Turbo Mooney Tax Planning

[kbreehne]

I have had my 1979 231 for a little over a year and I used it a couple times on business trips last year which I would like to write off on my personal return since the business is co owned with my cousin.  I am more of a reader than a poster and this is my first post here.  The gov't. makes it easy for mileage deduction but not much help with an aircraft an my accountant wants me to prove / justify what I am claiming which is why I am asking anyone else already doing so to share please.  If you are an accountant then this would be a professional service exchange and I am more than willing to pay for training or data exchange. 

Karl

kbreehne@yahoo.com

618-531-4563 cell

 

[Mcstealth]

Cannot help you, but welcome to the forum. Well, posting on the forum :-)

[DAVIDWH]

Pretty simple really.

Just keep a tally of all yearly expenses for aircraft. ( fuel,hangar maint et.)

For 2015, CPA expensed 25% for business write offs and 75% for nondeductible personal use. (This varies from year to year depending on # of hours plane flew in past year)

Business write offs to be documented by trip logs et. (Always remember per diem write offs in addition to hotel and other misc expenses. (Google per diem, different $$ for different areas.)

I would suspect Donald Trump's 757 is 100% written off without any issues whatsoever.

Best.

DH

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[gsxrpilot]

Just sent you a PM on this.

[Ned Gravel]

 

6 hours ago, DAVIDWH said:

Pretty simple really.

Just keep a tally of all yearly expenses for aircraft. ( fuel,hangar maint et.)

For 2015, CPA expensed 25% for business write offs and 75% for nondeductible personal use. (This varies from year to year depending on # of hours plane flew in past year)

Business write offs to be documented by trip logs et. (Always remember per diem write offs in addition to hotel and other misc expenses. (Google per diem, different $$ for different areas.)

I would suspect Donald Trump's 757 is 100% written off without any issues whatsoever.

Best.

DH

+1

I did exactly the same. Use of the aircraft for "personal travel for business purposes" has to be documented.  In 2012, I got 80% of all aircraft expenses written off. In 2013, it was 94%.  In 2014, it was 66%.  For 2015, it will depend on the amount of hours flown using the aircraft for "personal travel for business purposes" versus other uses.  Determine this ratio, then you can calculate the amount of annual, oil, parking, flying club membership fees, flight instruction, gas, insurance, Nav Canada fees, AOPA/COPA/EAA membership fees, maintenance, and improvement that can be allocated as personal (not deductible from your business revenues) and business related.  I haven't done the numbers yet, but I think 2015 will be better than 2014.

What is the easiest document to produce when someone asks about the ratio?  My aircraft journey log, one reason it is designated as a legal record.  All I have to do is show a relationship between some business activity in a city or town and the airport code associated with that travel, in my Mooney's journey log.  For example, work in Pittsburgh, PA and the airport used was Allegheny County Airport (KAGC).  When all the hours are added up, those that took us to and from those business destinations (using our Mooney for personal transport) are the portion of total costs that I can deduct from our business revenues.  

Note that I am not talking about the capital cost of the aircraft here.  I am not an accountant and I have been told that capital costs, depreciation and capital cost allowances are far more complex than what we do for operating costs.  Not my expertise.  For that, I would suggest you ask an accountant.

Just my 0.02.

[BigAirHarper]

Just curious, say a certain pilot were a dentist, and his business in the town was flying to some continue education courses, which are business write offs. I could deduct a portion of expenses from the plane as that would be a business visit correct?

Aka: help a dentist come up with some good business write offs to use his future plane

Edited January 17, 2016 by BigAirHarper

[Danb]

I'm not actually rendering tax advice. I'm a CPA with  Masters degree in Taxation plus over 40 clients in aviation either professional pilots , FBO's , controllers , CFIs and a couple DPEs. My strong recommendation  based on what is noted above is be careful.  Try to hire a CPA whose business rests in aviation( mine does not) and utilize there recommendation get a strong engagement letter from the professional outlining each responsibilities . Just because one may use there plane for business most Cpa's say ok it's deductible, perfect if it's his butt on the line with the IRS, Code  section 162 is to vague when ascertaining normal, necessary adequate expenses etc. in comparison to reasonable.  I'm all for screwing the irs but with over 4000 airports of which 400+ are serviced by the airlines the agent first may make one prove that your expense is reasonable even if necessary is there is a total business purpose does this make it an ordinary necessary business expense (I don't know without more info)  The Aopa and a lot of other organizations have quite a bit of guidance even though not legal to utilize. 

Again just be careful and seek competent adequate advice, all CPAs aren't crated equal.

[Tony Armour]

Tell your accountant what he needs to do for YOU. 

IF.....any proving is necessary it will be done to the IRS :-)

Seriously, I just tell my CPA what trip expenses are. Not what part are flying expenses. I don't think it's any of his business unless we are fighting an audit .... And yes, I have been thru that plenty.

 

 

Edited January 18, 2016 by Tony Armour

[Danb]

7 hours ago, Tony Armour said:

Tell your accountant what he needs to do for YOU. 

