Yacht Ownership, Charter & Tax Matters
By David Bohonnon, Bohonnon Law Firm LLC
For some, the allure of tropical breezes, calm waters and retirement aboard a beautiful new yacht travelling the world seems satisfying. For others, the slow boat to nowhere may not be enough, and to offset the restless pursuit of tranquility (and, frankly, expenses), a charter strategy is introduced to yacht ownership and operations.
Over the years, we have seen many seasonal and full time charter programs operated by clients around the world meet with success; in some cases, they experience frustration. Recently we have noted an increase in IRS scrutiny and audits of yacht charter operations in which the IRS challenges business expenses and depreciation claimed by taxpayers. There are many regulatory challenges to a charter program for a yacht which include complex domestic and international law, regulations, safety and insurance considerations. If all of this is not enough to consider, the federal and state tax treatment of such operations are additionally tricky for anyone not up on the law in this area.