DEDUCTIONS: The Loophole For Portholes

Tax reform eliminated interest deductions on most forms of consumer credit except for loans on first and second homes, but the lawmakers left a large loophole for wealthy seafarers. Yacht owners can still treat their floating pleasure palaces as second homes if they contain a head and a galley (toilet and kitchen, to landlubbers) and sleeping facilities. Skippers can deduct the interest on loans used to buy their craft or obtain a yacht-equity credit line to cover the purchase of, say, a Rolls-Royce. "Aristotle Onassis would have loved this," fumes Republican Senator John Danforth of Missouri, a member of the Senate Finance Committee. "If we have to make choices in the tax code," he asks, "why would we want to choose yacht ownership over paying for college education or medical expenses?" Danforth has introduced legislation to close the porthole loophole.