Using my Plane for Work Travel

[pilotmichael]

Let's say I am a partner in a business (sub chapter s corp), I own maybe 5% of said business to keep things easy, and I am also employed by said business. I want to personally buy a plane and then use it for some fun but also make it easier to visit our branch offices.

What are the tax implications? Positive/negative.
What are the liability implications for the business?
What haven't I thought about?

Before you say "talk to your tax and legal adviser", you bet I am going to do that. Just curious if anyone out there has a similar arrangement and can lend any advice like "nightmare, don't even bother".

Having the/a business buy the plane would be the cleanest setup of course and may be an option but I may want to go my own route.

Thanks,

 

[James331]

I'm not a tax dude, but I am a professional pilot and have my own plane. I can say if your plane isn't MAKING you some money, or at least trying to (al la CPL + certified and 100hr inspections), there are quite a few tax benifits that don't apply

 

[JCranford]

Talk to azbb. He can set you straight

 

[steingar]

I think using your own aircraft for business is a horrid idea unless you have an extremely capable aircraft. Sooner or later you will feel pressure to do something you shouldn't. This is the unfortunate beginning in far far far too many NTSB reports.

 

[Ravioli]

If you can't do a 1500 mile training cross country you're just wasting your time and money.

 

[PPC1052]

I think using your own aircraft for business is a horrid idea unless you have an extremely capable aircraft. Sooner or later you will feel pressure to do something you shouldn't. This is the unfortunate beginning in far far far too many NTSB reports.

Not necessarily. I use my own plane for business travel when it makes sense. If it doesn't make sense, I book a flight or drive. You just have to have self discipline. This is no different than wanting to use it for a personal vacation with the family packed up staring at you waiting for you to make a go/no-go decision.

 

[SCCutler]

I use mine for business all the time. It is a big time-saver.

Because it is not owned by the firm, I just reimburse myself at the IRS-allowed mileage rate of $1.15/SM (Note conversion from nautical miles). Hardly makes it profitable, but it's reasonable.

 

[Acrodustertoo]

Just get "one of the best aviation attorneys in the country(unnamed)" and you are good to go. Just contact the member mentioned already.

 

[gsengle]

I use mine for business all the time. It is a big time-saver.

Because it is not owned by the firm, I just reimburse myself at the IRS-allowed mileage rate of $1.15/SM (Note conversion from nautical miles). Hardly makes it profitable, but it's reasonable.

Do you do google maps estimated mileage or straight line? The google maps driving estimate is around 39% longer typically and is what you would have had to do in a car...


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[Ted]

There are a couple of ways you can go about it. Spike's way is one. Often, the plane is put into an LLC (either owned by the individual or as a subsidiary owned by the business). Then either the business owns the plane and you rent it from the business for personal use (or else your personal use gets considered "income") or you own the LLC (or the plane outright) and you have some way that the business pays for your use of it. Putting it in an LLC tends to provide some level of insulation from the core business. If you die in a crash (and take someone else with you) then there is some extra liability to consider. A lot of businesses get hung up about this, but they shoot themselves in the foot that way. Just make sure you have pilots who won't take stupid risks.

It's very feasible. Small planes are great business tools.

What part of the country are you in, and what sort of dispatchability, etc. are you looking for?

 

[RudyP]

I use my airplane extensively for business trips but I don't get any tax or other savings from it. I actually pay out of my pocket (not reimbursed) for every one of my flights even though I could go for 'free' on the airlines. I do have a fairly capable airplane (200KTAS, FIKI, lots of gizmos, etc..) and I do have to be conservative in my decisions but then again, I don't particularly feel more pressure to make the business meeting in NYC than I do to make the family wedding in Charleston and I can easily make safe tradeoffs, use airlines/car as backup or not go. It also increases my annual usage (from about 150 hours if I only used it for personal trips to 250-300 with mixed use) which keeps me current and proficient.

 

[PPC1052]

Do you do google maps estimated mileage or straight line? The google maps driving estimate is around 39% longer typically and is what you would have had to do in a car...


Sent from my iPhone using Tapatalk

I just usually do a google maps to find the mileage I would turn in if I were to drive, and turn it in at the auto mileage rate. It works out about what it costs me-- probably a little less than actual expenses if you throw in depreciation. I'm not turning it in to make money. Just to offset some of my expense.

 

[citizen5000]

Let's say I am a partner in a business (sub chapter s corp)

It is not this simple. One of the most audited and denied tax treatments is the attempt to write off any or all of an aircraft expense. The IRS will actually look to see if you could have taken a commercial carrier to said destination instead of your own plane and question the travel, for example. Do not fantasize about how this works. Talk to an aviation tax pro.

 

[paflyer]

I use mine for business all the time. It is a big time-saver.

Because it is not owned by the firm, I just reimburse myself at the IRS-allowed mileage rate of $1.15/SM (Note conversion from nautical miles). Hardly makes it profitable, but it's reasonable.

Doers that cover all expenses, fixed and variable?

