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Borrow money to buy a boat. Stuff a mattress into the bow, and drop in a camp stove, a port-a-potty and a sink.

Do all that, and in the eyes of the government, you’ve got a second home — and a sizable tax deduction.

The second-home deduction for interest paid on boat loans is the biggest tax deduction in American recreational boating. It is used on runabouts that have tiny cuddy cabins and multimillion-dollar yachts. Boat manufacturers nowadays have the tax deduction in mind when they install the proper amenities in small boats.

The Internal Revenue Service rarely bats an eye at questionable cases, nor does it keep track of the lost revenues.

Approximately 500,000 pleasure boats in the United States are large enough to qualify, about 3 percent of all recreational boats in the country, according to Jim Petru. research director at the National Marine Manufacturers Association.

Only about 100,000 people actually live full time on boats, recreational vehicles and vans, according to the 2000 Census.

Living on a boat isn’t required, though. All that’s needed is a sleeping platform, toilet and cooking facilities, and some indication that the owner stays overnight on the boat at least 14 days a year, according to Internal Revenue Service regulations

I don’t know if anyone ever checks on it, said Mike Shannon. 44, whose second home sits most days on a trailer in his driveway in the apple-growing community of Orondo, north of Wenatchee.

He quickly added that he and his wife stay on the boat more than two weeks a year. He probably need not worry about proving it.

Rob Nichols, assistant secretary of the U.S. Treasury for public affairs, cautions, Taxpayers aware of the 14-day requirement who ignore the requirement are committing tax fraud and face substantial civil, and perhaps criminal, penalties for doing so.

But studies have shown the Internal Revenue Service is buried in a backlog of uninvestigated cases in which people have outright failed to pay taxes, or sheltered income in offshore accounts. The Bush administration has called for staff increases at the IRS. But the administration has not provided enough money to cover pay raises and other required staff expenses, said Nancy Killefer. chairwoman of the IRS Oversight Board. in testimony last March to Congress.

The second-home deduction is too fuzzy for the IRS to crack down, said Keith Ashdown. vice president for Taxpayers for Common Sense, a watchdog group.

If when you create those kind of rules, they are not that strong, then the IRS is not going to enforce them, Ashdown said. Move 14 days to maybe 60 to 90 days, where it is not just a second home symbolically but something you are using for a significant minority of your time.

Extending the time requirement would be very unpopular.

David Reitze, a Tacoma mortgage broker, bought a well-fitted 47-foot yacht at a boat show this year, acknowledging he did so in part because of the second-home provision.

He’ll declare his yacht a second home for tax purposes next year, allowing him to reduce his income by $19,200, the amount he pays in interest on the loan. He’ll also deduct his annual $3,600 state registration fee.

That way, the yacht will help lower his tax bracket from 36 percent to 32 percent, saving a bundle of money.

Shannon’s aluminum 26-foot boat isn’t a yacht, but it contains all the necessary ingredients — sink, stove, bunk and refrigerator, even a little shower — so that he and his wife can take overnight trips on Lake Roosevelt, Chelan and occasionally in the San Juans. They both work in the apple business.

Their floating Winnebago, as he calls it, provides a nice tax break because their monthly payments on their $145,000 loan and their state boat taxes are all deductible.

Another boat, parked at a visitor’s dock at the Port of Seattle’s Shilshole Bay Marina recently, was a 23-footer with barely enough room in its forward cabin to give elbowroom to two people. But sure enough, owner Lloyd Dennis Matthews of Des Moines said, it is a second home, for tax purposes.

The galley consisted of a sink and portable propane stove dropped into a makeshift compartment and the head is a port-a-potty. But Matthews said that if he couldn’t take advantage of the second-home deduction, he wouldn’t have bought a $22,000 boat.

The deduction for his $225-a-month loan payments is welcome given that he is self-employed as a carpet installer. It is also a business asset, he says, because he takes customers fishing. Kissing up, he calls it.

Well-equipped vans and motor homes also qualify.

Michael Jenkins. Northwest area sales manager for Trident Funding Corp. estimated that 90 percent of his 15 to 20 boat loan customers a month use the second-home deduction, on loans ranging into the millions. Tobey Wilkins at Viking Bank in Ballard said every boat that qualifies probably uses it.

Low interest rates — lower than home loans in some cases — have made boat buying very popular, they said.

