios.

Maryline Bossar: Okay.

AMANDA: That is a very fair assessment and assumption. I know for a fact that in 2022 and 2023, proformas looked a lot better than they look today. And people made decisions based on those proformas. And I think as we've gone along now, it's 2026, and we're coming off the high of that COVID boom and bust. People are now seeing a more realistic proforma, hopefully being painted.

Joe: And our tagline and something we make sure to tell every client, especially as and advisors on assets, is this is the most affordable way to own this type of asset. It is not necessarily ⁓ function of a retirement plan ⁓ reliable cash flow. And so you have to ⁓ sure that you are ⁓ wide open looking at

Maryline Bossar: Right.

AMANDA: Thanks

Joe: asset and the real risks involved from a business standpoint. What is this business going to earn me ⁓ a good year and on a bad year?

AMANDA: Yeah. We are always the first ones to tell people that it is a lifestyle investment and look to offset your cost of ownership putting the boat into charter and not so much going into it with ⁓ desire that this asset and this business that you've started will be ⁓ super profitable you. That's really just reality.

Joe: Yes.

Doug Benefield, CPA: can build this boat into your retirement plan ⁓ perfectly, but it is not necessarily the retirement plan itself.

Joe: not the foundation.

Maryline Bossar: So what else, Doug, do we need to be on the lookout for for proper planning and business documentation? We started with the operating agreement. We talked about the business plan. What else?

Doug Benefield, CPA: opinion is that your boat should be able to stand on its own without the charter broker. Most of the charter brokers will allow for owner's weeks where you can rent your own boat. Some them even offer a discount or an extra ⁓ commission to the boat owner for bringing your own charter guests. ⁓ We you should have some sort of marketing presence other than the charter broker. Maybe it's a website, maybe it's Facebook, maybe...

Maryline Bossar: Okay.

Doug Benefield, CPA: you take pictures when you're on the boat and you just post them to Facebook under a separate social media page. But if somebody wanted to come to owner number two and say, hey, I would like to rent your boat. I love the pictures I'm seeing on Facebook. You should rent it to them. This bolster our argument that you're actively participating in the business.

Maryline Bossar: Okay, that's a good one.

Doug Benefield, CPA: Any regular business would have accounting and record keeping. This is easy, we can do it. That's my world that I live in, small business, accounting and tax. Your business, your charter business should have a QuickBooks or a spreadsheet and you should be tracking income and expenses. If it was a real business, you would. If you're just dumping cash into it every month and the boat never makes any money. You might not care about the accounting records. We do. We want to check one more box to the IRS that we're operating this business legitimately. We were watching the bank account. We have a credit card. It's set up for the LLC as an EIN number. We have QuickBooks. We're running monthly financials. We are monitoring the performance of our assets.

Maryline Bossar: Okay, very good. So naturally this takes us to the next question, which is for that particular business ⁓ form, ⁓ the entity formation is most common? What do your clients typically use?

Doug Benefield, CPA: The most common entity that we prescribe is a multi-member LLC. By default at the IRS, a multi-member LLC is a partnership. of the benefits is debt that you place on the boat that you're personally guaranteeing allows you to take the losses. It's what gives you basis in the business. The debt gives you risk. The risk allows you to take losses against the debt. a multi-member LLC is not possible, if it's just one person, we can also choose to be an S corporation, which is a pass-through entity. That entity, ⁓ S will also satisfy part of our deflection. If we put this business directly on your 1040, on your individual tax return, the IRS only has to go one place to audit it. If we set up a pass-through entity such as a partnership or an S corporation, we've added a layer of complexity that at this point the IRS just doesn't have the ability to

Maryline Bossar: So I have a follow-up question from what we discussed earlier. Obviously, IRS scrutiny is on everyone's mind. Whatever you're doing that may not be kind of the bread and butter of every taxpayer, you want to ensure that you know what you're doing. And if you are raising red flags with the IRS, you can navigate them smoothly. So have you dealt with any audits from your clients based on these strategies? And can you speak to what you've learned, if so?

Doug Benefield, CPA: ⁓ ⁓ the IRS against an audit. We have had one client that had trouble with the IRS that we inherited from someone else who had set up the business.

Maryline Bossar: Okay, that's getting interesting.

