What is the occupied seat rule?

Transcript:

The occupied seat rule generates out of Section 274-10, which defines personal use of business aircraft. What occupied seat rule says is the IRS is going to treat aircraft very differently than they would treat the use of other transportation equipment such as a car. That is, when an aircraft flies to a particular destination the IRS is going to look at the purpose of every passenger on that flight, and any passenger that is on there for personal entertainment purposes the IRS will deduct the pro rata share of the expenses for the entire year of the aircraft based upon the seat miles of that passenger. While in a car, you might be able to throw your kids in the back seat for a business trip you were going to take anyway, because they don’t cost you anything more, taking those children along for entertainment on a business trip to Disney may have a totally different consequence in your aircraft, because a flight that would have been 100 percent deductible for business now only becomes 50 percent deductible because of the existence of the occupied seat rule.