Marine Accounting

marine accountant

 

 

Daniel P. Ehmke, C.P.A., P.A.
Marine industry accounting at it's best.
Check out our latest Marine Industry Tax & Accounting Update. 


Accounting is my career. Sailing is my hobby. Providing personalized accounting services to the marine industry is where I excel. If you would like personalized accounting services, give me a call. 
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Marine Industry Tax & Accounting Update

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 only considered the couple's personal use of the boat, finding that the lower court "gave due consideration to the factors outlined in the regulations," such as the Wolf's lack of expertise and willingness to sustain large losses from the activity. 
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Deductions Not allowed for Fishing Boat and Fuel Boat ventures. 

Paul Matthews, an attorney, purchased a commerical fishing boat at auction for $100,000; one of Matthews's clients had a judgment against the boat's former owner and owed legal fees to Matthews. Matthews hired an experienced commercial fisherman to operate a fishing venture using the boat in 1984. Matthews wrote a series of checks, totaling at least $80,000, apparently to overhaul the vessel. The fishing venture earned $25,000 in 1985, but did not earn a profit from 1985 through 1993. Matthews also purchased two fuel barges in 1984 and 1987. He leased both boats to a marine fuel company, but the lease payments were to be paid only out of profits. The fuel barge venture never earned a profit, and Matthews never received any rental income. 

On a joint 1985 tax return, Matthews and his wife reported income from his law practice, along with the $25,000 in gross income from the fishing venture, and claimed deductions totaling nearly $19,000 for depreciation of the fishing boat. In addition, they claimed deductions for an investment tax credit for the purchase of electronic equipment, and for expenses. In 1986 and 1987, the Matthewses reported income from the law practice and claimed depreciation deductions for the fishing boat. The IRS determined a deficiency, disallowing the investment credit claimed for 1985, denying certain deductions for the three years, and asserting penalties for negligence and substantial understatement. 

The Tax Court held that the Matthewses did not enter into the two boating ventures with the intent to make a profit. The court allowed the couple's depreciation deduction for the fishing boat in 1985, but disallowed any deductions in 1986 and 1987 for either activity, and disallowed, for the lack of substantiation, the claimed investment credit or depreciation deduction in 1985 for the electronic equipment. The court imposed additions to tax under sections 6653(a) and 6661(a). The Matthews appealed. 

The Second Circuit considered nine factors determining the Matthewses' profit motive, and agreed with the Tax Court that "these factors point to the conclusion that the Matthewses engaged in neither venture for profit." The appeals court pointed out that the Matthewses "did not keep complete or accurate books and records for either venture," wrote checks from various bank accounts to cover expenses, had no prior commercial boating experience, and did not consult with experts before entering the ventures, either to appraise the boats or to assess the fishing and fuel boat business. 

Further, the court noted that neither venture ever made a profit; the "Matthewses did not offer any evidence indicating their losses were attributable to down business cycles, supply problems. etc."; and "Matthews stated that he purchased the fishing vessel to assist a client and secure his attorney's fees, and purchased the fuel boat business to provide a livelihood for his son." Finally, the court refused to disturb the Tax Court's finding that the Matthewses had failed to substantiate their claimed deductions, and affirmed the imposition of additions to tax. 
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Member of:

American Institute of Certified Public Accountants
Florida Institute of Certified Public Accountants
AICPA Tax Division
AICPA-PCPS
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Marine Specialization

My experience in the marine industry is extensive. I am currently serving clients in various aspects of the marine industry. I am a member of various marine industry organizations including: 

Marine Industries Association of South Florida
Florida Yacht Brokers Association
Gulfstream Sailing Club - audit committee / assigned rating class handicapper
Gulfstream Regatta - board of directors 
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Tax Specialization

My background is vertically specialized in federal taxation. I have extensive experience with small business and the relevant issues involved such as: 

starting a business
state sales tax
changes in ownership
domicile 
transfers of assets
form of organization 
lease/buy decisions
employee/subcontractor issues 
many other issues you may typically face 
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Personal Services

In addition to my specialized expertise, our office can handle all your bookkeeping and tax compliance requirements. I can prepare projections for you or help you obtain bank financing. I am qualified and have an excellent history of client representation before the IRS or state tax authorities. Our service to you will be dictated by your needs. I can add real value to your business as a tax and business advisor. I can give you the personal service you require. Your account will not get shuffled to a junior staff accountant. Even though you will receive personal service from a small CPA firm, I have a well connected network of other professionals, including other CPAs from a national firm, to consult with on issues where someone else may have more experience or is more qualified, such as for an SEC audit or public stock offering. 
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Technology

I have taken the necessary steps to stay current with the latest in computer technology. When ever feasable, I communicate and transfer documents by E-mail, jump on-line to research the internet, and use electronic filing procedures with the IRS. Taking advantage of the latest in processing and communications technologies has allowed me to become much more efficient. 
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Biography   marine c.p.a.

I graduated cum laude with a BBA, finance major from the University of Miami. I continued undergraduate accounting studies at Florida International University in Miami and earned my Master of Science in Taxation degree at FIU in Fort Lauderdale. I have developed professional accounting and tax skills through my eighteen years of experience in business and public accounting which includes several years of financial statement auditing, and most recently, a tax specialist at the national accounting firms of Laventhol & Horwath and KPMG Peat Marwick. I have recently been an adjunct professor of accounting at Fort Lauderdale College. 
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Daniel P. Ehmke, C.P.A., P.A.

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DANIEL EHMKE DIRECT

 
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