By: A.J. Cook

In June 1971, salvage divers recovered an anchor, 40 miles southwest of Florida, like those on galleons in the 1600s. Sound interesting? The IRS thought it did.

Three hundred and fifty years earlier, a Spanish ship, the Nuestra Senora de Atocha, one of 28 ships of the Tierre Del Firme fleet, sailed from Havana, Cuba for Cadiz, Spain. The next day the galleons smashed into a deadly hurricane. The crew battened down the hatchways and secured the sails and cargo of valuable coins and gold and silver bullion. Alas, it was for naught; the Atocha sank.

For years before 1971, Dr. Eugene Lyon, a historian, pored over Spanish archives of treasure shipments from the New World looking for clues to the site of the fatal sinking. Divers, employed by Treasure Salvors, Inc., followed Lyon's maps and directions.

Encouraged by the anchor find, they continue the search. Months, then years go by. They find just enough to encourage them to continue: muskets, cannon balls, barrel hoops, a few coins. But this minor success is hard earned. The company and its personnel encounter many dangers -- bad weather, faulty equipment, the State of Florida, the United States. The Florida government tries to pirate 25 percent of Treasure Salvors' find by claiming the Atocha sank in its territorial waters. The state loses in the U.S. Supreme Court. Then Uncle Sam hauls the company into court to claim all the artifacts. The federal government loses also.

This legal defense and the salvage operation cost plenty. By now the company needs money badly. It owes $40,000 in back payroll taxes and other debts continue to mount. Will a shortage of funds sink the operation?

Not now. Franklin Perdue, of Salisbury, Md., to the rescue. Perdue, an expert in making tender chickens, as chair of an integrated poultry company, loans Treasure Salvors $90,000. The company gives as security a gold disc weighing 4 pounds, 7.2 ounces. This artifact later becomes famous. It is widely publicized and displayed in many exhibits, including one hosted by the King and Queen of Spain.

In 1983 the company, continuing to limp along financially, fails to repay the loan. Perdue takes ownership of the disc plus a gold chain and a two-escudo gold coin securing the debt.

On the ocean floor, the search continues. Buoyed by finding more and more artifacts, the divers dig deeper and deeper. Then on July 20, 1985, they find a barnacle encrusted chest. They find another and another -- a total of 30. All are packed with metal bars, coins, jewelry. This is the mother lode: 60 gold coins, 115 gold bars, 1041 silver ingots, 100,000 silver coins, 350 uncut emeralds. The Atocha becomes one of the Western Hemisphere's most famous shipwreck discoveries. The company displays the artifacts in museums throughout the country and Hollywood makes a movie about the ship and the exploration.

Meanwhile, the National Museum of American History, part of the Smithsonian Institution, discovers a generous donor. Perdue gives it the gold disc and the other two artifacts.

Then the Internal Revenue Service discovers Perdue. The agency deep sixes his charitable deduction of $374,814. It allows only $74,000 and tacks on three penalties.

The chicken executive goes to Tax Court squawking loudly that his gift is worth much more than that.

The judge agrees. He notes the donation has intrinsic value far beyond its numismatic worth. He throws out the IRS penalties and allows Perdue a charitable deduction of $311,000, which included a premium for the artifacts' excitement and glamour.

The Moral: Glamorous treasures salvage deductions that aren't chicken feed.