End of a partnership

[Ferina]

For 5 years I have shared 2 boats (currently a Hunter 25.5) with a friend. He has only a few months to live so last week we reconciled our finances. I haven't decided whether to buy his share or find another partner. He and his family are happy with this and for me to send them his share once the decision is made. We are only talking about $3000 or so. I am an ex-pat Brit so can plead ignorance of how it should work in the USA. I have a couple of questions
(1) Formal - If I give him his share of the money, will state sales tax be due on that sum? Likewise will a new partner pay sales tax on their half?
(2) Moral - in 18 months ownership of this boat we've put some money and time into the boat. Any thoughts on a fair way (to both of us) to proceed? Identical boats of the same age that are for sale vary in price.

 

[rgranger]

On question #2. What if you sold the boat for as much as you could... that way the market decides what is a fair price...give your partner his share and then buy a new boat for yourself without any guilt.

 

[Calif. Ted]

If there is a title change required sales or use tax may be involved.
Time and money spent in the normal course of ownership that doesn't increase value of boat is just maintenance, if you made some extraordinary upgrades I'd feel obliged to assume more of the cost. By extraordinary I mean a new suit of sails, watermaker, radar, something not REQUIRED.

 

[Tally Ho]

My 2 cents...i am not a lawyer...but I do have an informal partner on my boat..

1) is the boat titled in both of your names? If so, and you want to remove your partner from the title, his estate may be able to sign over the title, maybe without paying any sales tax. You may need to talk with your DMV or whoever handles the title. I would inquire anonymously and see what they say.

2) My partner and I jointly purchased our boat, and if one wants out of the partnership, we would a) allow the remaining partner to buy out the other share of the purchase price, not including the maintenance no other costs invested into the boat since we purchased it (at least that is my story if he asks me to buy out his share) or b) put it up for sale and split the net proceeds of the sale.

Greg

 

[BigEasy]

I am not a lawyer and I am sure that taxation varies from state to state.
In Louisiana, the sale of a used boat between two private individuals (without a broker involved) is considered a private or casual sale and state/local taxes are not assessed on the sale. Regardless of who purchases the boat, either you or a new partner, sales tax would not be payable .

 

[SG]

How the boat is titled (tenants in common, joint ownership, with a partnership agreement, etc.) If you are going to deal with this, doing so before he passes with him signing over the interests to you would be easier.

If he passes, you may have probate or estate taxes to deal with -- you will certainly make title more complicated.

My advise would be purchase his INTEREST in the boat. If the boat is documented, then you'll have to deal with the USCG. If it's just registered in Florida, I'd call them and ask how to deal with the title and registration issues.

In any event, I'd resolve it while you friend is alive and deal with a "note" that would provide for the subsequent payment to his heirs. If you did that before his passing, it might not get to probate or estate issues at all.

 

[MitchM]

draw up a sale contract by which he sells you his 1/2 interest in the boat, have him sign in front of a notary as seller with you signing as buyer. (you can download a sales agreement and get this signature done at a AAA office. ) at the same time, send the sale contract and a copy of your title to your state to have the boat re - titled in your name. (they will then charge you sales tax.) if it's USCG documented, call USCG and ask what documents they need besides the USCG sale form and documentation transfer form. and by all means do ALL this while your partner is around to sign . it may cost more than the boat is worth to have lawyers mess around with this in an estate..

 

[wsmac]

Dealing with the affairs after a family member dies can bring about issues no one would have any reason to be on the lookout for ahead of time.
I'll be the heavy here and tell you that with the death of a family member.... sometimes buried personal issues come to the surface among the survivors.
.
You won't know how any of the family members will react once the issue of settling the financial estate becomes the reality.
No matter how well you think you know people... you have to realize you cannot predict their feelings/behaviors later on.
For everyone's benefit, I suggest you and your friend (if he is physically and mentally able to) resolve the whole issue as soon as possible!
Taxes may be the least of any trouble that comes later on.
.
If you want to feel good about hurrying to dissolve the partnership, think about the family.
This will possibly be one issue that they won't have to be dealing with after their loss.
If this were to turn into a major emotional and financial problem... it would be hard for everyone involved.
Sorry to hear about your friend and his health issues.

