by Jed Wolcott, A guide for structuring ownership and reporting income and deductions for aircraft used in business. Includes sections on depreciation and tax-related comparisons between single and multi-member LLCs, S-corps, and individual aircraft ownership. Discusses leasing to flight schools and charter operators. Includes strategies for dealing with hobby loss rules, partial business/partial personal use, passive loss issues, at-risk limitations, and related topics.
A Guide for Structuring Ownership and Reporting Income and Deductions for Aircraft Used in Business by Jed Wolcott
What Constitutes Business Use of an Aircraft?
Defining “Incidental” to the Business of the Company.
by Jed Wolcott
The Real Question: Does Owning the Aircraft Make Business Sense?
Which Costs are Available for “Write Off?”
Conflicts Between IRS and FAA Regulations.
Cash vs. Accrual-Based Accounting.
The Importance of Internal Documents Agreeing with Each Other.
Do You Need an Aviation Attorney?
Structures for Owning the Aircraft.
Using Special-Purpose (or Single-Asset) Companies to Own Aircraft.
The Flight-Department Company Dilemma.
Passive Activity Loss Limitations.
S-Corporation Shareholder Basis.
Hobby Loss Rules.
Loss Carry-Forward and Carry-Back.
Why are these Taxes an Issue?
State Sales Tax.
State Use Tax.
Personal Property Taxes.
Possible Exemptions from Sales and Use Taxes.
Closing Offshore, in Another State, or using a Delaware Corporation.
Book Depreciation & GAAP.
What Type of Property is Depreciated?
Capitalize or Expense - the Dilemma.
Section 179 Deductions – Individual Owners.
Section 179 Deduction – Partnerships, LLCs, and S-Corporations.
Aircraft as Listed Property.
MACRS Depreciation – For Most Aircraft Used in Business.
ADS Depreciation for Aircraft Used Less Than 25% for Business.
Determining the First-Year Depreciation Deduction.
Depreciating Improvements and Upgrades.
Different Depreciation Rates for Business vs. Charter.
May I Claim Depreciation for My Airplane Used in My Employer’s Business?
Depreciation Restriction on Recently-Formed Entities (Called Short Tax Year).
Preparing Form 4562 for Reporting Depreciation.
Depreciation Deductions – General Comments.
Taxing the Gain or Loss from the Sale of a Business Aircraft.
Tax Free Exchanges (Section 1031).
Trading-In Your Aircraft.
Preparing Form 4797 for Reporting the Sale of a Business Aircraft.
Example 1: Individually-Owned Aircraft Used for Business.
Example 2: Single-Member LLC Owns Aircraft Used for Business.