Boat manufacturers admitted they consider the tax deduction when they design their boats, especially boats 19 to 25 feet long that wouldn’t otherwise be properly equipped because they are so small.

When asked about it, Niles Schurle. product manager for Cobalt Boats at the company’s plant in Neodesha, Kan. quipped: I’m not talking to the IRS am I?

He said the tax deduction is certainly considered and in some ways that is one of the main reasons we make those amenities available.

The savvy boater understands what he needs, said Cobalt sales representative Brett Chilcott. We offer those options.

You get people making decisions on what model to buy, based on that tax advantage, said James Baker. manager of Seattle Boat on Lake Union. which sells the smaller Cobalt boats that qualify, ranging in price from $65,000 to six figures. They will physically ask, ‘Does this qualify?’

Paul Olliges. senior director of product planning for U.S. Marine in Arlington, said the company’s Maxim line has a 21-footer that could qualify and their Trophy line has a 19-foot boat with sleeping facilities and a portable toilet. He joked you could mount a barbecue on the side and you’ve got a cooking facility, adding that it would probably work.

Ironically, America’s biggest tax break for recreational boats arose from a congressional effort at tax reform back in 1986.

Then-president Reagan vowed in his second term to simplify the tax code, much the same way President Bush has promised to do today. Congress followed through in 1986, but not the way everyone wanted.

Though deductions for most consumer-loan interest payments were eliminated, a prominent U.S. senator objected strenuously when borrowing on boats was kept as a deduction. At a 1987 hearing, he called the second-home tax break for boats an enormous loophole that had to be eliminated.

Do you think we should allow somebody to deduct interest payments on a yacht when a young person cannot deduct interest payments on a car, for instance? asked then-Sen. John Danforth — a Republican — at a Feb. 4, 1987, Senate Finance Committee hearing.

If you ask me do I think it is the right tax policy, I would say there is probably a question about it, replied Treasury Department official J. Roger Mentz.

A short time later, the late Sen. John Chaffee of Rhode Island, a fellow Republican, interjected that he was from the largest boat-building state in the country, where yachts are simply called boats. This isn’t some scandalous thing, he said. Indeed, perhaps it should be encouraged.

Danforth failed to kill the loophole, stifled by Chaffee. Danforth is now President Bush’s ambassador to the United Nations.

The use of the second-home deduction is, indeed, encouraged as Chaffee had hoped. Today, the National Marine Bankers’ Association puts out a brochure on the deduction with the headline: If you’re paying cash for your boat, you’re probably paying too much.

Most yacht buyers already know about the deduction, said Jenkins at Trident Funding, but if they don’t they’ll learn about it from the salesperson or the lender.

Boat manufacturers adamantly oppose any changes in these tax advantages. They still cringe at a luxury tax imposed on boat purchases over $100,000 imposed in 1991 and rescinded three years later.

The fight against the luxury tax was led by Bob Healey. the 75-year-old CEO of Viking Yacht Co. in New Gretna, N.J. who predicted an uproar if the second-home provision is ever eliminated.

When Congress and the first Bush administration imposed a 10 percent luxury tax on yachts more expensive than $100,000 in 1991, Healey said, his work force was trimmed from 1,500 to 60. His annual sales dropped from $100 million to $16 million in just two years. The biggest problem wasn’t the tax itself but the fact that used yachts were exempted, and plentiful, so buyers stopped buying new yachts, he said.

What we had was a financial hurricane, he said.

He formed an ad hoc group of yacht builders and, with some employees, they burned a boat on a barge in a Rhode Island harbor and demonstrated on the steps of the Capitol.

Though jewelry, expensive cars and airplanes were also affected, the boat builders led the fight, and Congress voted in 1993 to repeal the tax. Healey’s business returned to normal. He is also involved in real estate development.

The boating industry’s primary lobbying arm is the National Marine Manufacturers Association. The association contributed $423,360 to candidates in federal races since 2000, with nearly two-thirds — $273,535 — going to Republicans. The organization represents 1,400 companies.

Eliminating the second-home deduction would be tantamount to increasing the price of a boat in America, said Thom Dammrich, president of the association. Total sales are $11 billion a year, he said.

Those who would call the tax breaks a federal subsidy are right, he said, but it is just like the federal government subsidizes home ownership and other second-home ownerships.