Doug Benefield, CPA: Yes, this individual put the boat to charter business directly on to his individual tax return and the IRS that hold up. We're not giving you this big refund. This depreciation is not real. You're not really operating a business. So we have dealt with the IRS and we have succeeded for the client. we have not experienced any IRS trouble with the method that we prescribe.

Maryline Bossar: And there are other cases that Amanda and I have come to learn about ⁓ over the years. Have you into those to also make sure that your strategy and approach is safer ⁓ than most?

Doug Benefield, CPA: Sure, we did. When Joe and I first connected, Joe had a client that wanted to buy a boat. Joe said, hey, Doug, do you know how to write off a boat? Writing off a boat used to be pretty easy. They changed it in the Tactics, Cuts and Jobs Act that made it more difficult. there are plenty of court cases where people buy boats and those boats are run as businesses. They're chartered out.

Maryline Bossar: Thank

Doug Benefield, CPA: and the owner of the boat gets a tax deduction very similar to a bulldozer. You could go buy a bulldozer and use bonus depreciation, put that bulldozer to work on a daily basis and that's a business. The same thing exists here with the boats. It's documenting your participation, it's being thoughtful in your decisions. All of these pieces feed into minimizing audit risk.

AMANDA: Joe, the next question is for you and your role. It goes just beyond tax compliance. Can you tell us more about how you are part of the Tidelines team?

Joe: Yeah, so generally we run into two types of clients or who are ⁓ to fall into two camps. The first being they are really solely focused on the compliance. So hey, maybe they have a team or maybe they just to make sure that they're working with individuals like Doug ⁓ specific tax compliance ⁓ that's all they want to talk about. That's all they want to know. They want to make sure that that is squared away and they stop there. There, the second camp, a lot of people who are looking to more holistic financial planning involved with the asset purchase. And that leads into kind of bigger questions about where should I draw the money to pay for this? Should I take a loan? How does this affect my financial plan? Is this gonna impact my retirement? Doug and I working together we're able to zoom out and look at the big picture and provide enhanced strategies that the boat complements and make sure that the client is staying on the course they want to be on financially, not just for the next three years, but for the next 30 or 40 years.

AMANDA: So this includes funding sources. What are some of those creative sources that you recommend?

Joe: Yeah, so there's multiple options when it comes to buying the boat. mean, some individuals can just pay for it in cash. Some put down a down payment and can borrow from a maritime lender, which there are a handful of them that exist. Some of them may from a home using a HELOC if they're real estate professionals. and some individuals are able to borrow from an after-tax brokerage account. we come into play is to really help weigh those options and decide based on, again, the big picture financial plan. which one would make the most sense based on their risk tolerance, based on their expectations of the future, based on how they want, how they wanna keep the boat, when they wanna sell it, if they just wanna own it themselves one day. But we really curate ⁓ a ⁓ funding or purchase strategy ⁓ that matches with client's unique needs and goals.

AMANDA: So you basically take into consideration their retirement income, their desire for tax diversification, ⁓ estate planning, then how that all affects their long-term wealth strategy. ⁓ Wrap it one bundle and say, you want this lifestyle. This is the best way financially for you to achieve this goal. ⁓ Is that

Joe: Exactly. And a big thing we look at is liquidity as well. I'll give an example real quick. We had a client in 2021, we'll call him Dan, and he purchased a beautiful, I think it was like a Bali 5.6, it was maybe like 1.6, 1.7. And we worked with him, he was in a position where he was retired early and had a very robust after-tax stock account. And so instead of him taking a loan from a bank, paying cash out of pocket, we borrowed from his stock account, opened up a ⁓ line of credit where the stock account was the collateral, which provides him one of the lowest interest rates that exists in the marketplace to purchase the yacht. So now he owned the yacht, and his stock account was still fully invested. He didn't have to sell assets or do anything to make that purchase. Fast forward to today, the S &P 500 since 2021 is up about a little under 100 % since that purchase was made. And so because his money was still invested in a moderately aggressive allocation, his, you know, call it $2 million is now $4 million. and he's been paying interest which Doug I think has been deducting to some extent his outcome could not have been better. He owns the boat, he still owes money on the boat because he has that, he borrowed against his line of credit but his assets have grown at 14 % annualized returns and he is a wealthier guy because of it. the financing side. then Doug, I don't know if you want to touch on what we able to do with those losses that were generated by buying the boat.

