Little confused on Commercial Operator requirements

Fearless Tower

Fearless Tower

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Fearless Tower
I'm currently prepping for my Commercial and at the same time looking into possible time building options from a tax standpoint and I am a little confused between the FAR and the various study materials out there.

Here is the scenario:

I have a successful real estate investment business that requires some travel. Being a pilot, I naturally like the idea of using the business travel expense as a way to build time. Costs more than airline travel, but the expense deduction while building time and experience is more beneficial. One of the options that I am looking at is to rent planes to fly myself on business trips and claim the rental expense as a tax deduction.

Now, it seems to me that my investment company compensating me to fly myself could be construed as a commercial operator engaged in private/non-common carriage.

As a commercial operator, the LLC would need a Operating Certificate and Op specs. But, reading through the Part 119 requirements for Op specs for non-common carriage operators, it seems a bit difficult to include all of the required information when the operation is utilizing rental aircraft (ie op spec requirements call for specific details on all aircraft used by the operator).

Seems like I am missing something and unfortunately while there is plenty of material out there to explain common carraige, private carriage seems a little vague. Has anyone seen similar situations?

Thanks,
Andrew
 
I think you're in Part 91...in fact, I think you'd be good even pre-Commercial (see 61.113(b))

Your "company" is not paying you to fly. They're paying you to be a real-estate guy. They flying is incidental to the business.
 
The FAA is not who I would be worried about in the scenario you mention, it would be the IRS!
 
Dean said:
The FAA is not who I would be worried about in the scenario you mention, it would be the IRS!
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Why, if you're legitimately traveling on business, and your business is paying the expenses for that travel, why would the IRS care? It's a perfectly legitimate business expense.
 
JeffDG said:
Why, if you're legitimately traveling on business, and your business is paying the expenses for that travel, why would the IRS care? It's a perfectly legitimate business expense.
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Its this statement here that will cause the issue.

"I am looking at is to rent planes to fly myself on business trips and claim the rental expense as a tax deduction"

He better have a plane rental business also, if he is renting his plane to himself, he will have to show it as income, so whats the point.
 
Dean said:
Its this statement here that will cause the issue.

"I am looking at is to rent planes to fly myself on business trips and claim the rental expense as a tax deduction"

He better have a plane rental business also, if he is renting his plane to himself, he will have to show it as income, so whats the point.
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Confusion, I guess, reigns supreme. I am not following, Dean. I don't get where you think he is renting the plane to himself. If he rents the plane from an FBO, why can't he claim it as a business expense and deduct it? OR get reimbursed from his place of employment. I can see an issue if he tries to double dip it, but one or the other shouldn't raise eyebrows, should it?

:confused::confused::confused:
 
Dean said:
Its this statement here that will cause the issue.

"I am looking at is to rent planes to fly myself on business trips and claim the rental expense as a tax deduction"

He better have a plane rental business also, if he is renting his plane to himself, he will have to show it as income, so whats the point.
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Looks like a slight mis-wording in my original post. I meant LLC pays to rent an aircraft (not my own) from FBO/Flying Club and claim the expense of the rental for the specific trip involved. In other words, I might fly 15 hrs or so a month and maybe 6 of that would be claimed as travel expense related to business. Don't think there is any tax issue with that as long as I maintain the receipts and documentation for the specific travel being claimed.
 
As a private pilot operating under Part 91, you are allowed to fly yourself places for business so long as your business is not flying. You're a real estate agent, so that's not a problem. You can charge the company for plane rental and fuel expenses. There is no commercial operation here. Check with your accountant, but your company should then be able to deduct your travel expenses (which you have not paid for) as a business expense.

If your company were to buy a plane that you could use for company business that should still be fine, once again so long as your business isn't the flying portion. You just happen to be using a company plane instead of one you rented. It would still be Part 91. What would be a problem would be if you flew someone else in the company to a meeting that you had no part in and didn't have your commercial.

Also remember that there are plenty of Part 91 commercial operations. The main difference is that Part 135 is on-demand flight service. What a person or company does with its plane is its business, so long as it's the one making the decisions and is not making them because someone else says "Fly me from A to B."

Part 91 operation: I have a plane, I have money, I'm flying from A to B because I want/need to go there.

Part 135: I have plane, you have money, I'm flying you from A to be B because you are paying me to do so.