 

[paflyer]

I use my airplane extensively for business trips but I don't get any tax or other savings from it. I actually pay out of my pocket (not reimbursed) for every one of my flights even though I could go for 'free' on the airlines. I do have a fairly capable airplane (200KTAS, FIKI, lots of gizmos, etc..) and I do have to be conservative in my decisions but then again, I don't particularly feel more pressure to make the business meeting in NYC than I do to make the family wedding in Charleston and I can easily make safe tradeoffs, use airlines/car as backup or not go. It also increases my annual usage (from about 150 hours if I only used it for personal trips to 250-300 with mixed use) which keeps me current and proficient.

Why don't you take advantage of the tax code and save yourself 30% + on operating the airplane? How about depreciation write-off?

 

[paflyer]

It is not this simple. One of the most audited and denied tax treatments is the attempt to write off any or all of an aircraft expense. The IRS will actually look to see if you could have taken a commercial carrier to said destination instead of your own plane and question the travel, for example. Do not fantasize about how this works. Talk to an aviation tax pro.

Really? Not what I've heard from people that do it all the time. IRS looking at why you didn't take a commercial flight is BS.

Are you a CPA or IRS agent?

 

[RudyP]

Why don't you take advantage of the tax code and save yourself 30% + on operating the airplane? How about depreciation write-off?

Good question - the answer is a bit complicated but essentially amounts to it being more trouble/risk than it is worth in my specific circumstances. Happy to discuss in more detail over PM but frankly it's kind of boring. That said, I certainly did consider it and its not a black or white situation.

 

[John221us]

It can be done. I had a friend who did it. Personally, I just had my company pay the gas for said flights and didn't write anything else off. Keep in mind that depreciation has to be recovered when you sell the plane (assuming it is fully depreciated and you sell it for more than zero). Also, airplanes are a big red flag for the I.R.S. My friend did get audited, but his records were good and he survived the audit (you have to show greater than 50% business use, if you depreciate the plane). Controller is full of planes that the owners depreciated and now owe more money on them than they can expect to recoupe, after having to recover the depreciation (the reason for some of the over priced planes you see).

 

[pilotmichael]

What part of the country are you in, and what sort of dispatchability, etc. are you looking for?

I live in the great Pacific Northwest. Typical trip range is 200-300NM with an occasional 500nm being an option. The problem of course here are the cascade mountains and the semi-permanent airmet zulu in the winter time. The plane would have very limited use cases because of this and I would restrict myself to only the best days - my schedule is pretty flexible so that would help. Typically day trips or one overnight stay with a last minute go/no-go. Otherwise I drive or fly commercial which is fine. Just looking for the best ways to structure this and/or be reimbursed in some fashion which helps justify the plane to some extent. Some good advice on this thread so far but I will definitely talk to my tax advisor / aviation attorney.

 

[Ted]

I live in the great Pacific Northwest. Typical trip range is 200-300NM with an occasional 500nm being an option. The problem of course here are the cascade mountains and the semi-permanent airmet zulu in the winter time. The plane would have very limited use cases because of this and I would restrict myself to only the best days - my schedule is pretty flexible so that would help. Typically day trips or one overnight stay with a last minute go/no-go. Otherwise I drive or fly commercial which is fine. Just looking for the best ways to structure this and/or be reimbursed in some fashion which helps justify the plane to some extent. Some good advice on this thread so far but I will definitely talk to my tax advisor / aviation attorney.

I'm not sure what your pilot background is or what you're looking for airplane wise. Yes, the PNW has some issues. Really turbos do get nice, as does pressurization. But any plane can be workable so long as you take appropriate precautions.

A Turbo 310 with deice would be a great choice.

 

[paflyer]

Controller is full of planes that the owners depreciated and now owe more money on them than they can expect to recoup, after having to recover the depreciation (the reason for some of the over priced planes you see).

That's only true if the actual sales price exceeds the basis cost, less the depreciated amount.

 

[John221us]

That's only true if the actual sales price exceeds the basis cost, less the depreciated amount.

True, it depends on the amount borrowed and still owed. You can get long term notes on planes. I guess, even if nothing was borrowed, the thought of selling a plane for $500K and only walking away with 20 or 30% of that didn't sit well with some. If you buy the plane brand new for $1M, then depreciate it, but sell it 5 years later for $750K, you might still owe $600K on it and you need to come up with close to $400K in recovered depreciation. The sweet spot for this problem seems to be around $500K to $1M. A lot of these were purchased as company planes and fully depreciated. My friend, who was shopping in this range, ran into a lot of sellers who were just stuck, because they had to come out of pocket $100K or more to sell their plane. It is apparently pretty common.

 

[paflyer]

True, it depends on the amount borrowed and still owed. You can get long term notes on planes. I guess, even if nothing was borrowed, the thought of selling a plane for $500K and only walking away with 20 or 30% of that didn't sit well with some. If you buy the plane brand new for $1M, then depreciate it, but sell it 5 years later for $750K, you might still owe $600K on it and you need to come up with close to $400K in recovered depreciation. The sweet spot for this problem seems to be around $500K to $1M. A lot of these were purchased as company planes and fully depreciated. My friend, who was shopping in this range, ran into a lot of sellers who were just stuck, because they had to come out of pocket $100K or more to sell their plane. It is apparently pretty common.

Yep, something else to consider and why you need a good accountant, and keeping aware of the market. I'd guess a lot of PC12 owners have a problem, since the market value has held but they were taking big depreciation deductions.