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Tom Kelly
Tom Kelly
The Real Estate Adviser

September 6, 1996

SELL THAT HOUSE, SAIL AWAY

  • The Real Estate Advisor

    • By TOM KELLY
    The Real Estate Advisor

    Just about everyone -- at least in this region -- knows of someone who would like to sell all of his worldly possessions and sail away.

    Think about it . . . just about every community in and around Puget Sound has a quality marina: Bremerton, Kirkland, Renton, Edmonds, Everett, Kingston, Elliott Bay, Des Moines. Boating dreamers are much more plentiful here than elsewhere.

    The act of actually moving aboard is probably more whimsical than real, yet I received three inquiries last week from readers who were genuinely interested in moving into a "floating home" and they were not referring to our conventional houseboats.

    These folks had read my column on capital gains and principal residences and they wanted to know if they could roll their cash from the family home into a new boat, live on it, and defer capital gains tax consequences.

    "The answer is `absolutely,"' said Rich Morse, real estate tax attorney and an instructor in several Washington Association of Realtors courses. "Basically, you have to be able to show your intent of living on it. Technically that means the boat, or yacht, should have a head and a galley because a home typically has a kitchen and a bathroom."

    Most homeowners and potential home buyers understand that they can defer tax on the sale of their principal residence forever as long as they purchase a home of greater value than the one they sold within two years. However, a boat can also be a principal residence.

    For example, if you buy a home for $150,000 and sell it five years later for $200,000, you must defer the tax on the profit ($50,000) as long as you purchase another home (or boat, bus, van, etc.) costing more than $200,000 within two years.

    This is called the "residence replacement rule" and it includes new construction and extensive remodels, as long as the acquisition and fix-up costs surpass the sale price of your old home. Technically, the Internal Revenue Service refers to the rollover replacement as Section 1034. (This section is sometimes confused with Section 1031, the rollover guidelines for investment property).

    "Most people around here know that many communities have liveaboards," Morse said. "What some many not know is that several have governing bodies similar to condominium associations. They vote and negotiate and also spend a lot of time away from the area."

    I was also thinking about the number of potential liveaboard folks this week because the Superyacht Northwest Exhibition -- moored the past few years at the Kirkland Yacht Club Marina -- runs through Saturday at the new Bell Street Pier on the Seattle waterfront. Although the show showcases multi-million dollar yachts, it also features more than 100 booths of information for vessels 10 feet to 150 feet.

    Some of the yachts on display were designed by locals Ed Monk and Jack Sarin, internationally recognized naval architects, along with Bill Garden of Sydney, B.C.

    "The Northwest is an international center for the design and construction of luxury yachts," said Sharry Stabbert, show director. "More luxury yachts are built in the United States than any other country in the world with over 40 percent built in the Northwest."

    The show has expanded to include the first Workboat Northwest, featuring tugboats, fire and rescue boats, oil spill control and recovery vessels and passenger ferries. It will be the first for private yachts at the new Bell Street Pier, part of an $88 million public-private Central Waterfront Project that has been 10 years in the making.

    Public boat access to the Seattle waterfront has been very limited. The only public pier had been at the foot of Washington Street just south of the Washington State Ferries's Colman Dock. The new marina, with 93 slips just south of the Bell Street Pier, offers public moorage for up to two days and makes the marina a huge public plus to the Central Waterfront Project.

    According to Superyacht Northwest organizers, more than 4,500 people attended last year's show, with 42 percent of the attendees coming from outside the Pacific Northwest, including visitors from New Zealand, Australia, Southeast Asia and Europe. The total estimated economic impact from the 1995 show on the local economy was $6.3 million.

    From one show? I guess more folks than I thought have moved aboard.

    And, I underestimated what a refurbished waterfront would bring.



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