An established method to purchase a share in a
Fractional Yacht Ownership Program is to setup a business entity to own
the share or shares in the LLC that owns the yacht. The resulting
business investment allows the Fractional Yacht Owner to deduct the 10%
share of the annual operating expenses, the interest on the loan and
the 10% annual depreciation of the total investment.
In this
example, a Fractional Yacht Ownership Program purchases a 120’ yacht
for $10,000,000. Purchasing a 10% Fractional Yacht Ownership Interest
in the yacht costs $1,000,000 and entitles the Fractional Yacht Owner
to use the yacht four weeks annually. If the Fractional Yacht Owner
decides not to use any of the allotted four weeks annually, the yacht
charter management team for the Fractional Yacht Ownership Program will
book yacht charters for $90,000 weekly.
Yacht management
companies recommend that you budget 10% of the yachts purchase price
for the annual operational costs and expenses associated with private
yacht ownership. Therefore, the total operating expenses for the yacht
are projected to be $1,000,000 annually. The Fractional Yacht Owner
will be responsible for paying 10% or $100,000 of these expenses.
Below
is an example where a Fractional Yacht Owner makes a cash down payment
of 20% or $200,000 and finances 80% or $800,000 of the remaining
balance:
Fractional Yacht Ownership Group’s
Purchase Price $10,000,000
Operating Expenses $1,000,000
Depreciation Tax Basis $1,000,000
10% Fractional Yacht Ownership of a Yacht
10% Interest Investment $1,000,000 20% Cash Down Payment -$200,000 ____________________________________________________________________________ 80% Remaining Balance $800,000 Financed at 6% Interest Only
TAX STATEMENT
Charter Income
Charter Income (4 weeks - $90,000 weekly) $360,000 Charter Broker Commissions -$72,000 ____________________________________________________________________________ Net Charter Income $288,000
Annual Expenses (Deductible)
10% Share of Operating Expenses $100,000 Loan Interest on $800,000 Calculated at 6% $48,000 10% Annual Depreciation +$100,000 ____________________________________________________________________________ Total Annual Expenses $248,000
Taxable Income
Net Charter Income $288,000 Total Annual Expenses -$248,000 ____________________________________________________________________________ Net Taxable Income $40,000
The net taxable income is decreased by the depreciation amount, which is a paper loss only for income tax purposes.
There
are numerous advantages to setting up business ownership of a share in
a Fractional Yacht Ownership Program. The first benefit is reducing a
Fractional Yacht Owner’s personal liability. In addition, the tax
advantages are tremendous and will include the following: 100% of the
Fractional Yacht Owner’s share of the annual operating expenses, the
annual depreciation and the interest on the loan are all deductible for
income tax purposes for every year of ownership.
CASH FLOW STATEMENT
Cash Expenses
Share of Operating Expenses 10% $100,000 Loan Interest on $800,000 Calculated at 6% +$48,000 ____________________________________________________________________________ Total Cash Expenses $148,000
Cash Income
Net Charter Income $288,000 Total Cash Expenses -$148,000 ____________________________________________________________________________ Actual Cash Income $140,000
The 70% Return on Investment (ROI) is based on the cash return versus the cash invested. This assumes a net charter income of $288,000. In
the unlikely event that the yacht charter management team is unable to
book the yacht for charter one or two weeks out of four weeks total,
the Fractional Yacht Owner would still realize positive cash return.
Although a smaller return, the benefit would be increased because in
that year the business might show a tax loss, which would lower the
Fractional Yacht Owner’s overall taxes.
Fractional Yacht Ownership Expenses (3 Years)
Total Annual Expenses $148,000 Number of years x 3 ____________________________________________________________________________ Total Fractional Yacht Ownership Expenses $444,000
Please note that in this example, the Fractional Yacht
Owner decides to sell the 10% Fractional Yacht Ownership Interest after
three years for $950,000.
Fractional Yacht Owner’s 10% Interest is Sold
10% Interest is Sold $950,000 Lien Payoff Amount -$800,000 ____________________________________________________________________________ Net Proceeds of Sale $150,000
As
a result of selling the 10% Interest in the Fractional Yacht Ownership
of this yacht, the Fractional Yacht Owner can expect to recoup the
majority of the initial $1,000,000 investment. Please note that
approximately 50% of the net proceeds of sale will be owed in capital
gains taxes.
