Tax depreciation laws


#1

Looking at purchase and using a plane primarily for business. What are the tax rules for depreciation expecting to retain the plane for 5-10 years.

Traveling east coast. What states are most favorable for ownership? Sales tax? Depreciation rules? Property tax? Why?


#2

You would be better served consulting a tax attorney that has experience with aircraft transactions rather than seeking advice here…


#3

It would be nice to get some constructive input to help me get started on what peoples experiences have been after they have implemented a plan. All attorneys are not created equal and do not give the exact same advise.

I am hoping for individuals experiences - good and bad, advise, ideas, and will not be the sole source for my final decision.


#4

I’d have to agree with azav8r on his good, sound advice in checking with a GOOD tax attorney that deals with aviation. If you are not a member of AOPA legal services, that may be something you may want to consider using.

Like you said yourself, all attorneys are not created equally, and the question you ask is a very complex one at best and the same goes on the other side of the coin, what fits others may not fit your situation.

While folks may be able to share experiences, the accuracy and appropriatness of the information would be tough to weed out the wheat from the chaff to fit your particular situation especially your first question which really is more along the lines of an IRS or taxation question.

For example, I went to the IRS website and searched for airplane depreciation and found 1565 references.

search.irs.gov/web/query.html?co … n+airplane

Needless to say, this should suffice to say you ask a very complex question that I personally wouldn’t seek over the internet especially when it would pertain to my own personal finances.

Your second paragraph of questions, I am sure that a little research on your end will answer all of your questions. But if you intend to check with an attorney (HIGHLY recommended in my opinion) let him do the research for you, after all, that’s what you are paying him to do.

After all, “internet doctoring” could be even more hazardous to your health when given partially correct information then no information at all. :slight_smile:

Allen
(who found it intriguing that helicopters are not airplanes for IRS taxation purposes irs.gov/irb/2003-46_IRB/ar09.html )


#5

I am an expert and consultant to museums, NGOs, schools and individuals in the donation and/or operation of large yachts and other vessels, including possible tax ramifications to both donor and recipient.

Having lightly studied tax law as it applies to aviation, I wouldn’t even attempt to offer any advice to you beyond parroting what has already been offered, seek professional advice. This is due to the fact that there may be as many as three government agencies (FAA, IRS, DOT) involved in determining your tax status, but they don’t agree and each follows different laws.

Nor have you mentioned if the aircraft is to be owned by a corporation or an individual.

As a corporation? Delaware. No sales tax, no property tax, depreciation follows federal rules.


#6

Yes, very true… But as myself and the others above have proffered…

And by using a well versed aviation attorney the burden falls upon him/her as well, rather than you individually should something be challenged.

In my experience… I would call Kent Jackson at Jackson, Wade and Blanck

He and Nel Stubbs at Conklin & de Decker have served me well in these types of issues.


#7

I apologize that my question may have been a little focused. I intended to generate conversation about traps and pitfalls of ownership and what has worked for people. I am an AOPA member and read their emails and magazines. I have attended AOPA conferences, FAA conferences and vendor related seminars. I am just a novice but understand it is too late to ask questions after you have signed on the dotted line. I am beginning to explore the possibility of ownership but open to all venues personal vs corporate vs incorporating for the legal protection (seems to be a must in this day and time of liability risks).

I appreciate the gentleman’s information into property tax, sales tax in delaware. I doubt an attorney without a license to practice in Delaware would have given me this insight. I know of others with planes incorporated there so now that might make some sense. Property tax in my current state are not as favorable as they are in Delaware or Ohio and corporate jets apparently are moving out of W. VA related to this issue. (Recent AOPA Email -my source) This alone could make a substantial difference with my planning while I have unlimited options.

Recent VLJ seminar a vendor was telling me of a client who flew their jet to florida and got a high 5 figure tax bill (6% florida sales tax) even though they were a resident of another state where they had already paid sales tax. This was a bill supposedly designed targeting Yacht owners but has now caught airplanes in their net (Thru flight tracking and people on the ground). Similar law in maine (per AOPA email - yes I am a member and read them). To date, this was my first time hearing about this issue and I have never attended a seminar (Aviation Lawyers lead) that addressed this risk.

So I am not looking for free legal advise and will pay for such advise when the time is appropriate. Just thought some others would share what has worked or not worked for them in plane ownership.


#8

This ruling pertaining to sales tax on aircraft is usually only applied to aircraft owned by FL residents or aircraft domiciled in FL. This would appear to be reasonable until you realize that the state of FL will attempt to define “domiciled” as any vessel (or aircraft) that remains in the state for 90 consecutive days absent some specific exemptions.

A boat that remains in Florida for more than 90 consecutive days or more than 183 days in a one-year period is presumed taxable, unless it qualifies for another exemption.


