Business airplane question

A

Angle228

Filing Flight Plan
Joined
Sep 3, 2019
Messages
16
Display Name
Display name:
Angle228
First, sorry if this as already been discussed ad nauseam. I could not find an information relevant to my specific situation anywhere on the interwebs. At least none that were not written in tax lawyer language.

Here is the situation.

I currently own a business. We will call it business A which is an S-Corp. I also personally own a pa-28 that is strictly for fun with the very rare business trip (2-3 hours per year at most).

Soon I will own business B which is west of business A by about 650 miles. Airline service is awful where business B is located (expensive and poor flight availability) and driving would suck sooooo bad (13 hours one way + hotel means it will cost about the same as flying the cherokee)

After buying business B my personal use of the airplane will make up about 20-30% of the total airplane use with 70-80% being for legit business purposes.

So now that this airplane can actually be a business expense what is the best way to structure the use of the airplane without breaking tax laws or FAA rules (ie not becoming an air carrier or needed a commercial rating etc...)

Does one of the business buy the airplane from me personally? Do I create and LLC for the airplane? How do I account for personal uses for costs of things like annual, engine reserve, maintenance etc...?
 
We need to know the type of plane... for legal reasons?
 
Angle228 said:
First, sorry if this as already been discussed ad nauseam. I could not find an information relevant to my specific situation anywhere on the interwebs. At least none that were not written in tax lawyer language.

Here is the situation.

I currently own a business. We will call it business A which is an S-Corp. I also personally own a pa-28 that is strictly for fun with the very rare business trip (2-3 hours per year at most).

Soon I will own business B which is west of business A by about 650 miles. Airline service is awful where business B is located (expensive and poor flight availability) and driving would suck sooooo bad (13 hours one way + hotel means it will cost about the same as flying the cherokee)

After buying business B my personal use of the airplane will make up about 20-30% of the total airplane use with 70-80% being for legit business purposes.

So now that this airplane can actually be a business expense what is the best way to structure the use of the airplane without breaking tax laws or FAA rules (ie not becoming an air carrier or needed a commercial rating etc...)

Does one of the business buy the airplane from me personally? Do I create and LLC for the airplane? How do I account for personal uses for costs of things like annual, engine reserve, maintenance etc...?
Click to expand...

I'm gonna assume it runs similar to how business vehicles that also get used for some personal use get handled, or a room of your house dedicated as a work office. FAA won't really care if your flights are solo. IRS, most likely going to be %'s
 
The only wisdom I have here is that the FAA doesn't care about your tax situation and the IRS doesn't care about your FAA situation.
 
Can you make it work for one or both businesses (not simultaneously) to reimburse you at the IRS mileage rate for privately owned airplanes?
 
EdFred said:
I'm gonna assume it runs similar to how business vehicles that also get used for some personal use get handled, or a room of your house dedicated as a work office. FAA won't really care if your flights are solo. IRS, most likely going to be %'s
Click to expand...

And having proof of the percentages in the form of an airplane log where you log each flight (hours) and purpose makes it easy to defend.
 
I had a similar situation. Except that I created a business to own the airplane (originally for leaseback). I simply paid the standard hourly rental for the plane. Since it used to be in leaseback, I had a good baseline for hourly rate.

Made everything very simple and aboveboard.
 
Angle228 said:
First, sorry if this as already been discussed ad nauseam. I could not find an information relevant to my specific situation anywhere on the interwebs. At least none that were not written in tax lawyer language.

Here is the situation.

I currently own a business. We will call it business A which is an S-Corp. I also personally own a pa-28 that is strictly for fun with the very rare business trip (2-3 hours per year at most).

Soon I will own business B which is west of business A by about 650 miles. Airline service is awful where business B is located (expensive and poor flight availability) and driving would suck sooooo bad (13 hours one way + hotel means it will cost about the same as flying the cherokee)

After buying business B my personal use of the airplane will make up about 20-30% of the total airplane use with 70-80% being for legit business purposes.

So now that this airplane can actually be a business expense what is the best way to structure the use of the airplane without breaking tax laws or FAA rules (ie not becoming an air carrier or needed a commercial rating etc...)

Does one of the business buy the airplane from me personally? Do I create and LLC for the airplane? How do I account for personal uses for costs of things like annual, engine reserve, maintenance etc...?
Click to expand...

If you are serious about this, see a Tax Attorney or a CPA, not SGOTI.
 
jsstevens said:
And having proof of the percentages in the form of an airplane log where you log each flight (hours) and purpose makes it easy to defend.
Click to expand...

I kmow GSA reinbursment rates for private aircraft (PA) are based in straight line mileage in statute miles from point A to point B. The PA rate for 2020 is $1.20/mi.

Private businesses don’t have to use the GSA rates, but I think it is wise to do so.

For a 650SM trip, that would be something like a $780 reimbursement. I would assume the business would have this spelled out in their travel policies.
 