Doug Benefield, CPA: Sure, thanks Joe. Let's call the client Dan, like you did. Dan's got the after-tax stock portfolio. Dan's a single guy, he lives in California, and we threaded the needle so tightly with excess business losses. Dan was able to pull money from a qualified retirement account in IRA. We used a specific amount of depreciation every year from the boat, tax depreciation. to offset his IRA distributions and keep him in a income level where marketplace insurance, Medicare insurance, you're not paying back the government subsidy and you're not being assessed a Medicare premium. So we've got a guy with $4 million in a stock account. He's got an old retirement plan that we've gotten all the money out of. He maintained. California health insurance with a subsidy and he's got a boat that basically paid for itself because his money was sitting in the stock market the whole time.

Joe: Yeah, so what that looked like is $1.6 million came out of a pre-tax account, an IRA. into a Roth or a brokerage account. And he paid zero tax on that money leaving the retirement account, along with the portfolio, you know, growing at the nice percentage rate that the market's given us over the last five years. It really was, ⁓ it's of a key example of some of the decisions and some of the risks he took led to this amazing outcome.

AMANDA: That's a great example of something very outside of the box, but had turned into a very great result.

Maryline Bossar: Now, some of these strategies are quite advanced and perhaps reserved for people who have larger portfolios. Can you speak to the typical client profile that would take advantage of that particular example so we're not misleading anyone? And then we'll probably kind of zero in on some other perhaps more common options that are still relevant and something you may assist with. I have a question on that, but let's start with that one.

Joe: Yeah, we see three or four different camps of buyers that come in or ⁓

Maryline Bossar: Okay.

Joe: are looking at implementing this charter strategy. The first and kind of easiest one is, is, hey, we just had a major liquidity event. Doesn't matter what age you are. You could be 30 and you just sold your tech company or you could be 65 and you have sold the business you build over your whole life. And now you have this massive influx of capital in one year with a massive tax bill. And you're like, what am I going to do now? I'm going to buy a boat and sail around the world. right? That's the dream. You made it. And that's a pretty straightforward, you know, there's not much management in that situation per se. Then there's ⁓ the biggest which is more probably people in their ⁓ 50s or 60s who are looking at retirement. They see it coming right around the corner and they love boating. They love sailing.

AMANDA: you

Joe: And they're looking for a way to exposure to the ⁓ and the lifestyle ⁓ they're still working. And then once they're done working, maybe have the boat there available in the practice, having been done ⁓ sailing to make it a huge part of their retirement lifestyle. And that ⁓ worth kind of range or asset range could anywhere. It could be anywhere. The reality is it doesn't matter if you have 10 million, 20 million, or 1 million, or 2 million. You want to make sure that the plan to get to that dream lifestyle fits in your financial plan. And so that's one we run into often. Doug any what's another good one high income earners

Doug Benefield, CPA: another client of ours has a large SeaSuite, big company, publicly traded, half a million dollars on a W2, million dollars on a W2, living in New York, paying out the rear end in taxes. They want a boat, they love to sail. They're still working full-time. It's like the best bang for the buck. The depreciation. a W2, offsets just enough of their W-2 income where that drops them from a 37 % tax bracket down to a 35. We're saving 37 cents on the dollar with this boat purchase. The boat's basically on sale 37%.

Joe: And biggest thing with W-2 earners, and they know this, there's not ⁓ many to pull to lower your tax liability.

Maryline Bossar: Right.

Joe: Business owners get all the fun bells and whistles with ways that they can write things off and assets they can own. But W-2 earners really hamstrung ⁓ things that they can own and strategies they can implement to directly lower their adjusted gross income.

Maryline Bossar: Yeah, so thank you for kind of clarifying who this may apply to. We run across a lot of clients who are getting ready to liquidate ⁓ company, sell a company, something ⁓ that nature. Can you come up with an example that you've helped with recently that could illustrate this point and what that would look like ⁓ from end and how you advise clients in that situation?

Joe: Yeah, absolutely. We had a client who sold a business, was the largest liquidity event that they'll get in their life. ⁓

Maryline Bossar: Mm-hmm.

