IRS Write Off

[meddesign]

Well the PropPastie is starting to sell.   What say the list on write-off, those that use their bird for their business.  How much an hour, or a percentage of yearly costs based on business use.  What do Mooneys rent for anyway,  is that a reasonable number,  double the fuel cost, half a rental cost?  Need some help here.

[Skywarrior]

Sounds like you're a novice in the tax deductions arena. I would consult a tax specialist, like a CPA, to learn more about the whole shebang. None of the things you mentioned have any relevance.

Simplistically (very):

Your % of flying time spent on the business must be > 60%.

Multiply that percentage times the money you spend directly on the airplane and your required training and any other required expenses.

Take that result and subtract it from your business entity's gross revenue.

Report that result to the IRS.

 

I'm not a CPA, but business school covered some of this stuff...

 

Chuck M.

[meddesign]

Thank you, but the aircraft is privately owned, the company is seperate.  Sort of like using your private car for business and write off .75/mi.  or what ever the allowed rate is.  Does that make a difference? 

[N601RX]

Quote: meddesign

Thank you, but the aircraft is privately owned, the company is seperate.  Sort of like using your private car for business and write off .75/mi.  or what ever the allowed rate is.  Does that make a difference? 

[rbharvey]

Trying to do this Personally  can be a fruitless exercise if you have significant income and/or condition that subjects you to AMT. AMT backs out misc deductions which is where you would 'write off' an aircraft used for business uses. Basically keep a log of hobbs out/hobbs in and every dime you spend on fuel, maint, ramp fees, etc. Keep track of the Hobbs as to whether it was business or pleasure. Business write off is the percent business use multiplied by total cost of ownership less any reimbursements.

Again this deduction falls apart if you are subject to AMT and makes LLC, or corp the only way to write off an aircraft for those of us lucky enough to pay AMT every year... cause we are rich..... yeah right

BOb Harvey

KDTO

[John Pleisse]

My S corp owns and operates my Mooney. I use it to go from DC to NYC for jobs. I accomplish this backwards. My corp. pays for everything...hangar, insurance, gas, debt service, etc. If I use it for persoanl reasons, I keep a seperate log to account this use and demish my deduction accordingly. I doubt you can deduct fair market rental rate for a Mooney, you can only deduct your commensurate... expense and usage, whatever that maybe.

One word of advice and I think most will agree. An aircraft is a red flag for an audit, particularly if your income to support it isn't overwhealming. In official documentation, refrain from words like "aircraft" (M20 transportation vehicle), "hangar" (business storage), "aviation training" (recurrent correspondence), "avionics" (GPS or computer equipment), Maps and GPS data cards (dues and subscriptions) etc. Be honest, but don't light flares. Make Uncle sam do the work. Keep records.

Also, understand the IRS's very clear definitions of "ordinary and necessary" as it applies to business travel. Sporty's sells a book on this entire subject. Good Luck My Friend!!!

[meddesign]

LLC, or corp the only way to write off an aircraft

That means aircraft as a LLC or Corp. I assume. 

and what you said is total costs and write off the % flown for business.

here is another little glitch,  I do not depreciate the "paid for private aircraft", and do my own maintenance.  An allowable per hour rate would be better is that is a possibility.

 

[meddesign]

Quote: N601RX

I looked into this a while back and it seemed to me that common practice was to deduct the price of the most expensive comercial ticket you could find between the same two points.

[Jfinch]

I bought my M20R in Dec, 2011 and took advantage of the accelerated depreciation.  Owned by my company, an S Corp.  That's good advice about terminology in record keeping.  I am charging 100% of all expenses to the company, and will reimburse the company for my personal use on a Hobbs hour basis (percentage of total hours per tax year).  So far, almost all my hours have been business (maintenance, IFR recurrency training, or business development trips).  My CPA (files my taxes) has blessed this approach.

[John Pleisse]

Quote: meddesign

LLC, or corp the only way to write off an aircraft

That means aircraft as a LLC or Corp. I assume. 

and what you said is total costs and write off the % flown for business.

here is another little glitch,  I do not depreciate the "paid for private aircraft", and do my own maintenance.  An allowable per hour rate would be better is that is a possibility.

 

[meddesign]

Lots of help from lots of people, I am sneaking up on it and waiting for my CPA to get back to me.  Looks like  % flown for business out of pocket if I do not want to depreciate the plane (and I do not).  Now a car is .51-.55 cents a mile, too bad I can not do the airplane that way.  Interesting about the car, the rate has gone down this year, I wonder if those IRS guys have to buy gas.

