In Uncategorized on 08/02/2018 at 18:24

Once again we’re on FL’s sunny shores, and at sea again on a high-priced fishing boat. This time, though, it’s no latter-day Flying Dutchman like the ill-fated Shockwave, the 62-foot Viking Convertible in my blogpost “Go Fish,” 10/15/12. Rather, we have Damon R. Becnel, 2018 T. C. Memo. 120, filed 8/2/18 and his 67-foot Bertram fishing boat. Da-Bec is a heavy-hitting real estate developer out of Destin, FL, “The World’s Luckiest Fishing Village.”

Poor Judge Holmes; I feel his pain. I remember lamenting that the surest sign of my failure in the world is that I do not own a boat; see my blogpost “Your Money or Your Life,” 1/10/13. So here’s The Great Dissenter/Concurrer, Master Silt Stirrer and Old China Hand, Judge Mark V. Holmes, pining over Da-Bec’s seagoing palazzo.

“…Becnel paid just over $2 million for a Bertram fishing yacht.  We find the boat a beautiful specimen of its species:  It’s 67 feet long with four staterooms; a well-appointed salon, galley, and bar; a tuna tower; and a slew of electronic gadgets and built-in fishing equipment.” 2018 T. C. Memo. 120, at p. 4. (Footnote omitted, but it says Da-Bec bought it in a disregarded, so it’s his).

Of course Da-Bec wrote it off, hiding expenses under the heading of “beach chairs, boxes and umbrellas,” and being coy about handing over documents to IRS’ auditor. Da-Bec claimed it was “relationship marketing,” wooing high-rolling types to his high-priced fishing village to buy his condos. And he did credibly testify he made sales.

But his substantiation of expenses craters when he tries the shoebox gambit, handing in a ton of paper at the trial and claiming IRS’ auditor never asked. Except Judge Holmes says she credibly testified she did. So the 14-day rule ruled out Da-Bec’s shoebox.

“Becnel might have gained access to potential condominium buyers at the fishing tournaments, and he did credibly testify about anglers he met who later bought units.  But just because an activity generates some business doesn’t mean it can’t be entertainment under section 274(a).  See, e.g., Harrigan Lumber Co. v. Commissioner, 88 T.C. 1562, 1563-64 (1987) (hunting with clients is entertainment even if those clients generated over $5 million worth of business in two-year period), aff’d without published opinion, 851 F.2d 362 (11th Cir. 1988).  Becnel emphasized the third party referrals he received from people he met at the tournaments, but this is analogous to the influence that wives of appliance retailers might exercise over their husbands.  See Churchill Downs, 307 F.3d at 427.  And Becnel may have kept sales packets for his condos on board the [yacht] at tournaments, but that doesn’t make condominium sales the focus of those events.  See id.  Becnel is not a professional fisherman–he isn’t even in the boat business–so we find that the fishing tournaments were merely entertainment activities for him and his company.” 2018 T. C. Memo. 120, at p. 17 (Citation omitted).

And the yacht was an entertainment facility, of the kind abhorred by Reg. 1.274-2(e)(2)(I). Da-Bec’s lack of logbooks of business guests, business talk and business doings sinks his attempt to distinguish between entertainment activity (deductible, maybe) and entertainment facility (definitely not).

But his yacht, the Britney Jean, motors safely though the Shoals of Graev. Da-Bec raised the accuracy chops on the merits in his papers, but IRS fell silent on Section 6751(b). No chops.

So it’s a Rule 155 beancount. Da-Bec and IRS, go fish.



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