wabower
Touchdown! Greaser!
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Wayne
For those business aircraft owners who think the current administration is their friend, an article in the August issue of B&CA provides a laundry list of the current and proposed changes by the IRS.
The prediction is for tighter rules, increased scrutiny and more audits. Much attention is being devoted to closely-held firms, such as LLC's and Sub-S corps that own airplanes. Almost every aspect of the tax-deductability of aviation expenses is being evaluated, some for the first time.
For example, most business owners take advantage of the MACRS 5-year depreciation rules available for aircraft. A new wrinkle poses two threats to this deduction:
1. The IRS now says that the proof for use of the accelerated deductions will be calculated on a year-by-year basis. If the business use of an aircraft for a particular year falls below the 50% minimum required for depreciation, the accelerated depreciation claimed for that year and all prior years will be recaptured and restated at straight-line rates, with the taxpayer being liable for payment of taxes on the gain at ordinary rates.
2. The generation of business income by the owner of the aircraft will be scrutinized, especially those that lease the airplane to affiliated or related parties. Some existing rules regarding the usage by direct or beneficial owners of more than 5% of the aircraft are being tightened, and other rules are being added to the mix.
The unfavorable future tax environment is prominently mentioned in most articles describing the sorry state of the business aircraft market, and this particular article provides a good summary of the reasons for that sentiment.
Since the article is copyrighted material I'm not going to post it here, but if you're thinking about a business airplane or want to CYA for one you already own, you might want to obtain a copy and/or talk to your CPA ASAP.
PM if you want to discuss. I'm not an attorney or CPA, but try to follow these tax issues as a part of the other stuff relative to acquisition and consulting engagements.
The prediction is for tighter rules, increased scrutiny and more audits. Much attention is being devoted to closely-held firms, such as LLC's and Sub-S corps that own airplanes. Almost every aspect of the tax-deductability of aviation expenses is being evaluated, some for the first time.
For example, most business owners take advantage of the MACRS 5-year depreciation rules available for aircraft. A new wrinkle poses two threats to this deduction:
1. The IRS now says that the proof for use of the accelerated deductions will be calculated on a year-by-year basis. If the business use of an aircraft for a particular year falls below the 50% minimum required for depreciation, the accelerated depreciation claimed for that year and all prior years will be recaptured and restated at straight-line rates, with the taxpayer being liable for payment of taxes on the gain at ordinary rates.
2. The generation of business income by the owner of the aircraft will be scrutinized, especially those that lease the airplane to affiliated or related parties. Some existing rules regarding the usage by direct or beneficial owners of more than 5% of the aircraft are being tightened, and other rules are being added to the mix.
The unfavorable future tax environment is prominently mentioned in most articles describing the sorry state of the business aircraft market, and this particular article provides a good summary of the reasons for that sentiment.
Since the article is copyrighted material I'm not going to post it here, but if you're thinking about a business airplane or want to CYA for one you already own, you might want to obtain a copy and/or talk to your CPA ASAP.
PM if you want to discuss. I'm not an attorney or CPA, but try to follow these tax issues as a part of the other stuff relative to acquisition and consulting engagements.