[N601RX]

Pay close attention to the last few paragraphs, especially the conclusion.  The determining factor is the cost of a first class ticket + cost of lost time due to comercial travel

 

In Kurzet, 222 F3d 830 (10th Cir. 2000), taxpayers claimed the costs of a personally owned Lear jet as ordinary and necessary expenses of a timber farm, a consulting business or a computer and real estate rental business.

The potential business use of the jet included flights to a timber farm in Oregon and to condominiums in Park City, UtahPark City is a city located in Summit County, Utah, United States. It is one of two major resort towns in Utah, the other being Moab. It is considered to be part of the Wasatch Back and a part of the Salt Lake City metropolitan area.
..... Click the link for more information.. The court found that the expenses of purchasing, maintaining and operating a personal Lear jet to make a few trips each year to Oregon and Utah were extraordinary. Further, the court regarded the inconvenience the taxpayers would have experienced flying to their timber farm in Oregon "as minimal, as ordinary and as common, both for individuals and for businessmen," especially because the timber farm was not currently earning income. The travel to Park City on the Lear jet was rejected as either extravagant or personal (relating torelating to relate prep → concernant

relating to relate prep → bezüglich +gen, mit Bezug auf +acc 
..... Click the link for more information. the taxpayer's skiing and personal residence there). The court allowed the otherwise ordinary and necessary travel to the timber farm based on first-class airfare.

The Tenth Circuit reversed the Tax Court's disallowancedis·al·low  
tr.v. dis·al·lowed, dis·al·low·ing, dis·al·lows
1. To refuse to allow: "[The government]
..... Click the link for more information. of the cost of the Lear jet to fly to the Oregon property, but did not criticizecrit·i·cize  
v. crit·i·cized, crit·i·ciz·ing, crit·i·ciz·es

v.tr.
1. To find fault with: criticized the decision as unrealistic. See Usage Note at critique.
..... Click the link for more information. the Tax Court's allowance of first-class airfare in lieu ofInstead of; in place of; in substitution of. It does not mean in addition to.
..... Click the link for more information. a showing that the expenses attributable to an alternative means of travel by air were reasonable.

First, the Tax Court should not have considered the airplane's depreciation when determining whether its expenses were unreasonable. Second, the Tax Court had underestimated the number of trips the taxpayers had taken to Oregon by at least half. Lastly (and most significant to the present case), the Tenth Circuit found that the Tax Court did not give sufficient weight to the time savings associated with use of the Lear jet. The Tenth Circuit took the number of hours saved by flying by personal Lear jet during each year, multiplied mul·ti·ply ¹  
v. mul·ti·plied, mul·ti·ply·ing, mul·ti·plies

v.tr.
1. To increase the amount, number, or degree of.

2. Mathematics To perform multiplication on.  it by the value of the taxpayer's time on an hourly basis and added the result to the cost of first-class travel. The Tenth Circuit then compared this sum with the expenses deducted for the Lear jet and found that the actual costs of the Lear jet for the trips to Oregon were reasonable.

Thus, the Tenth Circuit retained the reliance on first-class airfare as a standard for reasonableness in determining ordinary and necessary travel expenses. The fair market value of a taxpayer's time, which the Tenth Circuit added to the first-class travel for the purposes of comparison, would not be de-ductible.

Conclusion

If B's payments to A for X's air travel are found not to be reasonable, the amount of deduction allowable should be limited to the cost of first-class travel (rather than the cost of private charter).

[meddesign]

I like it except, when I fly 40 mi. North to the little airport with a pilot shop, or 60 West, to the other one, there is no other way to get there except by car or air taxi.  The second would be much more than the cost to fly my Mooney, I will bring it up if audited, to show how much money I saved the Government my way.

[N601RX]

Perhaps you could argue that it is necessary to have your aircraft there to demo your prop pastie.  That way it is not just used for transportation, but a necessary part of your sells pitch.

[meddesign]

Great idea

[kilobravo3]

I'm in a similar situation and have been doing some research myself.  I'll throw this link out and see what people have to say about it.   From reading this mileage reimbursement page from the GSA, it would seem that you could deduct the plane mileage in a similar fashion to a car, only at a rate of $1.29/statute mile.  Thoughts?

 

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

 

[meddesign]

will check with my CPA thanks much, he is slow or perhaps on vacation after tax season

[meddesign]

My CPA just got back from vacation after busy season, and said go ahead and use that rate, of $1.29/statute mile. and of course keep track of your business trips.  Sure is lots easier than keeping track of every thing I spend on the aircraft, and I really do not like to do that, for obvious reasons.