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Let your airplane work for you.
Many purchasers don’t think about how to structure the ownership of their aircraft until it comes time to fill in the blank on the FAA purchase form.
- Name of purchaser? Should it be me or my business?
- Do I need to set up an “asset protection entity”?
- Do I need to disclose the purchase price?
Although asset protection jumps to the forefront, and most people assume that a Corporation or LLC is the popular answer to all their problems, you need to look at the tax implications that arise - on both federal and state levels - before signing an offer to purchase!
Most of the “street” advice and hangar stories is incorrect, or may be right for someone else’s situation.
Your attorney may give you the wrong advice - especially if he is not familiar with the latest IRS Audit techniques to deny deductions to business owners. Even your accountant is probably not aware of the FAA regulations that will apply to your intended use, and certainly does not understand SIFL rules.
If you intend to use your aircraft for business purposes, there can be substantial advantages to owning your aircraft appropriately through a properly structured entity such as an LLC or Corporation. Too frequently though, the type of entity or the ownership chain has unintended tax consequences.
Although you may escape paying a “sales” tax at the closing of the purchase, most states now have a “USE TAX” that applies to most non-retail purchases. There are techniques to minimize, postpone, or eliminate some taxes, but you must know the law, and file the correct forms on time to avoid penalties and interest surprises.
Flying clubs and partnerships must be especially vigilant, particularly in states where each transfer of title is subject to Use Tax. Many states will apply a tax even when there is only a minor change in ownership! Admission of a new member may or may not trigger these taxes. Every state is clarifying its rules to capture more tax dollars. Transfers between an individual and his/her solely owned businesses can cause problems!
Applying your aviation expenses to your business income may allow you to fly at greatly reduced costs, if you develop the best structure in advance, and keep the proper records from day one!
It is an important matter to identify and set up the proper structure. The IRS knows the common mistakes, and some approaches raise red flags. Doing it right requires direct knowledge and experience with your situation, the available options, and the IRS regulations and audit techniques employed since 2009.Jim Baloun and his staff at CPAaviation.com have the experience and knowledge necessary to successfully execute a good strategy. They will listen to your plans, and ask the right questions to get a complete understanding of how you and your business will operate the aircraft. They know how and when to structure a new entity to properly hold your aircraft, to ensure that the expected tax benefits can be realized, and to maximize your ability to leverage these opportunities, and to reduce risk from IRS and State audits.
CPAaviation.com’s services include a free initial consultation, and range from a simple reality check of your established accountant’s and attorney’s advice, to a complete structuring of the deal, and formation of an entity. Continuing services are available.
Logs for both the aircraft and operators can be arranged.
Simple accounting systems can be modified to fit your needs.
Ongoing accounting and tax preparation services are also available at a reasonable cost.
To reach Jim click to his web page or call 847.991.1111. His cell phone is 847-812-0661, and he welcomes night and weekend calls from pilots in need of last-minute advice.