Kerry In Hot Water Over Yacht Tax

by Mike Godfrey, Tax-News.com, Washington

29 July 2010

Massachusetts Senator John Kerry has announced that he will pay taxes to the state on his recently purchased private yacht, Isabel, which is docked in Rhode Island, allegedly to avoid paying USD500,000 in taxes.

His announcement came after the Boston Herald revealed that Kerry had docked his 76ft sloop at Rhode Island in a move that would save him from paying a USD437,500 one-off sales tax charge, and an annual excise tax of USD70,000. Docking his yacht in tax neutral Rhode Island for six months will have absolved him from having to pay Massachusetts' tax.

However, it was since reported that Kerry may have have used his yacht in Massachusetts waters, triggering taxation on the sloop under state tax law, and initiating a probe of the yacht’s whereabouts since its purchase in May by state tax officials.

In a statement on the situation, the Department of Revenue confirmed that from a legal perspective Kerry is within his rights for his vessel to reside in Rhode Island, but it was noted that tax would be payable if at any point in the initial six-month period the yacht was to enter Massachusetts’ waters.

Kerry announced his decision to voluntarily settle the dispute in a statement to the Associated Press: "Whether owed or not, we intend to pay the equivalent taxes as if the boat's home-port were currently in Massachusetts."

A spokesperson for Kerry insisted that the yacht was based in Rhode Island, not for tax purposes, but because it was a preferential base for upkeep and chartering purposes. Kerry said payment would be made promptly.

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