Go get your comm, it's a lot of fun! :)
 
Fearless Tower said:
Looks like a slight mis-wording in my original post. I meant LLC pays to rent an aircraft (not my own) from FBO/Flying Club and claim the expense of the rental for the specific trip involved. In other words, I might fly 15 hrs or so a month and maybe 6 of that would be claimed as travel expense related to business. Don't think there is any tax issue with that as long as I maintain the receipts and documentation for the specific travel being claimed.
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You'd rent the plane from the FBO/club, and then submit your expenses for reimbursement to your company.
 
Fearless Tower said:
Looks like a slight mis-wording in my original post. I meant LLC pays to rent an aircraft (not my own) from FBO/Flying Club and claim the expense of the rental for the specific trip involved. In other words, I might fly 15 hrs or so a month and maybe 6 of that would be claimed as travel expense related to business. Don't think there is any tax issue with that as long as I maintain the receipts and documentation for the specific travel being claimed.
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Sounds pretty straightforward to me...

Altho I would check with a accountant or a prestigious tax firm like "the Charles Rangal inc" tax consultants. :yesnod::rofl::nono::nonod:
 
Greg Bockelman said:
Confusion, I guess, reigns supreme. I am not following, Dean. I don't get where you think he is renting the plane to himself. If he rents the plane from an FBO, why can't he claim it as a business expense and deduct it? OR get reimbursed from his place of employment. I can see an issue if he tries to double dip it, but one or the other shouldn't raise eyebrows, should it?

:confused::confused::confused:
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My mis-interpretation of what he meant, I thought he was renting his own plane back to himself, but if he is renting from the FBO and writing that cost off, I see no issue.
 
If you're thinking that getting paid for carrying yourself is carrying a person for hire under the operator regs, you're reading way too much into it.

Don't even need a commercial pilot certificate for that one.
 
Fearless Tower said:
Looks like a slight mis-wording in my original post. I meant LLC pays to rent an aircraft (not my own) from FBO/Flying Club and claim the expense of the rental for the specific trip involved. In other words, I might fly 15 hrs or so a month and maybe 6 of that would be claimed as travel expense related to business. Don't think there is any tax issue with that as long as I maintain the receipts and documentation for the specific travel being claimed.
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To keep the documentation straight, it probably wouldn't hurt if the company rented the plane for the 6 business-related hours you personally rented it for the remaining non-buisness flying.
 
kkoran said:
To keep the documentation straight, it probably wouldn't hurt if the company rented the plane for the 6 business-related hours you personally rented it for the remaining non-buisness flying.
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Why? If anything, that would sound more to me like a Part 91 commercial operation, and that doesn't sound correct.

Provide receipts, it's not a problem.
 
Fearless Tower said:
Looks like a slight mis-wording in my original post. I meant LLC pays to rent an aircraft (not my own) from FBO/Flying Club and claim the expense of the rental for the specific trip involved.
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It will look better to the FAA if you rent the plane yourself and then submit an expense report to the company for reimbursement. IRS shouldn't care either way.
 
Ted DuPuis said:
If your company were to buy a plane that you could use for company business that should still be fine,
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After the Mangiamele letter, I would not be sure of that. Not saying it's a definite no-no, just that I'm no longer sure about PP's being able to do stuff like this. Note also that post-Mangiamele, he can't take anyone else with him either way until he gets his CP.
 
Ron Levy said:
After the Mangiamele letter, I would not be sure of that. Not saying it's a definite no-no, just that I'm no longer sure about PP's being able to do stuff like this. Note also that post-Mangiamele, he can't take anyone else with him either way until he gets his CP.
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I don't think Mangimele would restrict you, provided you didn't carry any passengers or property with you as a PP...in fact I think it validated 61.113(b) for solo flight.
 
JeffDG said:
I don't think Mangimele would restrict you, provided you didn't carry any passengers or property with you as a PP...in fact I think it validated 61.113(b) for solo flight.
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It did, but it didn't discuss an aircraft provided by the employer, just one provided by the worker; hence, my caution.
 
Ron Levy said:
It did, but it didn't discuss an aircraft provided by the employer, just one provided by the worker; hence, my caution.
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Not a bad suggestion...

You said once you were working on requesting a reconsideration. Anything I might be able to assist with? I think you and I have about the same low opinion of that interpretation!
 
