Youtube income tax | Advocate Consulting Legal Group, PLLC

Why might the IRS treat my aircraft business as a passive activity?

Transcript:

When the IRS takes a look at our income and our expenses, they divide those income and expenses into several categories, that is, active income and expenses, passive or investment income and expenses. The IRS may be inclined to treat the aircraft expenses, even if they’re incurred in your active income-producing business, as passive because of the common nature of aircraft leasing. That is, aircraft are commonly operated under a lease agreement,

Why is the tax depreciation on aircraft accelerated?

Transcript:

Aircraft are subject to tax depreciation that is very accelerated based upon, in contrast, the actual loss of value of the aircraft. That is makers for part 91 aircraft which is the modified accelerated cost recovery system, is a recoverable life of about five and a half years. This is a purchase and investment incentive built into the tax code. That is if you purchased a new aircraft or a used aircraft even and it only lasted you five and a half years there’s something wrong with your machine.

Why is tax record keeping for aircraft different?

Transcript:

Tax record keeping for aircraft is different because the IRS says that they want us to meet a higher standard in showing the use of the aircraft and why it should be deductible. Therefore there are specific regulations that govern what the IRS is going to be looking for if you’re going to take deductions under the listed property rules under which aircraft apply. Additional documentation, like a tax flight log and support for those trips is necessary in order to avail yourself of full deductions for the aircraft.

Who can receive fringe benefit flights?

Transcript:

When a company compensates and individual in the form of providing use of the company airplane, that type of flight is known as a fringe benefit flight. It can be provided to any employees of the company, any partners in the company, or even any independent contractors that the company hires. It would have to be reasonable, ordinary, and necessary compensation in order to be deductible. For certain corporations, there could be deduction limits pertaining to highly compensated employees.

What type of documents do I need to support my aircraft deductions?

Transcript:

Just like any other deductions you’re going to take on your tax return, aircraft deductions, many of which are direct expenses. You want to keep receipts, you want to keep any invoices, and proof of when that expense was incurred, and how the expense was paid. On top of those traditional documents that you would keep, aircraft also require a flight log, if you’re going to take depreciation deductions and expense deductions.