Membership in boatominium an asset?

Forum|Forum|1 year ago
August 21, 2024
11 replies
98 views

I have owned a "membership" in an incorporated association known as a boatominum. It gives me the right to use one particular wet boat slip. I have used this for my own vessel for years, however, during the past several years I have rented the slip, declared the income and the expenses (dues, assessments, dredging costs, etc). I now have sold the membership. My question is whether the "membership" is an "asset" and if so, is the difference between the original cost and the sales price considered a "capital gain". Associated with this, should it be considered an asset, what type of costs over the years that were paid separately (such as dredging assessments) or various costs that form the budget for the boatominium, which are split up and charged to members as "monthly dues"are considered costs to be added to the "basis" (my original cost of the membership?

Not A Product Question

Bsch4477

Level 15

Read the discussion below. https://ttlc.intuit.com/community/tax-credits-deductions/discussion/how-do-i-enter-the-sale-of-a-boat-slip-at-a-marina/00/755942

jdc001Author

Level 2

I have read the info referenced, however, this refers to a "boat slip". My sale was of a "membership", not a boat slip. It is effectively like owning a membership in a swim club, where it give you the right to use the pool. You pay $5000 for the membership and sell it for $10,000. Would that be a capital gain? It is not a tangible asset.

Bsch4477

Level 15

It is an asset subject to capital gains much like a country club membership.

Opus 17

Level 15

I will accept @Bsch4477 's assessment that this is an asset (I don't know),

but I do want to point out that if this was an asset, you have several new problems.

1. Some of your carrying costs may have been items to add to the cost bass and depreciate, NOT take as expenses. (And of course, any item you expensed, even if it was improper, can't also be used to increase your cost basis since that would be double dipping. You have to correct the expenses in order to capitalize your costs.)

2. You should have been depreciating the asset. It would enter into service at either your cost basis or its fair market value at the time, whichever was lower, and then be depreciated over 39 15 years (corrected timeline).

3. You now must include depreciation recapture tax to recapture the depreciation you took or could have taken even if you didn't take it. Any part of your gain that is due to depreciation is taxed as ordinary income, then additional gain may be eligible as a long term capital gain.

4. And of course, some of your carrying costs from before it was a business asset may be includable in your basis as well, if they could be classified as improvements, but not repairs, maintenance or other expenses that are not improvements. (And I have no idea if dredging is maintenance or an improvement. I suspect it is mostly maintenance if it is maintaining the channel. It might be an improvement if it was opening, widening or deepening the channel.)

You need to talk to a tax pro about this.