Joe: immediately went and looked to buy a in cash, which offset the capital gains and a lot of the ordinary income that they earned. they were in a position where they hadn't worked with any professionals that were specifically ⁓ at strategy. versus just doing compliance work and just giving them a place to put proceeds or put money. And so Doug and I were able to work together to not only help with the boat in that tax incentive, but work in another, couple of other spaces that we also specialize in, which include real estate and opportunity zones and energy to build out a portfolio things ⁓ of the boat that they could purchase, that they could invest in, that helped them defer ⁓ minimize a lot more than what just the boat could have done. And so it was a ⁓ really nice And I think, ⁓ you know, we do that zoom out, when we start to look at things holistically and we see that somebody's a real professional, they have a bunch of investment properties, some commercial real estate, we're gonna make sure we specialize in that as well. So we're gonna say, hey, is there any tax stuff that we can do here that you are already doing?

Doug Benefield, CPA: think it's important that from our end, we're looking at your entire picture. How old are you? What part of the life cycle are you in? Do you have kids at home? Do you have a retirement account? Can you access the retirement account? Are you still earning money? Where do you want to be in 10 years? do we avoid the tax on the back end? Every dollar of tax minimized is dollars that you can put into the market and they can sit and grow for you. The opportunity cost is there. We can save $400,000 in a year with the IRS. That $400,000 can go to work.

Maryline Bossar: And perhaps, Doug and Joe, you can speak to ⁓ how collaborate with existing advisors to clients that come to you. Because a lot of these people have already had a relationship with somebody they like and trust. ⁓ Can speak to how you collaborate?

Doug Benefield, CPA: our number goal is ⁓ to a client for life ⁓ and clients tend to end up trusting me. But if you have a CPA or an advisor that you've built a relationship with and you trust, you should stick with that guy. That guy knows you, he knows your business, he knows your life. We're more than happy to come in and consult on the side. We're not in the business of making you break up with your CPA, but we are the experts in this boat world. And we think that your CPA is probably not as educated about boats specifically as we are.

Maryline Bossar: Okay, that's helpful.

AMANDA: ⁓ you're to do the K-1 returns on the that you set up and ⁓ give that over the person's ⁓ CPA who does of their tax returns. Okay. ⁓

Doug Benefield, CPA: Check. Absolutely. We're more than happy to help from an a la carte standpoint, LLC, legal set up, operating agreement, business plan, QuickBooks, and tax returns. We can produce a partnership for an S corporation tax return that spits out a K1. You give the K1 to your tax guy. He inputs it in your 1040 and goes, oh my gosh, you're getting a refund or oh my gosh, we don't need to send a quarter of a billion dollars to the IRS this year.

AMANDA: Yes.

Doug Benefield, CPA: Keep it in your pocket.

AMANDA: That's great.

Joe: Yeah, from my end, it's very similar. If there are investment asset or planning strategies that. we can provide that their current person doesn't, then we're happy to just provide that niche service that we are the experts in. And we're even happy to communicate or have an understanding of going on with that advisor and ⁓ we're doing to make sure everything is copathetic. We want everybody's plan should have a holistic movement towards its goal.

AMANDA: Guys, this brings us to the question now that's on everyone's mind. How do we get started working with Tideline solutions?

Joe: I think the best way is a complimentary conference call where we just kind of get to know you. We want to know what your situation is, what your goals are, who you're working with, what do you know, what do you think you know, what do you not know. We take an education first step focus. Like the first thing we want to do is get you up to speed and transfer knowledge to you. ⁓

AMANDA: And this first consultation would be free, correct? And this is about how long in length? 15, 30 minutes, 45 minutes?

Joe: Correct. Correct. We would love if it was 30 minutes, but at times we find 30 minutes to an hour is generally where it ends up.

AMANDA: So start the initial consultation, then what? What's the next step?

Doug Benefield, CPA: Yeah, if we don't get the time to ask you the questions, the silly questions, where your kids go to school, all of those questions build a case on our end. It might seem like a regular conversation. We're finding out information that we're going to use for your plan.

