Hat tip to the magpie at Pacific Views
Buyers defend deductions, saying they help create jobs
By ERIC NALDER
SEATTLE POST-INTELLIGENCER INVESTIGATIVE REPORTER
When Layne Sapp takes delivery of a yacht four times the size of an average American home next month, he will be acquiring a multimillion-dollar tax break.
Yacht brokers on both coasts have lately been promoting the tax break he's using, a temporary deal provided by the Bush administration and Congress through a law passed in 2003.
Sapp said he'll first qualify the 130-foot yacht named Infinity as a business expense. Then he will depreciate the $15 million yacht by half its value -- $7.5 million -- immediately. Then he'll use the depreciation as a loss on his personal income and save about $3 million in income taxes, a rough estimate based on the fact he is in the top tax bracket.
Experts say he's on solid ground if he can prove the yacht is a business expense. Other yacht buyers are scrambling to do the same. All are taking advantage of the 2003 Jobs and Growth Tax Relief Reconciliation Act.
Signed by President Bush in May 2003, the law has a provision designed to stimulate business and job growth by enticing business owners to buy new equipment in 2003 and 2004. Rather than taking the normal seven years (on average) to depreciate equipment, they can declare a loss on half its value in the first year.
Sapp and others believe yacht buying is a legitimate way to stimulate job growth. For one thing, his boat is being built at Westport Shipyard in this state, and it will employ a captain, engineer, chef and two deckhands. It will also require local repairs.
With 8,500 square feet of living space, the 130-foot yacht has five lush bedrooms for guests, five quarters for crew, eight bathrooms, an eight-person hot tub, a 19-foot fishing boat on deck, two personal watercraft and luxurious dining and cooking facilities. It has inlaid burl wood, a movie theater and four bars.
Tax breaks like this "help stir up the economy," said Sapp, 42, owner of a large mortgage lending company headquartered in Mountlake Terrace and a member of the South Snohomish Chamber of Commerce board.
Others disagreed, at least in spirit. The law -- which hasn't stimulated as much equipment buying as was hoped -- requires that the spending be on equipment that is "ordinary and necessary" for business, said one congressional staffer.