The proceeds of sale after three years may not
appear like much money based on the depreciated cost of the yacht.
After factoring in the positive cash flow of $140,000 annually and an
annual tax basis of $40,000, then Fractional Yacht Ownership becomes a sound financial option to Private Yacht Ownership or Yacht Charter.
After
reviewing the example above, most will agree
that Fractional Yacht Ownership is a very attractive alternative to
Private Yacht Ownership or Yacht Charter. Review these numbers with
your accountant and attorney to get an unbiased perspective on the cost
benefits of purchasing a share in a Fractional Yacht Ownership Program.
FRACTIONAL YACHT OWNERSHIP versus PRIVATE YACHT OWNERSHIP
Over the past decade, the trend of clients purchasing
shares in Fractional Jet Ownership Programs has grown significantly.
This is due mainly to the ease of ownership and the significantly lower
price of entry than owning a private jet. When you factor in the
benefits of having a team of professionals managing all of the details
associated with owning a jet, you begin to understand why Fractional
Jet Ownership fleets continue to expand to meet the growing demands of
both private and corporate jet ownership. Finally, when you consider
that the initial investment and annual expenses are a fraction of the
cost to own a private jet, then you realize why Fractional Jet
Ownership is an attractive alternative.
Here is just a sample
of the laundry list of details that need to be managed when owning a
private jet: hiring the pilot and crew; dealing with compensation,
payroll, health insurance, vacations and benefits; scheduling regular
maintenance and repairs of the jet; stocking supplies and purchasing
fuel for the jet; and scheduling flight plans to name a few.
The
parallels between Fractional Jet Ownership and Fractional Yacht
Ownership are very strong. This is why private individuals and
corporations are beginning to explore Fractional Yacht Ownership
Programs. Are you considering purchasing a share in a Fractional Yacht
Ownership Program? Doing a simple cost benefits analysis reveals that
Fractional Yacht Ownership offers an economical way to experience the
luxury lifestyle of private yacht ownership.
Owning a private
yacht offers entrance into a very exclusive world, but the price of
admission is very high. Below is a simple comparison of the costs of
Fractional Yacht Ownership versus Private Yacht Ownership for a period
of three years:
In this example, a Fractional Yacht Ownership Program
purchases a 120’ yacht for $10,000,000. Purchasing a 10% Fractional
Yacht Ownership Interest in the yacht costs $1,000,000 and entitles the
Fractional Yacht Owner to use the yacht four weeks annually.
Yacht
management companies recommend that you budget 10% of the yachts
purchase price for the annual operational costs and expenses associated
with private yacht ownership. Therefore, the total operating expenses
for the yacht are projected to be $1,000,000 annually. The Fractional
Yacht Owner will be responsible for paying 10% or $100,000 of these
expenses.
Below is an example where a Fractional Yacht Owner
makes a cash down payment of 20% or $200,000 and finances 80% or
$800,000 of the remaining balance:
10% Fractional Yacht Ownership of a Yacht
10% Interest Investment $1,000,000 20% Cash Down Payment -$200,000 ____________________________________________________________________________ 80% Remaining Balance $800,000 Financed at 6% Interest Only
Annual Expenses
10% Share of Operating Expenses $100,000 Loan Interest on $800,000 Calculated at 6% +$48,000 ____________________________________________________________________________ Total Annual Expenses $148,000
Fractional Yacht Ownership Expenses (3 Years)
Total Annual Expenses $148,000 Number of years x 3 ____________________________________________________________________________ Total Fractional Yacht Ownership Expenses $444,000
Please note that in this example, the Fractional Yacht
Owner decides to sell the 10% Fractional Yacht Ownership Interest after
three years for $950,000.
Fractional Yacht Owner’s 10% Interest is Sold
10% Interest is Sold $950,000 Lien Payoff Amount -$800,000 ____________________________________________________________________________ Net Proceeds of Sale $150,000
As a result of selling the 10% Interest in the Fractional Yacht
Ownership of this yacht, the Fractional Yacht Owner can expect to
recoup the majority of the initial $1,000,000 investment. Please note
that approximately 50% of the net proceeds of sale will be owed in
capital gains taxes.
