Setting up an LLC in CA for a new plane, and depreciation.

[bluesideup]

Hi everyone.

I've read all the messages on this board, and some others, and the answer is still clear as mud. I am not sure if and SLSA is treated differently?
A Tax specialist, that sets up the large boys, jets etc., does Not recommend using Depreciation as a Tax deduction, for your other, or this business, unless you can show income / profit.

Here is the scenario:

A Private Pilot.

Create an LLC in CA, know how to do that, no questions.

Buy a new SLSA, around $200,00.00 and put it in the LLC's name.

This LLC will likely never make money, it only has the acft.

The intended use would be for another existing business as Scouting, Travel...

The question: Can the aircraft be depreciated, and deducted from the other's business ITax, and if Yes for how long?

Thank you.

 

[paflyer]

If it's a business asset, then sure it's subject to depreciation like any other. Why do you think new aircraft are salable at the prices the mfrs can get? Can't imagine the fact that it's an LSA has any impact on that. Don't forget recapture can rear its head when you sell it.

Not an accountant , but interested in a learned opinion.

 

[Stewartb]

Are you sure? I can't put new equipment into an LLC that has nothing but that piece of equipment for assets and no revenue and expect to depreciate it when it isn't generating income. I'm not sure how you put an airplane into an LLC and expect any benefit from it.

 

[SCCutler]

If there is never the possibility of a profit, the IRS and FTB will likely disallow any deductions, on the reasoning that it is not a legitimate business.

 

[Shawn]

This LLC will likely never make money, it only has the acft.

The question: Can the aircraft be depreciated, and deducted from the other's business ITax, and if Yes for how long?

Any business that does not show a profit in 3 out of 5 years is deemed a hobby the IRS and you will not be allowed the deductions. If you own the LLC shares peronally, good luck with that strategy.

From the IRS:

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year

If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.

Bottom line...unless you are a C Corp that owns the LLC you will not be able to depreciate as you mapped out.