Why sell your boat when you can give it away?

These are hard times in the yacht business. Interest rates are through the roof, financing is hard to get, gasoline and diesel fuel cost a bundle and no one is sure when petroleum supplies might dry up again.

Revisions in federal law have all but done away with the yacht as a business expense. Now the new administration is proposing federal user fees for recreational boaters.

That gleaming $100,000 motor yacht you bought four years ago has turned into millstone around your neck. It costs $5,00 a year for dockage, maintenance and insurance. The twin-V8 gas engine burns 20 gallons an hour. It costs money to leave the boat at the dock and more money to take her out.

When you burble up Spa Creek into Annapolis to impress the tourists on a summer Sunday, they no longer say,"Gosh, Mabel, look at that." They throw tomatoes and call you un-American.

Time for a new diversion? Okay, let's sell.

Oddly it's not impossible yet, but it's hard. There remains a market for big boats among the exceedingly wealthy, who don't care what fuel costs. But it takes time.

Realistically with the market what it is, you hope to get $80,000. You turn it over to a broker who takes nine months to find a buyer. Meantime your stuck with $3,500 in expenses. The broker finally gets $75,000 and takes 10 percent, so your $80,000 becomes $64,000.

Better you should give the boat away and take a fat tax break. You could come out ahead and save the aggravation.

The ad in this month's Yachting magazine reads this way: "Cash Plus Donation. Nonprofit, educational institution has a use for your boat. The donation can be more rewarding than an outright sale. We will advance a substantial amount of cash plus your tax donation credit on larger vessels as an IRS-designed Bargain Sale Donation."

The ad was placed by an outfit called Ocean Science Development in Fort Lauderdale. Bob Wickman, a marine surveyor who works there, said the company has acted as intermediary for the donation of about 150 yachts in seven years, with the boats going mostly to two nonprofit organiations, the South Florida Institute of Marine Science, and Ocean Learning Institute.

Here's the donation scenario: take the same $100,000 boat, get it appraised for $100,000 by a marine surveyor and donate it through OSD to one of the two nonprofit organizations. The charity would be willing to advance perhaps $10,000 cash, making the transaction an IRS-approved "bargain sale" to a charity. You walk away with the $10,000.The remaining $90,000 is your tax credit.

Assuming you are in the top tax bracket, 67 percent, the $90,000 donation is worth $60,000 off your taxes. So you end up with $70,000 total, and no hassle.

The charity has paid $10,000 to you, plus a similar commission to the intermediary. It has a $75,000 boat which it can use while and then sell. Everybody wins, right?

Generally, yes.

The truth is you as donor have violated tax laws by overestimating the boat's worth, which is supposed to be based on actual market value. But you can get away with that, adding in the values of electronics and other gadgetry, as long as the charity doesn't turn right around and sell the boat for significantly less than the appraised value.

But if it does that, IRS might take notice and your tax deduction could be chopped accordingly.It happens.

Dr. Joseph Dorsey, director of the Institute for Medical Marine Research in Florida, said he knew of one recent case in which a yacht was donated to a charity (not his) and valued at $400,000. "The appraiser works at a bar," Dorsey said. "They sobered him up and he wrote his survey."

Dorsey said the charity sold the boat a few days later for $246,000. "Now the donor's situation depends on the whim of some disgruntled secretary," said Dorsey. "All she has to do is call up IRS and inform them of what's going on."

"It's the donor that takes the heat if the boat is peddled quickly for a fraction of appraised value," said Bill Kelsey, who runs the Yacht Donation Bureau in Hallandale, Fla.

Kelsey said some "fly-by-night" donation agencies "don't go by any standards." He said these organizations hire "finders" to locate people anxious to donate yachts. The agencies pay these finders, then turn the yachts over for a fee to nonprofit organizations which have buyers waiting. The boats are sold immediately at a fraction of the appraised values, thus sticking the donors in an embarrassing tax situation.

When Kelsey went into business he sent away to IRS for a list of tax-exempt, nonprofit organizations. The list came back with 200,000 names.

"I get all kinds of calls," he said. "One clergyman called from New York and said he wanted a big yacht. I said, 'Why?' He said to take his family up and down the Hudson River.

"I asked him, 'How can I get on that train you're riding?' He said, 'No problem. I can make you a clergyman by mail.'"

But Kelsey and others in the yacht donation business maintain that there are actually only a few bad apples in the barrel -- that most yacht donations are going to organizations that have use for the boats in research and other marine programs.

The IRS won't say whether it is actively investigating the yacht donation business, though a spokesman did concede there is room for abuse.

Meantime, people familiar with yachting say the donation scam is a growing phenomenon.

"Here's how it works," said a New Yorker who asked to remain unidentified.

"You're looking for a certain kind of boat. You approach an owner who has such a boat for sale and tell him how to get it appraised and who to donate it to.

"Then you run around to the charity and tell them they're about to get a boat they don't want, but you do. You'll take it off their hands at a quick price.

"You win, the guy donates it wins, the charity wins. The only one who loses is the government, unless they catch you, which they never do."