In this example, the entire 120’ yacht is purchased
for $10,000,000. Private yacht ownership affords the owner the luxury
of using a yacht 52 weeks per year. A Private Yacht Owner determines
when, where and how often to use the yacht. Many private yacht owners
will make their yacht available for yacht charter in order to defray
the costs and expenses of yacht ownership. Yacht management companies
recommend that Private Yacht Owner’s budget 10% of the yachts purchase
price for the annual operational costs and expenses associated with
private yacht ownership. Therefore, the total operating expenses for
the yacht are projected to be $1,000,000 annually.
Below is an
example where a Private Yacht Owner makes a 20% or $2,000,000 cash down
payment and finances 80% or $8,000,000 of the remaining balance:
100% Private Yacht Ownership of a Yacht
100% Interest Investment $10,000,000 20% Cash Down Payment -$2,000.000 ____________________________________________________________________________ 80% Remaining Balance $8,000,000 Financed at 6% Interest Only
Total Annual Operational Expenses $1,000,000 Loan Interest on $8,000,000 Calculated at 6% +$480,000 ____________________________________________________________________________ Total Annual Expenses $1,480,000
Private Yacht Ownership Expenses (3 Years)
Total Annual Expenses $1,480,000 Number of years x 3 ____________________________________________________________________________ Total Private Yacht Ownership Expenses $4,440,000
Please note that in this example, the Private Yacht Owner decides to sell the yacht after three years for $9,500,000.
Private Yacht Owner’s 100% Interest is Sold
100% Interest is Sold $9,500,000 Lien Payoff Amount -$8,000,000 ____________________________________________________________________________ Net Proceeds of Sale $1,500,000
As a result of selling this yacht, the private yacht owner can expect
to recoup the majority of the initial $10,000,000 investment.
Fractional Yacht Ownership versus Private Yacht Ownership
Total Private Yacht Ownership Expenses $4,440,000 Total Fractional Yacht Ownership Expenses -$444,000 ____________________________________________________________________________ Total Savings $3,996,000
In this example, the Total Private Yacht Ownership
Expenses to own a 100% interest in a yacht for a period of three years
is $4,440,000. The Total Fractional Yacht Ownership Expenses to own a
10% interest in a yacht for a period of three years is $444,000. Based
on these projected expenses, the total savings for Fractional Yacht
Ownership versus Private Yacht Ownership are $3,996,000.
After
reviewing the example above, most will agree that Fractional Yacht
Ownership is a very attractive alternative to Private Yacht Ownership.
Review these numbers with your accountant and attorney to get an
unbiased perspective on the cost benefits of purchasing a share in a
Fractional Yacht Ownership Program.
FRACTIONAL YACHT OWNERSHIP versus YACHT CHARTER
The parallels between Fractional Jet Ownership and
Fractional Yacht Ownership are very strong. This is why private
individuals and corporations are beginning to explore Fractional Yacht
Ownership Programs. Are you considering purchasing a share in a
Fractional Yacht Ownership Program? Doing a simple cost benefits
analysis reveals that Fractional Yacht Ownership offers an economical
way to experience the luxury lifestyle of yacht charter.
Yacht
Charter offers entrance into a very exclusive world, but the price of
admission is very high. Below is a simple comparison of the costs of
Fractional Yacht Ownership versus Yacht Charter for a period of three
years:
In this
example, a Fractional Yacht Ownership Program purchases a 120’ yacht
for $10,000,000. Purchasing a 10% Fractional Yacht Ownership Interest
in the yacht costs $1,000,000 and entitles the Fractional Yacht Owner to
use the yacht four weeks annually.
Yacht management companies
recommend that you budget 10% of the yachts purchase price for the
annual operational costs and expenses associated with private yacht
ownership. Therefore, the total operating expenses for the yacht are
projected to be $1,000,000 annually. The Fractional Yacht Owner will
be responsible for paying 10% or $100,000 of these expenses.