#9

Now if you are just talking personal plane ownership, you got a whole raft of resources here :smiley:

I, myself own my own plane, for personal use, with me owning “lock stock and barrel” as I didn’t want to get into the conflicts of partnership and scheduling and so on. So, I bought a plane that I know I can maintain on my own.

There is the good, the bad and the ugly to plane ownership. I believe there is enough of a database in these forums where owners have already shared their experiences to see all facets of airplane ownership experiences…

Some links to gander at

discussions.flightaware.com/view … ght=owners

discussions.flightaware.com/view … ght=owners

discussions.flightaware.com/view … ght=owners

The above is by no means of the stretch of imagination all inclusive, but using the search feature will reveal a lot more experiences down to the specific model, whether ti be a Cirrus or my Sundowner, to Cessna drivers…

Hope this helps!

BTW, I read somewhere, I think it may have been in these forums, the happiest 2 days of plane ownership is the day you buy it and the day you sell it.

Allen


#10

aero-news.net/index.cfm?Cont … 94ad7070e& for non AOPA members. TAlk about an under the belt sucker punch by Maine!

Allen


#11

What a bunch of scumbags. This country is going to the dawgs, and fast. I guess freedom really isn’t free.


#12

Not as long as people don’t DRIP.

Don’t Reelect Incumbent Politicians


#13

A bigger issue than depreciation (which changes frequently) is liability protection for aircraft owners. If your plane falls out of the sky and people are hurt or injured, including your passengers, the odds are high that you, your insurance company, the shop that works on your plane and the manufacturer will all face lawsuits. There are layers of protection that you can put in place (including good insurance, owning the plane in a corporation, having all passengers sign liability waivers, etc.), which you should discuss with good aviation attorney.

On the tax front, there are good accountants and/or tax attorneys who can give you advice, including legal ways to avoid high state taxes.


#14

There have always been ‘suggestions’ that registration in a state such as Delaware would solve a tax ‘problem’. Unfortunately, the states with their unsatiable appetite for funds, will assess a ‘use tax’ which is usually equal to a sales tax on aircraft based in their state. Despite a registration with the FAA using a Delaware corporation and address, the home base of the aircraft is used by many states to determine whether a sales/use tax is due. Years ago using a Delaware corp and mail drop was sufficient to ‘evade’ the sales tax in a state that assessed taxes. Now, the states are very proactive, and require airports to provide the state sales tax folks with lists of those aircraft based there (states used to just send letters to those aircraft that show up registered on their states list with the FAA) There are certain ways to legally ‘avoid’ (vs evade) a sales tax, depending upon your state. Some states allow exemptions for certain weight aircraft, others exempt those involved in interstate air commerce (leased back to a 135 operator), others do not assess a sales or use tax but DO assess a personal property tax annually, etc. Short of buying and BASING your plane in a tax free state for up to a year before changing the address and actually moving it to your home state, it may take some creativity to legally avoid the sales tax.I have found that many accountants do not know what the legal sales tax issues are for their state with respect to aircraft.(having been in the aircraft sales biz for 26 years and seeing many attempts to beat the tax)


#15

Yeah, but the locals will applaud the action as it will be applied against visitors who don’t vote locally and who are perceived as being rich.


#16

Only insofar as it applies to income tax, not sales tax. As you noted, the aircraft’s place of domicile will be the deciding factor in determining what if any sales or use tax is assessed, a not unreasonable decision.


#17

Yeah, you are definately right on that, and they get (errrr steal) the benefits of a non residents income that normally would apply to a resident of that locality.

Guess low blows do pay dividends :smiley:


#18

Way too many folks think that using a Delaware mail drop, and taking delivery of an aircraft in Delaware will do the trick for them as far as sales tax avoidance. Its not accurate. I cannot speak to the income tax referenced by other poster. Personally, I would not want to be the subject of an audit of a Delaware corporation created soley for the avoidance of a sales tax in another state. Some questions to ponder before falling for this scheme: 1. What is the purpose of the corporation (expect it to be an income producing company, not a hobby) 2. Have you filed federal tax returns for this corporation showing legitimate income and expense 3. Since your Delaware corporation’s sole asset is the aircraft, could you please describe the corporate activities 4. Since your corporation bases its aircraft in State “XYZ”, has the corporation registered to do business in State “XYZ” and filed state tax returns since there is a ‘nexis’. What used to work in ‘the old days’ wont be sufficient today.


#19

Ain’t that the truth!


#20

Anybody else see a lot of jets registered to LLC’s in Delaware, that appear to be based far away from there? I know of at least one Falcon 50 that lives in a large hanger here at KSEE, registered in DE.