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aircraft, investment in a replacement aircraft will create new depreciation deductions that should offset the gains recognized on the sale of the current aircraft.
In summary, with the amount of depreciation available from a business aircraft, it is paramount that taxpayers and their tax advisors consider the various compliance requirements in order to benefit from the sizable tax benefits. Numerous Internal Revenue Code provisions can impact and limit the utilization of bonus depreciation – basis limitation for pass-through entity, passive activity rules, listed property, entertainment use, hobby loss, etc. It is important that an ownership structure should also comply with state sales and use tax laws and FAA Regulations.
A sound and tax efficient ownership structure should maximize income tax benefits available for a business aircraft, and also mitigate the chance of inquiry from the various government regulatory agencies. KA
Daniel Cheung is a member
of Aviation Tax Consultants, LLC, and is a certified public accountant who specializes in aviation tax compliance matters. He has established great working relationships within the general aviation community with business aircraft owners, pilots and aircraft sales professionals. Daniel is a frequent speaker at aviation events and aviation tax confer- ences around the country and a frequent contributor to aviation trade journals.
Effective January 1, 2018, TCJA disallows all entertainment expenditures, regardless of whether they are directly related to the taxpayer’s business activities, which includes entertainment use of a business aircraft.
6 • KING AIR MAGAZINE
FEBRUARY 2018