Below
is an example where a Fractional Yacht Owner makes a cash down payment
of 20% or $200,000 and finances 80% or $800,000 of the remaining
balance:
10% Fractional Yacht Ownership of a Yacht
10% Interest Investment $1,000,000 20% Cash Down Payment -$200,000 ____________________________________________________________________________ 80% Remaining Balance $800,000 Financed at 6% Interest Only
Annual Expenses
10% Share of Operating Expenses $100,000 Loan Interest on $800,000 Calculated at 6% +$48,000 ____________________________________________________________________________ Total Annual Expenses $148,000
Fractional Yacht Ownership Expenses (3 Years)
Total Annual Expenses $148,000 Number of years x 3 ____________________________________________________________________________ Total Fractional Yacht Ownership Expenses $444,000
Please note that in this example, the Fractional Yacht
Owner decides to sell the 10% Fractional Yacht Ownership Interest after
three years for $950,000.
Fractional Yacht Owner’s 10% Interest is Sold
10% Interest is Sold $950,000 Lien Payoff Amount -$800,000 ____________________________________________________________________________ Net Proceeds of Sale $150,000
As
a result of selling the 10% Interest in the Fractional Yacht Ownership
of this yacht, the Fractional Yacht Owner can expect to recoup the
majority of the initial $1,000,000 investment. Please note that
approximately 50% of the net proceeds of sale will be owed in capital
gains taxes.
In this example, a 120’
yacht is chartered four weeks annually at a weekly rate of $90,000 or
$360,000 annually. Below is an example where a private individual
charters a yacht four weeks annually for a period of three years:
Annual Costs
Yacht Charter rate per week $90,000 Number of weeks of yacht charter per year x 4 ____________________________________________________________________________ Annual Costs $360,000
Annual Gratuities
Annual Costs $360,000 15% Gratuities Paid to the Crew x 0.15 ____________________________________________________________________________ Annual Gratuities $54,000
Total Annual Costs and Gratuities
Annual Costs $360,000 Annual Gratuities +$54,000 ____________________________________________________________________________ Total Annual Costs and Gratuities $414,000
Yacht Charter Costs (3 Years)
Total Annual Costs and Gratuities $414,000 Number of years x 3 ____________________________________________________________________________ Total Yacht Charter Costs $1,242,000
Fractional Yacht Ownership versus Yacht Charter
Total Yacht Charter Costs $1,242,000 Total Fractional Yacht Ownership Expenses -$444,000 ____________________________________________________________________________ Total Savings $798,000
In this example, the Total Yacht Charter Costs to
charter a yacht four weeks annually for a period of three years is
$1,242,000. The Total Fractional Yacht Ownership Expenses to own a 10%
interest in a yacht for a period of three years is $444,000. Based on these projected expenses, the total savings for Fractional Yacht Ownership versus Yacht Charter are $798,000.
After
reviewing the example above, most will agree that Fractional Yacht
Ownership is a very attractive alternative to Yacht Charter. Review
these numbers with your accountant and attorney to get an unbiased
perspective on the cost benefits of purchasing a share in a Fractional
Yacht Ownership Program.
An established method to purchase a share in a
Fractional Yacht Ownership Program is to setup a business entity to own
the share or shares in the LLC that owns the yacht. The resulting
business investment allows the Fractional Yacht Owner to deduct the 10%
share of the annual operating expenses, the interest on the loan and
the 10% annual depreciation of the total investment. 
Over the past decade, the trend of clients purchasing
shares in Fractional Jet Ownership Programs has grown significantly.
This is due mainly to the ease of ownership and the significantly lower
price of entry than owning a private jet. When you factor in the
benefits of having a team of professionals managing all of the details
associated with owning a jet, you begin to understand why Fractional
Jet Ownership fleets continue to expand to meet the growing demands of
both private and corporate jet ownership. Finally, when you consider
that the initial investment and annual expenses are a fraction of the
cost to own a private jet, then you realize why Fractional Jet
Ownership is an attractive alternative. 
The parallels between Fractional Jet Ownership and
Fractional Yacht Ownership are very strong. This is why private
individuals and corporations are beginning to explore Fractional Yacht
Ownership Programs. Are you considering purchasing a share in a
Fractional Yacht Ownership Program? Doing a simple cost benefits
analysis reveals that Fractional Yacht Ownership offers an economical
way to experience the luxury lifestyle of yacht charter. 
