Only works when you have enough profits to effectively take the deduction. You can take the loss against profits but the loss can only be taken against your basis in the company. If you put nothing in you can't write anything off against it as you have no basis to take the loss. Once basis is gone you can't take further loss deductions. So make sure you have enough profits to take the deduction and or basis.
Tax Trade-In Help : I'm purchasing a new plane and sell my old plane privately. Can I do a "trade-in" sale to save the difference on Pennsylvania Sale tax? The Dealer is selling me the plane w/o tax collect, so it is a "fly-away" state. Its then up to me to register and pay the tax in PA. How do I save the difference? Who can help? My accountant is clueless.
Lots of aviation expert tax planning firms to ask, same with aviation law firms. You should be asking these question before you are signing contracts. Not after. One tip. If you do not have a business purpose for your aviation purchase you may think about forming a PNP Corporation, tax exempt entity, in your State or the State where the aircraft will be stored and used. After PNP Corp is formed, I think a IRS application for a 501(c)(7) is filed for tax exempt status for aviation (or boats?) I forget. One covers aircraft I think section 7. At any rate you can form a fligh club, PNP tax exempt entity, which saves you sales tax, use tax, local property taxes on the aircraft. A family can be a flight club. Mom, Dad, Sister, brother.
In short, create an LLC with a catchy name that does aircraft brokerage (totally unlicensed and unregulated), make some videos to prove aircraft buying “advice and planning” and then write your planes off on depreciation for reduced taxes. Sound about right?
@@apexclip3458Yeah. He’s a little too sales-y. And by ‘a little’, I mean I’m vomiting. “So 17.2%APY sounds scary, riiiight? But what if I told you, you can actually turn that into an asset?”
Does not matter what formal entity you form if you want income tax benefits from any business assets you must use any business asset for 51% or more for business purposes. Cars, boats, aircraft, real estate. If you form a formal entity then you must also follow the formal rules of the State you were formed in. Meetings, minutes, records, bookkeeping, etc. In Texas Best Practices is to form a Series LLC since September 2009. Merely forming an LLC or a Series LLC is not enough. You must practice the formalities and have records to show the business purposes. This is the difference in a tax return preparation firm and a quality tax planning firm. Yes, the careful record keeping and the business entity account records are insurance if you were ever to be questioned by any taxing authority. So you need good tax planning firm not a tax return preparation firm. My 2 cents.
@@dewholdingsllc1050 Great advice. I don’t wish ill on anyone, but I see so many men use an LLC “loop hole” for this toys, cars and planes mostly. I wouldn’t feel bad to see some of them audited and fined. I have those toys and just suck up the tax and fees and costs as part of the hobby.
I think you are thinking of regular and/or bonus depreciation for rental real estate; to avoid future recapture of bonus depreciation claimed, qualified business use must remain above 50% during the aircraft’s depreciable life
@@dewholdingsllc1050 If you sell the airplane above the depreciated cost basis, there is a taxable gain on the delta between the sales price and the cost basis. So assuming the plane sells for more than zero, there is recapture.
@@tedgarcia Aircraft like other equipment has a usable lifespan. (depletion) I have seen some posts five years power plant/engine, 10 to 25 year frame. Which is most used for aircraft depreciation lifespan? I see GA aircraft much older than this in use obviously. If you know? It seems to be two different types of IRS depreciation schedules depending on the use. I assume careful tax planning means you should never repay depreciation if you are selling below original basis as you have expenses in repairs to keep a aircraft flying? Finally an aircraft can be exchanged via section 1031 exchange. I am not sure about aircraft procedures as this is a new area for me not REI 1031 exchanges. In a real estate the motto is you "exchange until you drop" upon death there is a step up in the basis of the real estate asset and the estate's heirs do not pay any capital gains or depreciation, cost segregation recapture. In addition, in real estate you may 1031 exchange the relinquished property for the target property and use the new target property for two years as a rental income property. (works best for a 2nd home/vacation home obviously) After the requisite 1031 two year time-frame, you may transfer the acquired property (target) to yourself as your "forever" home as your primary residence. The end results is your never pay the capital gain from sale of prior exchange properties, nor any of the depreciation, cost segregation. A 1031 exchange can defer capital gains and depreciation recapture; or with careful planning you may avoid them. Do the same exchange principles apply to aircraft?