 

[Kermit]

Dealing with the affairs after a family member dies can bring about issues no one would have any reason to be on the lookout for ahead of time.
I'll be the heavy here and tell you that with the death of a family member.... sometimes buried personal issues come to the surface among the survivors.
.
You won't know how any of the family members will react once the issue of settling the financial estate becomes the reality.
No matter how well you think you know people... you have to realize you cannot predict their feelings/behaviors later on.
For everyone's benefit, I suggest you and your friend (if he is physically and mentally able to) resolve the whole issue as soon as possible!
Taxes may be the least of any trouble that comes later on.
.
If you want to feel good about hurrying to dissolve the partnership, think about the family.
This will possibly be one issue that they won't have to be dealing with after their loss.
If this were to turn into a major emotional and financial problem... it would be hard for everyone involved.
Sorry to hear about your friend and his health issues.

+1 Absolutely spot-on.

 

[Tony_Furst]

Another thought, if you simply give him $ 3000.00 for his share and he transfers the title to you solely as a "gift" and neither of you claim the 3K transaction there may be no sales tax involved assuming the boat is currently titled and registered in Florida and that the appropriate taxes were paid at time of original purchase. I do agree with what others have said, get this resolved before he passes away.

 

[Kermit]

I think you should consult someone who can give you advice based on your state. Meaning a local attorney, accountant or your state tax department. Don't trust internet opinions on this one. Except for the part about family issues. They're universal.

 

[BigEasy]

I think you should consult someone who can give you advice based on your state. Meaning a local attorney, accountant or your state tax department. Don't trust internet opinions on this one. Except QUOTE]

Sound advice from Kermit. Before I purchased my current boat in a private sale, I called the LA State Department of Revenue sales tax division. I explained my situation and they were able to give me guidance on the forms that I needed and the procedure that I needed to follow at the local tax authority level and state tax level as well as the forms that I would need to present to the LA Department of Wildlife & Fisheries, boat registration department. Bottom line, It took an entire day to get the forms signed off and the boat properly registered--no sales tax paid. Just be aware that you will have to deal with the transaction at the state & local tax authority level as well as the state boat registration department.

 

[JRacer]

Another thought, if you simply give him $ 3000.00 for his share and he transfers the title to you solely as a "gift" and neither of you claim the 3K transaction there may be no sales tax involved assuming the boat is currently titled and registered in Florida and that the appropriate taxes were paid at time of original purchase. I do agree with what others have said, get this resolved before he passes away.

Disguised sale - the terms "substance over form" come to mind. Don't do that. Also recommend seeking local counsel from an attorney and CPA.

 

[SG]

Used Hunter 25.5's are listed from less than $2,000 to over $8,000. Fresh water sailed, age, equipment, condition and sellers' expectations vary. I don't know what they actually trade for.

 

[Ferina]

Thank you all for your input. My boat buddy passed away a month ago. I went to the tax dept and found that he arranged the title in both names as OR rather than AND. The clerk said that this means that I can take ownership with minimum fuss. I just need to visit the office to change the title name for $80. I still haven't decided on whether to take a mutual friend as a partner or buy his share. The family said they are not in a hurry for that decision as they know the mutual friend is a snowbird and won't be back until October. They said that their dad would 'just want the boat to be sailed'. What a great guy.

 

[JRacer]

Sorry to hear about that.

 

[reworb]

I see you got the tax issue handled. Tax issues vary from State, here's a link to the Florida Department of Revenue rules, if anyone is interested, http://floridarevenue.com/Forms_library/current/gt800005.pdf

I am an attorney (not in Florida although I live in Florida). My recommendation when there is a partnership is to have some kind of written agreement and to make sure the boat is insured for at least liability and that the insurance company knows that there are multiple owners.

 

[Ferina]

Thank you for that link.

 

[Crazy Dave Condon]

You were very fortunate that your friend was thinking of the both of you making it easy when the boat was titled.