IF.....any proving is necessary it will be done to the IRS :-)

Seriously, I just tell my CPA what trip expenses are. Not what part are flying expenses. I don't think it's any of his business unless we are fighting an audit .... And yes, I have been thru that plenty.

 

 

Tony,to correct one item the IRS does not have to prove anything. It's the only forum in the USA where we are guilty until we prove without a shadow of a doubt our support for a position. Regarding audits even though the actual audit rate is at an all time low ,around 1% depending on the entity type. Regardless it's our duty to have adequate contemporous record keeping to quote the code. I unfortunately do IRS audits for a living they are not fun anymore the people we deal with have a terrible attitude etc.. My only suggestion was be careful. If anyone desires any tech. Info give me a buzz and I'd be more than happy to help. I don't want to mislead anyone there are a ton of legit deductions re. allowable deductions for our airplanes. Btw I don't want to jinx my clients but I have a 100% documented win rate, and I'm aggressive but careful. By law the BURDEN of PROOF rests with the individual not the IRS. My fun today is an IRS audit.

 

 

[Tony Armour]

I did say: any proving will be done TO  the IRS :-)

In my case/s they got little to nothing $$$ and we both spent a lot of money and a bunch of time. First one probably took years off my life ! I did it myself. Second time I just paid an attorney 8k to make it go away. The agent seemed to have it out for me but then when turned over to the IRS attorney and staff  it was like, ok, here is someone with common sense. Nothing was ever said about flying costs.

The op sounds like me, he will only fly the occasional business flight. With 2, 3 or 4 flights a year (bigger flights) for truely legit business reasons I wouldn't worry even if the airlines could have been used. 

I guess it would be wrong to fly to Washington DC to HAND DELIVER your appeal paper (or what ever it was called) Yes, I know someone that did that and then deducted the flight as an expense as part of the cost of the audit. LOL

[Danb]

Tony the sad thing is that the situation does suck..where else are we guilty until we prove otherwise, also the agents are so obnoxious its pitiful.  I general know I'm or my client's screwed in the opening minutes of the interview.  The attitude has become us against them there smarter than we are and they don't have to prove anything except put us in our place certainty sickens me, its only been this bad for about 10 yrs. or so. I get most of my work from fellow CPAs that just don't want to do this BS, quite a shame, sorry i misread your post. Most of the folks I know are actually honest but in the eyes of the IRS the opposite is true. I've thrown a couple out of my office and won't let them have contact with my clients because they will hang themselves even though innocent....I truly wish I had the answer. A couple of the clients have lost there homes this past yr. I have one guilty client (from another CPA) who owes $4.5 Million nit including Int/penalties and they are not doing anything to them, great system. I hate my tangents but this one rips my balls off.

 

 

[Yetti]

The GSA publishes a reimbursement rate for Airplanes.   Seems simple enough.  Not an accountant.

 

http://www.gsa.gov/portal/content/100715

[Danb]

That's a guide in ascertaining a general idea of an acceptable rate if the deduction is accepted ordinary reasonable and necessary. I know when I do get to have the expense accepted as an ordinary necessary business expense the amount that I generally get accepted is extremely higher than those depicted. 

[Danb]

Yetti, the guide is good for a fuel efficient plane like a single you'll easily beat actual. Eg. Fly 6 hours equals say 900 miles times 1.17 times 1.15 about $1200 deduction. Compare to gas $360 oil $15. Misc $100 %+ lots of fixed costs hanger insurance r/m capital costs(if you got the balls to try) training etc. compare this amount to the $1200 and that's your deduction. Easy to see if you have a single it's more than adequate . Problem is say a King air 90 no comparison. It just becomes a numbers game if you can pull off the fact of allowability. I use the gov't. Guide for my guys flying angel flight or pilots and paws etc. never had a problem using it for that purpose.  Great of you to post it for the forum.

[Yetti]

Ohhh king air 90 if we were talking that there would be a SoX policy written and signed off by internal and external audit.  As long as the policy was approved and followed, then then should be fine. Maybe a 179 deduction depending on income. Capital Asset classification and depreciation  could apply also.   But I think the OP wanted to know about a Turbo Mooney.  Not an Accountant.

Edited January 19, 2016 by Yetti

[Hank]

It's difficult to prove innocence. I've read to never go to Tax Court, take the agent to Federal Court to somewhat level the playing field. In Tax Court, you play on their field, by their rules,and they can change the rules at their whim. Not so in Federal Court. Hope to,never have personal experience with any of this . . . .

[Danb]

5 hours ago, Yetti said:

Ohhh king air 90 if we were talking that there would be a SoX policy written and signed off by internal and external audit.  As long as the policy was approved and followed, then then should be fine. Maybe a 179 deduction depending on income. Capital Asset classification and depreciation  could apply also.   But I think the OP wanted to know about a Turbo Mooney.  Not an Accountant.

Your right..it's hard to take off that hat.