JeffDG said:
You said once you were working on requesting a reconsideration. Anything I might be able to assist with? I think you and I have about the same low opinion of that interpretation!
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I'll let you know when I get a first draft written.
 
Of course as soon as you get your commercial, most of the gray area goes away. So get it! It's a fun rating anyway.
 
Fearless Tower said:
Now, it seems to me that my investment company compensating me to fly myself could be construed as a commercial operator engaged in private/non-common carriage.
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No more than if you rented a car for the trip and they either paid the cost of the rental or paid xx cents per mile for you to drive yourself.

Many consider using the standard IRS air milage rate to charge their expenses when they fly themselves. You are not carrying "company customers" on the trip are you?

Also check your company insurance policies. Many do not allow "upper management" to be their own pilots or to carry other company employees. Company liability and all.

You fly and take office mate Fred on the trip. Accident, Fred's family sues the company because they allowed you to carry Fred on company business.
 
One thing, make sure your employer/partnership does not forbid flight in non-owned aircraft on company business as part of their insurance policy.

Many, if not most, do as a matter of course.
 
As twedeckard just brought up, the major trouble area most corporations, and pilots who fly for them, run into is in liability. Your corporation can rent the aircraft and you can legally fly it as a private pilot to conduct your business. Or your company can buy an aircraft, and you can fly it, all as a tax write off.
The problem comes when there is and accident or incident, then your Company is liable. Your company can and will (most likely) be sued by all injured parties. Most FBOs have minimal insurance as related to renters, it usually only covers the aircraft and no liability. They usually make you sign a release accepting responsibility. And if you have personal pilot insurance it will not cover business flights, especially if you only have a Private license, unless your paying a HUGE premium, which you very well may be.
To avoid this liabilty most corporations form a "flight department" as a separate company, usually an LLC, to protect the primary company from liability relating to the Aircraft. This is illegal without a 135 certificate, although many companies do this, and hire low time, ignorant Commercial pilots to fly the aircraft. As a warning to all commercial and soon to be commercial pilots out there, watch out for this. Because the FAA looks for these part 91 "flight Department" LLCs and shuts them down, but since they are not tied to the original company (on paper) can not take legal action on said company, so they take certificate action on the pilots involved. Not a good way to start (or finish) your career.
 
midlifeflyer said:
Really...?

http://www.faa.gov/about/office_org.../interpretations/data/interps/2010/Wagner.pdf
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Hauling your employer's freight in a plane you provide on a trip you're making only to fly said plane is a long way from flying yourself around to places you need to go on business. In the Wagner case, the problem is that the pilot is not acting as a company employee, but instead renting the plane himself and providing air transportation to the company for money. If, instead, Wagner (a Commercial Pilot) were on the company books as company pilot, and the rental were made in the company's name and paid by company check, and Wagner was on the company clock for the flights, there would be no problem -- just another corporate operation.
 
Ron Levy said:
Hauling your employer's freight in a plane you provide on a trip you're making only to fly said plane is a long way from flying yourself around to places you need to go on business. In the Wagner case, the problem is that the pilot is not acting as a company employee, but instead renting the plane himself and providing air transportation to the company for money. If, instead, Wagner (a Commercial Pilot) were on the company books as company pilot, and the rental were made in the company's name and paid by company check, and Wagner was on the company clock for the flights, there would be no problem -- just another corporate operation.
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Your point being that all the gray areas do go away when you have a commercial pilot certificate?
 
OP said he has a successful R/E investment business. To me, that says that he calls the shots for the company and all the employer/employee permission/insurance issues can be ignored.

During a presentation at the NBAA tax conference a couple of years ago, one of the big-name aviation lawyers made the following distinction between the IRS and the FAA regarding aviation regulatory issues:

The FAA says you can't do anything that we don't expressly authorize you to do, and any violations of our regs can result in significant civil penalties.

The FAA says we don't really care what you did with your aviation-related activities, just tell us what it was and we'll tell you how much tax to pay.

I think he had it nailed, and use his comments regularly with clients who are wondering about their tax situations.
 
I'm not sure I'd quote put it that way (You need to change FAA to IRS in the second statement) but there's no doubt that the two agencies have different goals and look at the same conduct for completely different reasons.

Heck, the IRS doesn't care if you're a drug dealer or contract killer, only that you pay your taxes on what you earn from it.
 
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