From Davy Jones, a Tax Shelter

By Jane O'Reilly

An improbable investment yields riches from the ocean floor

For most investors, a tax shelter is about as tangible as an electronic banking transaction: a piece of paper documenting their part ownership of a shopping mall in the next state or an oil-drilling site half a continent away. But for some 30 investors with a special sense of romance--and risk--the payoff from an unusual Florida operation was the kind they could touch, even fondle: silver ingots the size of paving blocks, gold chains, gold bars, fistfuls of gold and silver coins, a coral-encrusted anchor, a bronze cannon, an emerald ring--all lost at sea 361 years ago.

The loot was handed out last month in Key West at the offices of Treasure Salvors Inc., the outfit that found the hoard on the ocean bottom. Three years ago, the investors, ranging from a California brain surgeon to a Florida auto dealer, paid $20,000 for each of the 35 units in a unique tax-shelter limited partnership. The deal was the brainstorm of an ebullient New Jersey tax-shelter specialist, Jerry Burke, 50. The money entitled the investors-partners to 17.5% of anything recovered during 1980 from the Spanish galleon Santa Margarita. That ship and a sister ship, the Atocha, both carrying New World treasure to Spain, sank in a hurricane off the coast of Florida in 1622. "It's a good feeling to finally be able to distribute this stuff. It justifies the faith people had in me," said Mel Fisher, founder of Treasure Salvors. It was an uncharacteristic understatement from the usually hyperbolic Fisher, 60, an incorrigible optimist who for years was regarded along the Florida Keys as at best a dreamer and at worst an unscrupulous hustler. Twenty years ago, Fisher and his indomitable wife Dolores, 46, began their search for the legendary lost galleons. Following a trail discovered by Historian Eugene Lyon in 1970 at the Archive of the Indies in Seville, Spain, Fisher found the wrecks lying in shallow water 30 miles west of Key West. So far, Treasure Salvors has recovered some 30,000 artifacts from both ships. The find has been appraised at $27 million for insurance purposes, but art experts think the treasure could be worth several times that. The effort has so far cost $7.5 million, much of it scratched together from the sale of early discoveries, outlays from a few adventurous souls who had faith in Fisher, and movie options. About $2 million of the total has been raised since 1980 through tax-shelter partnerships, including the one formed by Burke.

"People think we just go out in rowboats and fish up treasure," says Treasure Salvors Vice President Bleth McHaley, "but it took us seven years to find it, and seven more years to establish our right to keep it." Finding it involved 400,000 miles of crisscrossing the ocean, towing special magnetometers developed by Treasure Salvors' Fay Feild, an electronics engineer. Occasionally, Fisher brought in seers, psychics and trained dolphins to break the technological tedium. There were thousands of fruitless dives into holes blown through 20 ft. of sand. And in 1975 there was tragedy. A week after the Fishers' oldest son Dirk discovered bronze cannons that irrefutably identified the Atocha, he and his wife and another diver drowned when a salvage tug capsized.

Once Treasure Salvors began bringing up bags filled with gold and silver, the state of Florida, and eventually the Federal Government, laid claim to it all. Treasure Salvors fought a long, intricate legal battle all the way to the Supreme Court, which in 1982 finally declared in effect: "Finders, keepers." Not a moment too soon. Recalls Fisher's longtime partner Bob Moran, 57: "If we could have had access to what we brought up, we could have gone ahead without borrowing and finding investors." Instead, by 1980, Treasure Salvors' financial situation was desperate. Then, during Easter vacation, Jerry Burke's eight-year-old son Justin dragged his father to an exhibit that Treasure Salvors had set up in Key West.

"I said to Mel, 'Hey, you're doing it all wrong,' " recalls Burke. He proposed organizing the tax-shelter partnerships for each year's work on every salvage site, loosely fashioned after oil-exploration tax shelters. So successful was Burke in attracting investors in 1980 and 1981 that his firm, Underbill Associates, is now trying to register a $12 million tax shelter with the Securities and Exchange Commission so that it can be sold publicly. That money would go toward six new expeditions Fisher has in mind, as well as for further exploring at the sites of the Margarita and Atocha.

If nothing more is found--and assuming the IRS does not challenge the concept--most of the investment can be written off as expenses, as it is in unsuccessful oil-exploration partnerships devised to shelter income from taxes. If treasure is recovered, profits from the sale could be taxed at the capital-gains rate, currently a maximum of only 20%. If the finds are donated to a museum, the full appraised value is deductible. Of the 1980 Margarita partnership, Burke says, "I tell my investors they've made four or five times their money."

Actually, no one knows yet what most of the treasure is worth. "There has never been any situation like this," says Wiley Grant, chairman of the Commissioner's Art Advisory Panel of the Internal Revenue Service, which must approve donations taken as tax deductions. "There's been nothing of this magnitude or the magnificence of these particular items. All of this stuff is documented, and the publicity has made it more valuable. Really, the market will have to determine what it is worth."

Meanwhile, Mel Fisher's dream has turned out to be a unique contribution to the world's cultural heritage. Some of the swords and daggers he found are going to the Tower of London armaments collection. Starting next year, Thomas Hoving, a former director of the New York Metropolitan Museum of Art who is now organizing traveling cultural exhibits, plans to take the 1622 haul on a worldwide tour. As for Fisher, he is still dreaming, this time of finding the mother lode: 1,078 silver ingots that sank with the Atocha. And maybe he will.

--By Jane O'Reilly This file is automatically generated by a robot program, so viewer discretion is required.