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Old 03-08-2008, 15:53   #31
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Originally Posted by Curmudgeon View Post
There is a long list of these companies on yachtworld.
Thanks, i will check...
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Old 03-08-2008, 18:24   #32
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"strawmen" are, by definition, criminals acting as fronts. If they form a corporation which has no other purpose, and/or purchase a boat which has no other purpose, and everything is set up for the real purpose of "washing" or concealing ownership for the epxress and sole purpose of evading the laws?

That's strawmen, and that's just one more criminal violation--plus a conspiracy charge for all parties--and while it may work nicely for business corporations, for the individual buyer it is very risky business. If you get caught, you will lose the boat, you will be heavily fined (US law typically considers triple damages to be normal for frauds), interest and penalties will be levied, and then if you are really nice they will put you on probation instead of throwing you in jail.

Ask yourself, is it worth taking that risk? And are you--and your partners, who you really don't know--good enough to get away with it?

The last big tax scam in the US was to have all income sent to an overseas bank, so there was no record of income paid, totally evading income tax. And then, in order to have no record of money spent, accessing those accounts only via offshore credit cards from that bank. Perfect scam, no records our IRS could access. Except, the IRS found out about the scam, some deals were made with foreign banks, and tens of thousands of letters went out starting collections and prosecutions after all the paperwork--because there is always paperwork--was given to the IRS.

Your boat will leave a similar paper trail. You are talking about "evasion" not "avoidance" and that's all the difference. But then again, our own FBI says that some 95% of all high dollar (six figure and up) bank robberies stay unsolved, so crime can pay if you plan it carefully enough.

Consult with admiralty and tax attorneys in your homeland and the US before you try to save any money by diddling the paperwork this way.
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Old 03-08-2008, 19:41   #33
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The arrangements I'm discussing are entirely legal and have been reviewed and approved by the USCG. Perhaps I erred in using the term "strawman."

In the commercial world, a typical aircraft or vessel leasing structure is as follows: The vessel/aircraft is sold to a trust. It is financed 20% by an equity owner and 80% by a loan secured by a mortgage on the vessel. Both the equity owner and the lender are U.S. citizens. The 20% owner gets the tax benefit (depreciation) associated with the asset; the lender gets interest on its mortgage.

The vessel is then "head leased" to a leasing company that is also a U.S. citizen. The head lessor is responsible for compliance with safety regulations and the Jones Act (or with all of the FAA regulations in the case of an aircraft). This is the "strawman." The head lessor subleases the vessel to an operator, who can be a foreigner. The operator executes a "triple net" lease making it responsible for all aspects of operating the vessel. It's like leasing your car instead of buying it.

The operator, incidentally, furnishes a guarantee to the head lessor and the lender with respect to the ongoing headlease payments (which service the debt). It also furnishes a tax indemnity to the equity owner guaranteeing that the owner will obtain the expected tax benefits over the life of the lease. The head lessor is compensated by the difference between the sublease payments it receives and the headlease payments it makes to the trust.

When the vessel comes off lease (in 15-20 years), the operator has a fair market purchase option. If the operator wishes to purchase the vessel and continue to be U.S. flagged, it can simply repeat the process outlined above.

Incidentally, I am an attorney with considerable experience in leveraged leasing of aircraft and other assets. Many years ago as an associate with a large firm I worked on a transaction in which Sodexho (a French company) acquired a business that operates approximately 10 U.S. flagged harbor cruise vessels. All of the documentation was filed with the USCG and is available for public inspection. Feel free to contact the Coast Guard and request copies if you like.
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Old 03-08-2008, 21:15   #34
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I suspect that the ownership of a private recreational vessel would be looked at rather differently than a commercial ship reposnsible to, and operated by, financial corporations. And, that the overhead costs would be a stopper for private recreational vessels.

Unless I misread it, Freetime is not looking to set up a cruise or shipping business, but rather to deal with the rather different subject of a personal boat. Those are businesses, which normally will be leasing multiple assets from various sources. Personal ownership is a whole other game. Among other things, it may mean securing commercial insurance coverage instead of personal coverage--another hit in the pocket for the non-corporate customer.

Sometimes, it is just safer to render unto Caeser, rather than try to dodge his minions.
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Old 04-08-2008, 03:35   #35
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Unless the laws have changed recently, there is no legal difference between the requirements for a U.S. flagged commercial vessel vs a yacht.

And the above structure is not designed to "dodge" the government. Probably 80% of the world's aircraft are financed in exactly this manner, and that includes many private planes. (Think of them as "flying yachts"). You don't think that airlines and wealthy individuals actually own the planes they fly, do you?

As I said initially, it probably makes more sense for Freetime to register the vessel in a jurisdiction like the BVI. But setting up a trust and leasing the boat from it (using a head lessor that is a U.S.citizen) is certainly doable and 100% legal. Every maritime law firm of consequence has the requisite documents on word processing.

I would also recommend that anyone who buys a boat consider placing title in a trust, regardless of where it is flagged. It may make life easier when the owner wants to sell the boat or dies.
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