@@dewholdingsllc1050 The reference I was given is this - Exchanges after 2017. Pursuant to section 13303 of Public Law 115-97 (131 Stat. 2054), for exchanges beginning after December 31, 2017, section 1031 and §§ 1.1031(a)-1, 1.1031(b)-2, 1.1031(d)-1T, 1.1031(d)-2, 1.1031(j)-1, 1.1031(k)-1, and references to section 1031 in §§ 1.1031(b)-1, 1.1031(c)-1, and 1.1031(d)-1, apply only to qualifying exchanges of real property (within the meaning of § 1.1031(a)-3) that is held for productive use in a trade or business, or for investment, and that is not held primarily for sale. And real property is defined as - The term real property under section 1031 and §§ 1.1031(a)-1 through 1.1031(k)-1 means land and improvements to land, unsevered natural products of land, and water and air space superjacent to land. Under paragraph (a)(5) of this section, an intangible interest in real property of a type described in this paragraph (a)(1) is real property for purposes of section 1031 and this section. Property that is real property under State or local law as provided in paragraph (a)(6) of this section is real property for purposes of section 1031 and this section. An aircraft is not real property under that definition. I consulted with two CPAs and an aviation tax attorney - perhaps they were all wrong. Aircraft depreciate on the IRS schedule out of synch with the market value of the asset. So a sale often triggers a gain - and gains are taxable. Business aircraft are typically 5 year schedules. I actually did a leaseback through an LLC and took all of the depreciation - when the flight school closed and I chose to sell the plane at a 40% gain over purchase price, well, that triggered recapture and cap gains since I did not buy another plane. If I had bought another plane in the same year, the new asset depreciation would have likely offset the old asset recapture. My point at the start could have been clearer. If you start down the asset/depreciation path but then want to "cash out" you will likely owe some tax. Check with your tax pros...
Sure. Seen insurance companies flying to the Bahamas and Tahiti. I’m sure very important insurance work to do there. Meanwhile, many of the homeowners in our area had their taxes jump 85%. Glad the wealthy get their write offs .
Pro tip, the IRS is the largest growth aspect in Federal Government and things like airplanes and boats are the first direction they go when looking for tax revenue. This is an invitation for them to start digging into your financial situation, not a place I want to be.
I am on here as I have a new interest in aviation and reviving abandoned aircraft to help the next generation pursue their goals in an aviation career. Boomers are aging out of aviation so we need to help the next generation take over. Rental income real estate, aircraft, big boats all share similarities and share some tax benefits so long as they are used for business purposes. All are risky assets and should be owned as such. I think that is what this author is saying. Never own risky assets in your own name, and with aggressive tax planning with help of tax planning experts a person or their company can obtain max tax benefits. It is not about how much money you are earning its about how much money you are keeping pursuant to the law and the tax code of where the asset is located. Long time REI and licensed real estate attorney. My 2 cents.
The wealthy always create these loopholes. I still remember when Horses could be depreciated - so Kenny Rogers, Arman Hammer, Wayne Newton all jumped into the Arabian Horse world. Certain stallions were worth $10M and above. Then they were depreciated over like 5 years - although they lived 25 years. Breeding generated millions and millions. Then poof - Tax Law changed.
Sure would love to sit down with this guy. Got my own airplane and trucking business and my tax lady shook her head "no" when i asked her if I could write it off. 🙄
Ahh, another "I read the statues one time and interpreted them without reviewing treasury guidelines or case law social media tax guy" who isn't a CPA or tax attorney.