Joe: generally ⁓ we like to ⁓ on a second meeting is doing an analysis that we will bring to that second meeting that is twofold. ⁓ a baseline of where you are in the world right now with your present relationship with the IRS. So what do your taxes look like the previous year? What are they gonna look like this year? ⁓ And if you buy a boat, how does that change your relationship with the IRS? maybe there's additional scenarios there so at times we'll do up to three or four different scenarios maybe it's based on different price points with the yacht maybe different types or timeline on the depreciation we're using but we want it want the client to really understand what's going to change about their taxes ⁓ The second side of it is looking at cash flow and looking at liquidity and kind of fitting it into, if we're going to pay this way, do we have the cash? Are we going to have to sell something or are we pulling it from the IRA? We want to match those things together, ⁓ whole goal ⁓ the analysis is to give the client the confidence to ⁓ ⁓ good about making the purchase or not. ⁓ just a game of seeing the numbers versus acting purely on the emotional aspect, which is I definitely want to buy this. ⁓

AMANDA: So that's interesting, use the scientific method and you have your control, which is no boat buying scenario and then all your different samples which buy a boat, buy this expensive boat, buy this not so expensive boat, buy this boat, it in charter. And then you see your different variations of the results. That's an interesting scenario.

Joe: Exactly.

Doug Benefield, CPA: There are a thousand ways to get this boat into your life. We want to find the most efficient strategy. What saves you the most on taxes? What keeps the most money in your pocket? What's the lowest interest rate? How can we borrow the money to pay for it? We're analyzing all of that stuff to provide you with what we think is the most efficient and affordable way to own a million five catamaran and stick it in the Mahamas where you can take your family.

AMANDA: So what comes next then, Doug?

Doug Benefield, CPA: We're going to be with you from your first boat show to you close on that boat. Once you close on the boat, we move into stage two, which is operation of the business. We're going to be there quarterly, semi-annually, at a minimum annually to do a tax return. But we're here to help with all those life decisions. The business plan is this living document. It's got to work with the rest of your lifestyle and things change. Your kids grow up. Maybe you don't like spending time in the Bahamas. ⁓ I personally think it's Maybe you don't end up enjoying it. Maybe your wife hates sailing.

AMANDA: Yep.

Maryline Bossar: This is also why we definitely recommend our clients charter before they buy. think that, you know, happy buyers make happy boaters. If you buy the wrong boat or you make the wrong move, it's a waste of time and energy too. It's not just about the money. So we definitely recommend that you ⁓ charter. ⁓ go that.

Doug Benefield, CPA: These are expensive decisions. These are expensive decisions. You got a lot on the line. We're potentially advising you to not give the IRS a quarter million dollars this year. That's just a wild where you're paying, paying, paying, paying, and now we're not going to pay. It can cause a lot of fear. The IRS is scary to people. ⁓

Maryline Bossar: Yes. Okay. And we, I mean, Ameena, we've had conversation where the conclusion is buying a boat is not the right option for you. We're not trying to talk you out of it because this is how we make a living, but we also realize quickly if something doesn't make sense, they don't even have to talk to Tideline. We all of the time can figure this out early in the process. So that's where we come in as well.

Doug Benefield, CPA: Yeah, I was going to say Amanda and Maryline, close your ears. There are certainly scenarios where the prospective boat buyer ends up not buying a boat. Maybe they're just not there yet. They want a boat. They don't have the time to enjoy it. Maybe we can't free up enough but there are certainly scenarios where a boat is not the ultimate option.

Maryline Bossar: Well, we're totally on board with that.

AMANDA: And on it, I, yeah, we're on board with that. Absolutely.

Maryline Bossar: This is what we do at Current Yachts. We help you navigate one of the most exciting but also complex ⁓ tax advantaged opportunities available when you buy a boat. So you can find Joe and Doug at most major boat shows. They typically come every year to the Annapolis Boat Show and many more. visit our Marine Directory to contact Doug and Joe. You'll look up Tideline. The link is in the description below. And again, thank you for listening. Share episode with a friend who might be looking for the most tax advantaged way of buying and enjoying a boat. And contact Current Yachts if you need help in buying or selling your next boat. We love to talk about charter placement. This is what we do day in and day out. And we want to help you get into the right boat the right way. Until then, fair winds.

AMANDA: Fair

Doug Benefield, CPA: ⁓

Maryline Bossar: many clients have you cancelled on buying a boat over the last few years?

Doug Benefield, CPA: over 100.

AMANDA: Can a boat in a guaranteed income program qualify for tax advantages?

Doug Benefield, CPA: It depends.

Maryline Bossar: And what is the most common profession that you see as your clientele at Tideline?

Doug Benefield, CPA: new retirees or pilots.