Tax Trap for 2011 – Failure to Elect Grouping of Aircraft Company and Operating Company

Second in a series of articles on “How to Survive an IRS Audit of your Aircraft”

There are many valid business reasons to separate aircraft ownership from the operating companies it serves. These often include liability protection, ownership differences, and managerial issues to name a few. Although it is often beneficial to segregate ownership for non-tax reasons, it is important to avoid inadvertently causing the aircraft entity to be treated on a “stand-alone” basis for passive activity income tax purposes.

TAX DEDUCTION OF BUSINESS AIRCRAFT 2014 UPDATE

Tax Depreciation of General Aviation Aircraft

Businesses throughout the country routinely make use of general aviation aircraft to provide travel and communication efficiencies that provide them with an important competitive advantage. As part of a general Congressional approach to encourage business investments, the Tax Code allows a rapid depreciation schedule for aircraft that allows owners to fully write-off purchase/acquisition costs over a period of time (usually five year) that is far less than the economic life of an aircraft.

NEW IRS REGULATIONS: IMPACTS ON OWNERS, LESSEES, AND CHARTER CUSTOMERS

Deducting Aircraft Expenses? Detailed Tax Calculations Now Mandatory

New IRS regulations effective in 2013 and forward require taxpayers claiming deductions for aircraft to undertake detailed calculations to determine what fraction of total expenses may be rendered non-deductible due to personal entertainment use of the plane. These calculations are necessary not only for aircraft owners, but also for lessees and charter customers; they apply to any company seeking deduction of expenses for use or ownership of business aircraft.

SR22T

To Maximize Deductions The Taxpayer Must Place Aircraft in Service in 2013

Current tax law provides for both bonus depreciation and an enhanced expensing election available to new aircraft purchasers. Fifty percent (50%) bonus depreciation is available for all new aircraft, including fractional interest, that are used primarily for business. The enhanced expensing election of $500,000 applies to new or used aircraft placed in service by “qualifying small business” taxpayers. A qualifying small business is one that invests less than $2,000,000 in total equipment purchases during the year.

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SR22

To Maximize Deductions The Taxpayer Must Place Aircraft in Service in 2013

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