Doc Holliday said:
If you are serious about this, see a Tax Attorney or a CPA, not SGOTI.
Click to expand...
Yeah but the SGOTI is so much cheaper... HEHE I have a CPA but they are not super experienced with this kind of situation..... I think I might just get a consult with an tax attorney to point them in the right direction.
 
donjohnston said:
I had a similar situation. Except that I created a business to own the airplane (originally for leaseback). I simply paid the standard hourly rental for the plane. Since it used to be in leaseback, I had a good baseline for hourly rate.

Made everything very simple and aboveboard.
Click to expand...

I thought I recall a thread about this structure; some people suggested a commercial rating is required.
 
I really should start an aviation tax practice. Although sounds like the OP wouldn't want to pay my rates anyway. :cool:
 
TCABM said:
I kmow GSA reinbursment rates for private aircraft (PA) are based in straight line mileage in statute miles from point A to point B. The PA rate for 2020 is $1.20/mi.

Private businesses don’t have to use the GSA rates, but I think it is wise to do so.

For a 650SM trip, that would be something like a $780 reimbursement. I would assume the business would have this spelled out in their travel policies.
Click to expand...

This is what I've done for decades. No drama at all. YMMV.
 
Last edited:
Angle228 said:
I think I might just get a consult with an tax attorney to point them in the right direction.
Click to expand...

I am thinking this would be your best choice.


NealRomeoGolf said:
I really should start an aviation tax practice. Although sounds like the OP wouldn't want to pay my rates anyway. :cool:
Click to expand...

I don't know but a lot of pilots will spend a hundred bucks to save a dollar.....:lol::lol:
 
Angle228 said:
Yeah but the SGOTI is so much cheaper... HEHE I have a CPA but they are not super experienced with this kind of situation..... I think I might just get a consult with an tax attorney to point them in the right direction.
Click to expand...

Corporate lawyer here - I take it from "soon [you'll] own business B" that a buyout is in the works. Get your deal lawyer to refer you to tax counsel. Depending on the size of the shop, he may have a tax partner who can help you or may need to refer you to someone who can. Either way, the best answer is going to come from some combination of a competent tax lawyer and accountants who deal with this situation more than occasionally (wouldn't think you would need a Big 4, but probably a regional firm). The advice is going to cost you a few grand, but on the other hand, the IRS doesn't stop until the blood does...
 
Something to think about. Some businesses won’t reimburse you for travel expenses if you use your own airplane due to liability issues. Ie pharmaceutical companies for doctors that speak. They will reimburse you to hire a limo to take you from home to speaking event but not if you fly your own plane.

If you are flying for business does the insurance liability change. I don’t know.
 
Well considering he owns both businesses I think he can make the decision.
 
Google section 179 tax deduction and then meet with a good tax expert. You may find the deduction so lucrative you need to purchase a more expensive aircraft. Neighbor bought a Cirrus and said it’s free with the write off. It might not last forever since it was a Trump gift to rich friends but look into it!
 
An FAR answer is if you personally own the plane and fly for business even with just a PPL the "business" can compensate you for 100% of the direct flight expenses as long as you are solo and no other souls on board, employees or otherwise and as long as flying is incidental to that business. As soon as another soul in on board the pro-rata share rules kick in.

An IRS answer is you can user the airplane milage reimbursement rate linked above.

Owing the plane in the company to write off indirect flight expenses as well would need a very skilled aviation CPA to keep that from being a red flag with any personal use mixed in.
 
Ed Haywood said:
Keep it simple. Claim and reimburse mileage at GSA rate. Currently $1.27 per mile. I assume that is sm, not nm.

https://www.gsa.gov/travel/plan-boo...owned-vehicle-pov-mileage-reimbursement-rates
Click to expand...

That’s the easy solution, and it’s what I would do.

The IRS doesn’t publish a rate for private airplanes the way it does for cars, but the IRS car rate exactly matches the GSA car rate, so it seems to me that it’s very defensible to fly one’s privately owned plane and be reimbursed at the GSA rate without owing personal income tax for receiving the reimbursement.

As noted above, just be sure not to carry a passenger, if being reimbursed, because of the FAA rule.
 
donjohnston said:
I had a similar situation. Except that I created a business to own the airplane (originally for leaseback). I simply paid the standard hourly rental for the plane. Since it used to be in leaseback, I had a good baseline for hourly rate.

Made everything very simple and aboveboard.
Click to expand...

Make sure you are paying Florida sales tax on the rate that you pay back your business. Ask me how I know...:mad:
 
benyflyguy said:
If you are flying for business does the insurance liability change. I don’t know.
Click to expand...
None of the policies I've had over the years forbid it. As long as I'm flying for my own personal business (i.e., in the level that you're allowed to do with a private certificate), I'm covered.
 
We still don't know what kind of plane it is, do we..





..nor have we seen any pictures of the panel






my breath is bated.
 
Tantalum said:
We still don't know what kind of plane it is, do we..





..nor have we seen any pictures of the panel






my breath is bated.
Click to expand...
I think he said pa-28 in og post. But the panel remains in question. Judgment awaits...
 
You must log in or register to reply here.
Back
Top