"Never get out of the boat" (gain on boat sale)

Client buys boat for $30k, sells it for $80k.

He received a 1099 and he is livid becauee he dropped at least $150k into this thing over the years.

But much of that, I suspect, is slip costs, repair, and mx.

I haven't queried him or explained capital improvements yet.

But that's the approach, correct? He can only use the big ticket items (capital improvements of course) to offset any gain? It's similar to, say, a 2nd home? Any ideas?

No difference than a home in that respect.
It's not uncommon to have substantial improvements made to a boat, especially if it is not new.
I just sold my boat last summer. I bought it for $22K, put $40K into it over the years (improvements, not maintenance), and sold it for $26K.
Obviously, I'm not in the business of buying and selling boats.
However, I can tell you if I'd have put $80K into it, I likely could've sold it or $50K. The scope of the client's numbers seem reasonable to me.

What is he livid about? Losing money or getting a 1099?

Paying tax when he spent/lost so much money. I have not yet explained the details of what he can deduct and not deduct yet because I wanted to confirm my approach.

What he can deduct and not deduct? Deduct zippo. Add to basis, maybe. No deduction, no tax loss.

100% Agreed and understood on both levels, my fault.

What he can add to basis I think goes to intent/purpose. If he bought it and rebuilt it strictly for investment purposes, then I'd take every penny spent other than the rum and blender.

If it was for personal use, then only things that would not be expenses of running it, merely the stuff that adds improvements.

I am not getting anything to work today and so maybe I am dense today.

What kind of 1099 did he receive? NEC or a misc income with other income?

And what kind of company gave him the 1099? Maybe another business gave him a 1099 to him for his business? Because somebody would have needed his SSN or TIN to issue a 1099.

I wondered that, too. Who issues a 1099 on the sale of a boat?

I think it is the bank from which the buyer funds the purchase prior to wiring him the money.

Or the broker/title company that handles the transfer of the title, if there is one.

[note: Boat not an investment or business. Recreation only.]

Client is resistant - but I am suggesting he sends the W9. Why would he not want to be compliant and help the seller to be compliant? it turns out, he has capital improvements, with substation, for much more than the sale price.

Opinions on why I should suggest otherwise or that he should be resistant and not comply with their request?

I say, he's gotta report it anyway, there's no tax, why cause a conflict?

It seems that you have a lack of information on why the boat/transfer company wants this information and is requesting a W-9.

Is it to send a 1099 form or a sales/use tax reason or new a state requirement or something else?

Because of wire fraud, the bank won't wire funds if over a certain amount without a W-9?

I don't see any reason he can't contact who is requesting the information and say he hasn't been asked before to supply a W-9 and why do they need that information? Companies keep asking for SSN#'s and when you inquire further, they don't need it.

Maybe 1099-MISC box 3 (Other Income) if the payment was made in the ordinary course of the payor's trade or business.

Hawaii has no sales or use tax on boat sales.

Boat was 100% personal use.

It appears I do have a lack of info from the client.

Perhaps I should suggest that the client asks for what compliance purpose they need the W9.

What he can add to basis I think goes to intent/purpose. If he bought it and rebuilt it strictly for investment purposes, then I'd take every penny spent other than the rum and blender.
. OK, Jeff, we now know it was 100% personal. But if it was investment purpose, you'd "take" every penny etc.? Take as what? Basis?

Yes, of course. Now that it's personal, only additions/rebuild costs. No dock fees, usual maintenance, insurance and such.

The party requesting the w9 can't seem to be able to tell us why they are filing it, what box it will be filed in, or for what purpose (or tax code reference).

We sent them the 1099misc instructions (just the part for the required types of income to be reported) and asked them which item applied, and they couldn't answer.

They argued that the instructions I provided "were instructions on how to report it on his personal tax return" (they weren't).

They also said that they needed the W9 "so they could sent it (the W9) to the IRS."

If payor is making the payment in the course of a trade or business, I would think IRC Sec 6041 applies. See subsection a and the -1 reg.

In what box should it be included?

In the instructions, box 3 does not appear to be appropriate.

What specifically is leading you to that conclusion, taking into consideration the flush language at the very beginning?

Enter other income of $600 or more required to be reported
on Form 1099-MISC that is not reportable in one of the other
boxes on the form

If payor is making the payment in the course of a trade or business, I would think IRC Sec 6041 applies. See subsection a and the -1 reg.

That's news to me. Where have I been all these years?