Do rental regulations apply?

Discussion in 'Lessons Learned' started by Conn-fused, Mar 2, 2018.

  1. Conn-fused

    Conn-fused Guest

    Sorry in advance for my ignorance.

    #1 I know I can split operating costs with friends that I fly with, like for fuel and oil. Can I include an engine reserve charge? I think hangar/non-destination parking and insurance reimbursement are no-nos.

    #2 If I have friends that want to borrow my plane and I don't go with, can I charge them an engine reserve, or would that be considered rent? I want to avoid any added rental regulation compliance issues or insurance concerns. I want the plane to continue to fly during periods of long inactivity. The 2 guys who would use/borrow the plane are happy to pay fuel and oil. I'm not looking to turn a profit, but don't want to stuck with a big accelerated overhaul bill.
     
  2. Tom-D

    Tom-D Taxi to Parking

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    When friends borrow your aircraft and they pay anything thats rent and is legal.

    When you are the pilot, they can only pay half of the flight costs.

    I would think that an engine reserve is part of the operation costs of the flight.

    we will see who agrees
     
  3. dmspilot

    dmspilot En-Route

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    #1 No, you can't. The only expenses you may share are "fuel, oil, airport expenditures, or rental fees" (14 CFR 61.113).
    #2 There's no regulation stopping you from renting out your plane to another pilot and charging you whatever you want. It doesn't even need a 100-hr inspection in this scenario. However, your insurance company will have something to say about it. The limits will probably be similar to #1 above. One of the policies I've had stated "no coverage if a charge is made".
     
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  4. midlifeflyer

    midlifeflyer Touchdown! Greaser!

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    The words of the regulation disagree with you.
     
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  5. ifly4fun

    ifly4fun Line Up and Wait

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    I did something similar. I added my buddy as a named insured, he was a new pilot with little hours, cost him $50/year to be added.

    I had a loan, so he was renting it from the bank, not me. :)
     
  6. James331

    James331 Ejection Handle Pulled

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    A reason some people put their plane in a LLC and rent it from themself for their own use, also useful in this situation and I hear there are some tax benifits
     
  7. SkyDog58

    SkyDog58 Touchdown! Greaser!

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    Below are my non-attorney / non-accountant opinions.

    If he flies with you then the normal pro rata rules apply. These have been discussed ad nauseam.

    If you rent him the airplane to fly without you, you can charge him whatever you want. However there are two prime considerations.
    • It will impact your insurance especially if anything happens so you should talk to your agent beforehand.
    • It should be considered income for tax purposes. Of course when doing your taxes, you can deduct your costs associated with the operation. This would most likely mean that for instance, you fly the aircraft 75 hours this year and he flies it for 25 hours for a total of 100 hours, that you could deduct 25% of your fixed costs against the income generated as well as any variable costs such as fuel. I would suggest that you rent it dry which means that he pays for his own fuel. It simplifies things for you. As to the engine reserve, that would be part of your costs and you would divide the cost of an overhaul by the TBO to get a per hour cost.
    FAA wise, they mostly just care about when he flies with you in that you do not want to inadvertently become a commercial operation and run afoul of the regs. A pure rental without a provided pilot, keeps you in the clear with the FAA beyond what the regs (mostly Part 91) already state you must do as an owner. However, the IRS will care about the income should it become known to them.

    You also might consider setting up a legal entity.

    Bottom line: Talk to your lawyer and tax accountant.
     
  8. Palmpilot

    Palmpilot Touchdown! Greaser! PoA Supporter

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    Sometimes I wonder why the FAA even bothers putting the regs on the Internet.
     
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  9. SkyDog58

    SkyDog58 Touchdown! Greaser!

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    So that we can do the research for people who don't know how? :D
     
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  10. flyingron

    flyingron Touchdown! Greaser! PoA Supporter

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    You would be wrong as far as the FAA is concerned. Private pilots can only "share" the direct operational expenses (either rental charges if they are renting or the direct fuel/oil and things like FBO/landing fees). Banking to the maintenance reserved is specifically declined in counsel opinions.
     
  11. mscard88

    mscard88 Touchdown! Greaser!

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    It's done so someone can ask questions on POA and get all these wonderful answers. Great isn't it? :rolleyes::)
     
  12. midlifeflyer

    midlifeflyer Touchdown! Greaser!

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    I think the issue is more one of regaphobia or regulitis. Regaphobia is a fear that the FAR are too complicated to understand. Regulitis is related, a disease which causes people of above-average intelligence to lose reading comprehension skills or find hidden meanings in every sentence. The result is you don't even bother looking.
     
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  13. SkyDog58

    SkyDog58 Touchdown! Greaser!

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    Well, we certainly seem to see several cases of both diseases on a weekly basis. Maybe AMEs need to test for them.
    ;)
     
  14. midlifeflyer

    midlifeflyer Touchdown! Greaser!

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    The GA pilot population is too small as it is!
     
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  15. SkyDog58

    SkyDog58 Touchdown! Greaser!

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    :rofl::rofl::rofl: