Johnny Buys an Airplane, did he run afoul of the rules

Johnny should have never grown the lemonade stand beyond the size where it could operate for cold hard untraceable cash.
 
It's time for Johnny to sell the business, the future for lemonade looks sour:rofl:

Now if Johnny converts the assets of that business to a new business like nationwide strip clubs, attains his commercial and claims the flights as necessary for currency ... well, then his new "safety" pilots are going to be awesome:lol:
 
denverpilot said:
Johnny should have never grown the lemonade stand beyond the size where it could operate for cold hard untraceable cash.
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No, he should have started the Holy order of the Lemon and IRS exemption on church status providing the Citrus Highway to Heaven for a 10% tithing and a G-650.
 
Old Geek said:
I think Johnny should expect the IRS equivalent of a 709 ride.
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If he goes about it the way he intends, he can pretty much count on it. The way I laid out is what half a dozen of my long time clients in Johnny's situation do and it has a solid track record. As long as it looks like an ordinary acceptable model straight forward business transaction like renting a plane for fair market value, there are no flags raised. Splitting aircraft ownership and expenses between private and business deductions is a known audit flag that you want to avoid.
 
As long as the plane is operated exclusively under Part 91, then it's strictly a tax issue. If you have an asset that is owned by a for-profit business (LLC, in this case), but the asset is used 100% for personal use, then there can be no deduction for depreciation. THAT is the issue.
 
If Johnny is flying those four free hours each month, he might have a problem with the FAA. Here's the logic - feel free to shoot it down:

He would have to log the hours, since logging is needed to validate currency. The FAA sometimes deems that logging hours received for free is compensation for flying.

Holding only a private pilot certificate, he's not allowed to receive compensation for flying.
 
NoHeat said:
If Johnny is flying those four free hours each month, he might have a problem with the FAA. Here's the logic - feel free to shoot it down:

He would have to log the hours, since logging is needed to validate currency. The FAA sometimes deems that logging hours received for free is compensation for flying.

Holding only a private pilot certificate, he's not allowed to receive compensation for flying.
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Then the FAA needs to go after every kid whose parents footed the bill for their training since all of their training was compensation.
 
Johnny, even though he is a PPL, may be able to deduct the cost of staying current in his airplane. For tax purposes an LLC does nothing, and AFAIK the FAA has never considered legitimate tax deductions for business travel in a GA airplane as 'compensation'.

Johnny needs to know that "Because personal aircraft had for so long been viewed as a lavish business perk, the courts require taxpayers to prove that aircraft they claim as business deductions are actually necessary for their business and not just for the owner’s benefit."

Journal of Accountancy


Note: If you like to ***** about the AOPA, do not click this link:
AOPA
 
TK211X said:
:skeptical: What?



Am I out of the loop on something?
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They were flying a borrowed aircraft a while back that triggered some red flag in some LE kid's database who dispatched sheriffs deputies to meet them "cordially" at their next airport stop... some time ago.
 
denverpilot said:
They were flying a borrowed aircraft a while back that triggered some red flag in some LE kid's database who dispatched sheriffs deputies to meet them "cordially" at their next airport stop... some time ago.
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OH THAT. I remember. Just thought something more recent happened.
 
NoHeat said:
If Johnny is flying those four free hours each month, he might have a problem with the FAA. Here's the logic - feel free to shoot it down:

He would have to log the hours, since logging is needed to validate currency. The FAA sometimes deems that logging hours received for free is compensation for flying.

Holding only a private pilot certificate, he's not allowed to receive compensation for flying.
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He is the owner of the business that leases the plane, the flights are in furtherance of the business, no worries. Actually, a PP employee could fly the plane under his normal compensation to make it to a business meeting, no worries.
 
EdFred said:
But they have said getting reimbursed is compensation, thanks to that dumb **** MacPherson.
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He's not being reimbursed for flying, he's flying in furtherance of business he is conducting. You can tell the difference since it can be done on a Business/Personal insurance policy.
 
Henning said:
He is the owner of the business that leases the plane, the flights are in furtherance of the business, no worries.
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The 4 hours were for the purpose of currency. Not to attend a business meeting. The benefit of the currency does not uniquely apply to his business travel, because he is also allowed to fly the plane for fun.

