Unfortunately it would not really matter if the boat was in the name of the business or not, or if the business paid you a sponsorship fee, this would not be a deduction allowed by the IRS.
In order for an expense to be deductible for your business, it has to be what the IRS says is considered both ordinary and necessary in your line of work or trade. I think you would agree that most detail shops do not ordinarily buy boats for the sole purpose of advertising their business name and it is certainly not a necessary expense.
If you owned a boat rental business or if you were a boat dealer, then you could probably justify such an expense as being ordinary for your trade. But a small vehicle performance and detail business would not qualify to claim this as an ordinary or necessary advertising expense.
There was actually a very famous tax court case a number of years ago where a tax preparer tried to write off his boat by using it to advertise his business. The IRS audited his returns, disallowed all of his deductions, took him to court case, and he the IRS decision was upheld. He was forced to pay thousands of dollars in back taxes and penalties and interest that he owed due to claiming these expenses as deductions on his returns.
I am certain this is not the answer you were hoping for, but I thought you should be aware of the risks involved here in trying to claim this type of deduction.
Thank you Customer
Hello again Customer,
None of the expenses related to your boat would be deductible, whether it was used in events or not. Those events are not events that are directly related to your type of business and they do not meet the definition of ordinary and necessary expenses.
You could go ahead and deduct these expenses on your tax return, and if you never get audited you will have no problems. But I can pretty much guarantee you that if the IRS audits your returns, they will most definitely disallow any and all deductions that you claimed that were connected to any boat expenses. You would then end up not only having to pay the additional taxes due, but also face stiff penalties and fines, and that is what I am trying to caution you on so that you don't get caught in that situation.
Your business is not connected to the boating industry in any way, and the IRS would never justify expenses spent on a boat as ordinary and necessary advertising expenses.
Obviously I do not know in detail how your business operates. But in your first post you said that you had a small vehicle performance and detail business. I did not take "small vehicle" to mean boats and/or boat engines. But even if you do perform some work on boats or boat engines, if that is not the main focus of your trade, I am quite certain this expense would not be allowed.
Many taxpayers are under the impression that they can use their business to write off a number of lavish expenses or expenses connected with a hobby, simply by somehow connecting their business to that expense. But that is a false impression for many people who over the years have heard that you can "write that off as a business expense". Another example of this is a business who would buy a lake front property and try to write it off as an expense because they entertain clients there sometimes. That would not work either. It's just not that simple.
The expenses to purchase and maintain a boat far exceed what normal advertising costs would be. So in order to justify those expenses, your business would need to be primarily focused on the boat industry, and even then not all of the costs for the boat would likely be deductible. There is still the element of the personal use and enjoyment that you get from the boat, so even if your business were directly related to the boat industry, the expenses for the use of your personal boat would still be limited. But if this is not the primary focus of your business, then none of these expenses would be allowed by the IRS.
The IRS might allow you to deduct the cost of having the name of your business painted on your boat as an advertising expenses, but they would never allow you to actually deduct the cost of the boat or any of its operational expenses.
Believe me, if there were any way for you to claim this without it being risky, I would be the first one to share that information with you.
Thanks again Customer