Page 16 - February 2022

FEATURE
Aircraft Tax Planning When Selling a Business
by Daniel Cheung and KJ McCarter
Amidst a vibrant mergers and acquisitions landscape, many clients have approached Aviation Tax Consultants (ATC) in recent months to discuss aircraft tax planning strategies relating to the sale of their companies. Whether the aircraft is part of the current business going through a sale, or a business aircraft purchase is contemplated after the sale of the business, the following considerations are critical in ensuring the deductibility of an aircraft as a business asset.
Stock versus Asset Sales
If your company owns a business aircraft, a stock sale will likely require the restructuring of the existing aircraft ownership or the spinning off of the aircraft entity prior to the sale. This may result in the recapture of previously taken tax depreciation and immediate gain recognition.
If an asset sale is negotiated, the business owner can maintain the existing corporate entity and enjoy minimal disruption to the tax treatment of the aircraft.
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Employee (W2) versus Independent Contractor (1099)
It is common for the owner to stay on board with the new company to help with the transition or to continue to run the company. Whether the owner stays on as an employee or an independent contractor will create very different income tax implications.
Internal Revenue Service regulations are not favorable to employees. There is very little income tax benefit for
FEBRUARY 2022