Suppose he never attends business meetings, but just does 4 hours of touch and goes and manuevers, and thereafter flies only for fun. In that case, receiving the 4 hours free is not in furtherance of his business.
 
NoHeat said:
The 4 hours were for the purpose of currency. Not to attend a business meeting. The benefit of the currency does not uniquely apply to his business travel, because he is also allowed to fly the plane for fun.

Suppose he never attends business meetings, but just does 4 hours of touch and goes and manuevers, and thereafter flies only for fun. In that case, receiving the 4 hours free is not in furtherance of his business.
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Is it arguable that the maintaining currency is so that he maintains safety, legality and is ready to go at a moment's notice when the business opportunity arises? If a businessman buys a book on business isn't it tax-deductible on the idea of sharpening his business acumen? Can't Johnny argue that the airplane increases his competitive advantage?
 
NoHeat said:
The 4 hours were for the purpose of currency. Not to attend a business meeting. The benefit of the currency does not uniquely apply to his business travel, because he is also allowed to fly the plane for fun.

Suppose he never attends business meetings, but just does 4 hours of touch and goes and manuevers, and thereafter flies only for fun. In that case, receiving the 4 hours free is not in furtherance of his business.
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I'm no expert on the tax code or how being a PP vs. a CP/ATP would relate, but my company picks up the tab for my currency when I need to go to the sim for 3&3's. That doesn't come out of my pocket.
 
Jaybird180 said:
Is it arguable that the maintaining currency is so that he maintains safety, legality and is ready to go at a moment's notice when the business opportunity arises? If a businessman buys a book on business isn't it tax-deductible on the idea of sharpening his business acumen? Can't Johnny argue that the airplane increases his competitive advantage?
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No, it has to be DIRECTLY related, if his business is flying school, then he can deduct it.
If his business is selling lemonade, no.
You can't deduct a safe driving course either, despite needing a car for business reasons.
He can argue anything he wants, he'll just have to pay the tax and penalty, unless they think he tried to commit fraud, then he goes to Wesley Snipes school of hard knocks.
 
NoHeat said:
The 4 hours were for the purpose of currency. Not to attend a business meeting. The benefit of the currency does not uniquely apply to his business travel, because he is also allowed to fly the plane for fun.

Suppose he never attends business meetings, but just does 4 hours of touch and goes and manuevers, and thereafter flies only for fun. In that case, receiving the 4 hours free is not in furtherance of his business.
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The currency isn't going to matter one way or the other.
 
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teejayevans said:
No, it has to be DIRECTLY related, if his business is flying school, then he can deduct it.
If his business is selling lemonade, no.
You can't deduct a safe driving course either, despite needing a car for business reasons.
He can argue anything he wants, he'll just have to pay the tax and penalty, unless they think he tried to commit fraud, then he goes to Wesley Snipes school of hard knocks.
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You're mistaken, read the links I posted above. If you claim this expense on your taxes be ready to defend it. But the Tax Courts have allowed this exact deduction in a number of cases.
 
JimNtexas said:
You're mistaken, read the links I posted above. If you claim this expense on your taxes be ready to defend it. But the Tax Courts have allowed this exact deduction in a number of cases.
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I was referring to remaining "current" expenses, and compared it to a safe driving course and I didn't see anything in the linked article that counters this, I would consider the practice time as personal and would be separate as the article mentions.
 
teejayevans said:
I was referring to remaining "current" expenses, and compared it to a safe driving course and I didn't see anything in the linked article that counters this, I would consider the practice time as personal and would be separate as the article mentions.
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Sigh. The taxpayer would need to show that staying current is required because he needs to fly for his business. The tax court doesn't know or care anything about the FARs.

If the taxpayer can show that he needs 'practice time' and he is using his airplane for legitimate business purposes then he can deduct these expenses.

This taxpayer has a good chance of being audited, so he better ready to justify the deduction through the IRS appeals process.
 
GrampaMark said:
C'mon, take the money and run...

Oops, wrong thread.
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Beat me to it....

Johnny was a schoolboy when he heard his first Beatle song,
'Love me do,' I think it was. From there it didn't take him long.
Got himself a guitar, used to play every night,
Now he's in a rock 'n' roll outfit,

And everything's all right, don't you know?
 
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