Aircraft Tax Planning

Is Aircraft Tax Planning Needed When Planning To Sell An Aircraft Business?

The Federal Aviation Administration (FAA) and state planning comprises the effort from both the company's in-house accountant and aircraft tax professional. So, whenever you plan to sell the aircraft, you should prepare proper documentation that includes the aircraft's purchase price, how long it can be used, and explain other mechanisms related to the aircraft in detail. Aircraft Tax Planning is one of the most important planning when preparing the documentation to sell a business. Some of the points are mentioned below for calculating tax before selling a business or aircraft.

Asset Sales vs.Stock

Suppose an asset is settled to sell-off. In that case, without causing any effect to his business establishment, the business entrepreneur can easily sell the asset without being disturbed by the Aircraft Tax Planning authority. The stock sale or stock clearance process needs a lot of work. Suppose your business establishment possesses an aircraft you want to sell off as a stock sale. In that case, you have to reorganize the aircraft possessor or create a new aircraft establishment as a result of this process, your earlier tax depreciation, and recently attaining identification.

Independent Contractor vs. Employee

The implication of Aircraft Tax Planning hugely depends on whether the aircraft owner agrees to continue as an employee of the airline's company or continue as an independent contractor. The airline owner needs to stay connected with the company to run the company. There is less scope of income tax benefit for the company employees who contract their aircraft for the employer's business. On the other hand, the tax law favors business owners. Huge tax deductions are applicable when the aircraft does profitable business. So, if the independent contractor negotiates with the company, it can avail of the tax benefits of the aircraft company.

Federal Excise Tax

There are two essential elements of federal tax: the fuel tax and the per-gallon transportation tax. Both air carriers and private aircraft operators are liable to pay fuel tax. Airlines pay a transportation tax equivalent to 7.5 percent of the carriage compensation. They are also liable to pay per passenger and flight charge. Private operators do not become a subject of Aircraft Tax Planning, but the IRS considers some private aircrafts subject to transport tax. The fuel tax is always higher for private aircraft than air-carries, though they both pay the tax.

Aircraft Depreciation Value

The value of the aircraft used for any purpose depreciates either by the Modified Accelerated Cost Recovery System (MACR) or the Alternative Depreciation System (ADS). MARC is a five-year system used mainly for chartered operations apart from air transportation. On the other hand, ADS is a six-year system primarily used for aircraft in business-like air transportation. However, if the aircraft is primarily used for party-related or personal usage, the depreciation value is limited by the Hobby Loss Rule. Certain taxpayers are not allowed to apply for the losses to active gains. Visit Here: Advocate Consulting Legal Group, PLLC.