Tropical Rent-A-yacht

By Janice Castro.

Think of it: island hopping on your private yacht and watching the sun set in the port of your choice. Thanks to provisions of the U.S. tax code, a booming charter industry has sprung up to make such dreams come true. The tax shelters enable landlubber investors to buy yachts and lease them to vacationers for as little as $600 per person per week, or about the cost of a first-class beach resort. Says Simon Scott, marketing manager of The Moorings, a charter company that operates 110 yachts in the Caribbean islands of Tortola and St. Lucia: "Yachting is no longer the exclusive sport of the rich."

Known as bareboating, the practice of chartering yachts equipped with everything but a crew has become a big business around the world. While most of the vessels are moored in the Caribbean, marinas from Singapore to Scandinavia also have their share. In all, rent-a-yachts are now attracting U.S. sailors at a rate of more than 100,000 a year.

The huge tax cuts enacted in 1981 gave a big boost to the charter boom. Among other things, the legislation increased the tax credit on new business investments and accelerated depreciation rates. One result: an investor who buys a $100,000 yacht in order to rent it to vacationers immediately receives a 10% investment credit that cuts his tax bill by $10,000.

But that is only the beginning. The investor, who typically leases his yacht to a firm that operates charter fleets, can write off interest costs and virtually all other expenses associated with the purchase and can further slash his taxes by fully depreciating his boat over five years. Even the price of air fare to and from the mooring place can sometimes be deducted as a cost of inspecting the craft.

Lest the owner fear that an inexperienced mariner will run his vessel up on the nearest rocks, the charter firms ask renters to fill out detailed personal history forms and provide references attesting to their sailing skills. Sometimes they must also demonstrate their knowledge of the yacht they will use. "Look out for the guy wearing new Topsiders," says David Gegg, owner of Sail Belize charters in Belize City. The operators all retain the right to put a professional skipper aboard (at an extra cost of about $65 per day) as an added precaution. Most charter firms keep a "chase boat" on hand in case some happy-go-lucky sailor has a close encounter with a reef.

For vacationers, bareboating can satisfy wanderlust while supplying most of the comforts of a top beach resort. Many of the yachts come equipped with such amenities as freezers, stereos and video recorders, and are custom-designed to make sailing relatively easy. With a push of a button, the commodore can weigh anchor and head for open water. Says Normand Bremner, 51, a Dallas anesthesiologist who was cruising the Grenadines last week: "Bareboat sailing is like a luxurious type of camping. You fend for yourself, do what you want, and you don't have to worry about putting up your tent at night."

So far, the bareboat business has meant smooth sailing for virtually all concerned. But some storm clouds now loom. The Treasury Department's recent tax-reform proposals would eliminate the investment tax credit and remove other breaks that yacht investors use. Says Sail Belize's Gegg: "If the changes are drastic, they could wipe out our industry and many of the boatbuilding companies as well."

With reporting by Bernard Diederich/Miami and J.T. Johnson/Belize