[Danb]

On January 17, 2016 at 9:07 PM, kbreehne said:

I have had my 1979 231 for a little over a year and I used it a couple times on business trips last year which I would like to write off on my personal return since the business is co owned with my cousin.  I am more of a reader than a poster and this is my first post here.  The gov't. makes it easy for mileage deduction but not much help with an aircraft an my accountant wants me to prove / justify what I am claiming which is why I am asking anyone else already doing so to share please.  If you are an accountant then this would be a professional service exchange and I am more than willing to pay for training or data exchange. 

Karl

kbreehne@yahoo.com

618-531-4563 cell

 

Yetti, it appears he specifically asked for help from an accountant. Apparently his acct. wants him to prove/justify what he is claiming.  His  acct. should realize if  he proves the expense is ordinary, reasonable and necessary then it should be acceptedi without being in violation of Circular 230. Im just trying to help Karl while not getting into a debate of which I'm quite capable of winning. My win/ loss ratio in tax court is rather high,one of  the reasons  most of my tax audit work comes from other CPA firms all of which are larger than our firm.

I'm just trying to help Karl as requested. Also your guide from the gov't for accepted mileage rates should help his acct. come up with a justifiable rate to utilize for a turbo Mooney . Other mentioned policies could be avoided with a PLR.

Section 179, Bonus Depr. etc, would only be available upon the initial purchase but not available when utilizing specific mileage rates, it's one or the other. Similar to your automoblle ...miles or actual. The mileage rate of .54+ plus for ones auto includes a depreciation element within the rate as does the $1.17 rate for an airplane. Internal audit Sox policies are not recognized by the IRS under section 162 they are generally used for Sec and/or internal quality control purposes. If its a  Public company its usefulness lies therein  or  if private  the BOD may utilize it for other financial reasons apart from the IRS.  Time for bed.

[Yetti]

Good to know there are people to help.  

My ratio is yetti =1 IRS = 0.   They were trying to charge a penalty for non reporting.  The penalty calculation was a percentage * the amount not reported.   The amount for the period was zero.    So the case worker could not get his head around that zero times anything is still zero.

The good news is that there case workers are rewarded on a standard call center method.   So the longer I kept the worker on the phone the worse his bonus was going to be.   He actually said " Mr Yetti I have other customers that are waiting"  I responded with "Oh no we will be here all night till we sort it out"  It was fun to throw their own tax code at them and know that the case worker did not have a clue about it.  Also found that none of their systems across regions share data.  So you can be right in one system and wrong in another.  They seem to know this.  Finally he said he needed to talk to his manager.   "Mr. Yetti this has been resolved and you will get a letter stating so in 6 months"   I just added it to the several inches of paper they had already sent me for what was to be a $100.00 or so fine.    The amount of effort they put into the $100.00 penalty far exceeded the $100.00.

It just made me promise myself I would never have employees working for me again.  Too dang many rules to step in.

If you sold the plane from one person to a company or back then the 179 deduction could come into play.   :-)

 

Edited January 19, 2016 by Yetti

[Danb]

Oh gosh Mr Yetti you have made me laugh today what your saying is so true.There computers are definitely not linked, its actually a riot and a shame at the same time. I really feel bad for the folks that can't afford to get help, so many are getting screwed at least you shed a little comedy in my day, I have an agent currently  in the office next to me trying to screw a client as I write this. The agent is totally clueless and I'm having a field day burying her. The dude owed $1880 a couple days ago and right now we have a refund plus interest in excess go 10 AMU's. and there wrong...gotta love it.  have a great day

[Yetti]

Keep fighting the good fight!

My wife is handling the insurance claim for her sister going through breast cancer treatment.  Same thing.  Bunch of Millennials  thinking they should be CEO not paying attention or learning about their current job.    Starting with $1000.00 of bills and getting it down to free.

 

[Danb]

2 hours ago, Yetti said:

Keep fighting the good fight!

My wife is handling the insurance claim for her sister going through breast cancer treatment.  Same thing.  Bunch of Millennials  thinking they should be CEO not paying attention or learning about their current job.    Starting with $1000.00 of bills and getting it down to free.

 

Gotta love it, what the H has happened to our country?

[BigAirHarper]

Hahahaha I'm loving this. I really need to find a good aggressive CPA. I already pay mr Obama enough. 

[kbreehne]

Hey folks thanks for all the feed and info my CPA makes me prove or document or both and says if I do it now and we end up nose to nose with the IRS it is easy.  I am leaning towards the gsa deduction which I did not even know existed?  Always emailed the CPA for the mileage never looked it up.. THanks again!!

Karl

[Yetti]

Somewhere the NBAA has some guides for your question.  Maybe had to email them to get them, may have them on a hard drive.  I will look around.

 

https://www.nbaa.org/admin/taxes/personal-use/

 

https://www.nbaa.org/admin/management-guide/

If you want to send me some of the money for doing your CPAs job I can create an invoice for  you :-)

 

Edited January 20, 2016 by Yetti