My wife and I are 50/50 partners in an LLC. The LLC owns a sailboat managed by a charter company in the British Virgin Islands. Under the management agreement, the charter company handles all operating expenses of the boat and pays us a fixed amount every month for the term of the agreement, which ends in June of 2021. In addition, we make use of the boat or another like boat in the charter fleet for about 10% of the time. The LLC pays debt service on the boat out of the monthly fees paid to the LLC by the charter company. For 2017 and 2018, an accountant prepared the partnership return for the LLC and calculated MACRS, 150% DB, 15 year depreciation, which resulted in a net loss for the LLC even before interest on the boat loan. We have never deducted this loss from our individual tax returns since this is likely a hobby business. Our goal has been to avoid taxes on the management agreement revenue.
This year we decided to use TurboTax and, after doing the interview and looking at the forms, are told no depreciation is allowed for this asset. A quick look at the Asset Life History form tells me the program has calculated no depreciable basis for this asset, which I think should be the purchase price less previous depreciation. This does not seem right. Is the program mistaken or am I?
Also, is this boat listed property? I cannot determine from this form or the IRS documents.
