Discussion:Golf Club Membership Dues
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Discussion Forum Index --> Advanced Tax Questions --> Golf Club Membership Dues
Discussion Forum Index --> Tax Questions --> Golf Club Membership Dues
| September 25, 2008 | |
| I know - not deductible. I've read the threads, Pub 463, IRC Section 274.
My question is a bit different. Client held for investment a lot in high cost development neighborhood, with (you guessed it) a golf course. Membership in the golf club was mandatory, to the tune of $ 150,000. Annual dues were $ 12,000 per year. Lot and membership have been sold. Can the annual dues be considered part of basis of either the lot or the membership? I think not; just looking for confirmation before informing my client of the tax hit. | |
| 25 September 2008 | |
| Did the client derive any personal benefits from the membership? That is, did he play golf, use the club facilities, etc.? Or were the dues simply an integrated cost of owning the property over which he had no control and could not refuse, paid for services he did not, and possibly could not, participate in? For instance, was he an absentee owner who lived in, say, California, and owned the lot in Florida so that the dues were mandatory but effectively worthless to him personally. I know I'm not answering your question, but if you could flesh out these details, it may influence the outcome. Maybe. I don't know. | |
| September 25, 2008 | |
| HT - no personal use of the facilities. Physical proximity exists (no opposite coasts involved) but client never visited the club house; doesn't even OWN golf clubs; probably never even visited the property after purchase. It was listed for sale immediately; just took a bit longer to sell than originally anticipated. Which has resulted in three years worth of dues.
Client did a 1031 exchange into the property and is sitting on a large gain from THAT transaction. The replacement lot has actually decreased in value. I appreciate your thoughts; I'm still not sure adding to basis isn't just the same as deducting. I can argue the side of capitalizing costs on investment property; but club memberships is just such a specific hot issue.... | |
| 25 September 2008 | |
| If you argue it in the final analysis, see Reg. 1.6662-3(b)(3) and Reg. 1.6662-4(d)(3)(ii) and (iii). | |
| September 25, 2008 | |
| I have no intention of it going that far. If I can't find anything defensible for adding it to basis, I won't.
That's is my initial thought after researching. I haven't found anything that specifically says the dues cannot be capitalized; just that they can't be deducted. In my mind, it's the same thing. I was hoping some of you who are smarter/more experienced might have dealt with it before - I'm well aware of preparer penalties and understating income issues. | |
Death&Taxes (talk|edits) said: | 25 September 2008 |
| I swear we had a like discussion before. | |
Death&Taxes (talk|edits) said: | 25 September 2008 |
Here it is, Belle: Discussion: Rental Property and Country Club Membership. Now you can either throw me out on my ear or plant a big kiss on my scratchy face.
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| September 25, 2008 | |
| DT - I searched golf, club, dues, memberships and read them all. I didn't see anything about capitalizing, only deducting (a no-no!) There was one (June 08 I think)addressing if membership dues might be deductible for a rental property, but my client's issue deals with raw land held for investment.
We've had lots of discussions about capitalizing various carrying costs of properties/rentals/investments, but golf membership dues haven't been specifically addressed. And since the laws are specific that golf membership dues are not DEDUCTIBLE, I'm grasping a straws thinking of capitalizing them. Need something that specifically says YES; otherwise the client is going to just have to pay up. Thanks. | |
| September 25, 2008 | |
| DT - we must have posted at the same time. And I was busy researching Reg 1.266-1, which seems to say you can only capitalize deductible costs. IMHO, golf memberships are secifically not deductible, therefore not capitalizable (is that a word?).
Sooooo, no addition to basis for my client. That was my initial thought anyway, but now I'll sleep better knowing I tried. Right after I kiss that scratchy face ;-) Thanks for all the help, everyone. | |
Death&Taxes (talk|edits) said: | 25 September 2008 |
| The issue in the rental discussion was whether it was part of basis, if I recall, and I think we came to a conclusion that while it could not be depreciated, it had possibilities, but as you note, no one could find a smoking gun. In that case, the membership was bought with the real estate and apparently was a one time cost without a life, but part of the investment. If your membership goes with the land when sold, then surely it must be part of the investment. | |
| September 25, 2008 | |
| The membership at $ 150,000 = yes. The dues, I've concluded, nope. | |
