Question
Your long time clients, a married couple, Elijah and Lori are avid boaters and water skiers. They also enjoy parasailing. This year, they started a
Your long time clients, a married couple, Elijah and Lori are avid boaters and water skiers. They also enjoy parasailing. This year, they started a new parasailing venture to provide rides to patrons. Elijah and Lori are both employed full time in other pursuits, but they take patrons out during the summer months, on weekends and holidays.
Elijah has attended classes on boat operation and parasailing instructions. Elijah and Lori have owned a boat for four years, but because of the heavy usage this summer, they replaced their old boat in July. They plan to replace their boat with a new one every two years. They use the boat for the parasailing business, but also take occasional personal trips. This year, Elijah and Lori earned $6,500 from parasailing and incurred $11,100 of expenses. They come to you, their trusted tax accountant for your expertise regarding their new endeavor.
What is some tax advice you would give them regarding:
- Purchase of the new boats
- The usage of the boat for business and personal use
- How the loss will be treated (Business vs Hobby Loss)
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