On August 1, 2012, the Department of Treasury published final regulations addressing the negative tax impact of entertainment use of business aircraft. These new regulations solidify into law a legal framework first discussed by the IRS in a 2005 published notice, and later expanded upon in a 2007 set of proposed regulations. Although these rules are complex and address a variety of topics, in this author’s view, the primary, noteworthy feature of the new regulation and its antecedents is a legal framework (referred to here as the “occupied seat rule”) which deals with how much aircraft expense is attributed to entertainment passengers onboard flights that are primarily flown for business purposes,
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