IRS to Lifestyle Aviation: I’m going to audit you, your business, and anybody affiliated with you, and anybody you’ve ever sold an airplane to, or managed for them. Lifestyle Aviation: Do I still get my 10% reward for turning in folks that have cheated on their taxes?
Just adding a little humor, but while the information presented in this video is based on merit, the inferences explained should be vetted by your tax advisor. And, the IRS does have a reward program.
Only works when you have enough profits to effectively take the deduction. You can take the loss against profits but the loss can only be taken against your basis in the company. If you put nothing in you can't write anything off against it as you have no basis to take the loss. Once basis is gone you can't take further loss deductions. So make sure you have enough profits to take the deduction and or basis.
What about the flight department trap? If your entity’s sole purpose is operating the aircraft it’s a part 135 op.
Tax Trade-In Help : I'm purchasing a new plane and sell my old plane privately. Can I do a "trade-in" sale to save the difference on Pennsylvania Sale tax? The Dealer is selling me the plane w/o tax collect, so it is a "fly-away" state. Its then up to me to register and pay the tax in PA. How do I save the difference? Who can help? My accountant is clueless.
Lots of aviation expert tax planning firms to ask, same with aviation law firms. You should be asking these question before you are signing contracts. Not after. One tip. If you do not have a business purpose for your aviation purchase you may think about forming a PNP Corporation, tax exempt entity, in your State or the State where the aircraft will be stored and used. After PNP Corp is formed, I think a IRS application for a 501(c)(7) is filed for tax exempt status for aviation (or boats?) I forget. One covers aircraft I think section 7. At any rate you can form a fligh club, PNP tax exempt entity, which saves you sales tax, use tax, local property taxes on the aircraft. A family can be a flight club. Mom, Dad, Sister, brother.
We find that most regular CPA’s don’t know much about the aviation tax space, but our aviation tax experts do! Give us a call: (406) 359-1669
Great advice! Thank you! I really super enjoyed the way you explained the process. I am flying on a piper m600
Thanks so much! We're here if you have any additional questions.
In short, create an LLC with a catchy name that does aircraft brokerage (totally unlicensed and unregulated), make some videos to prove aircraft buying “advice and planning” and then write your planes off on depreciation for reduced taxes. Sound about right?
These guys won't be in a room with you and the IRS guy if you're ever audited.
@ That’s a fact.
@@apexclip3458Yeah. He’s a little too sales-y. And by ‘a little’, I mean I’m vomiting. “So 17.2%APY sounds scary, riiiight? But what if I told you, you can actually turn that into an asset?”
Does not matter what formal entity you form if you want income tax benefits from any business assets you must use any business asset for 51% or more for business purposes. Cars, boats, aircraft, real estate. If you form a formal entity then you must also follow the formal rules of the State you were formed in. Meetings, minutes, records, bookkeeping, etc. In Texas Best Practices is to form a Series LLC since September 2009. Merely forming an LLC or a Series LLC is not enough. You must practice the formalities and have records to show the business purposes. This is the difference in a tax return preparation firm and a quality tax planning firm. Yes, the careful record keeping and the business entity account records are insurance if you were ever to be questioned by any taxing authority. So you need good tax planning firm not a tax return preparation firm. My 2 cents.
@@dewholdingsllc1050 Great advice. I don’t wish ill on anyone, but I see so many men use an LLC “loop hole” for this toys, cars and planes mostly. I wouldn’t feel bad to see some of them audited and fined. I have those toys and just suck up the tax and fees and costs as part of the hobby.
And never sell the plane - or you pay recapture. What the IRS gives, they also take away.
I think you are thinking of regular and/or bonus depreciation for rental real estate; to avoid future recapture of bonus depreciation claimed, qualified business use must remain above 50% during the aircraft’s depreciable life
@@dewholdingsllc1050 If you sell the airplane above the depreciated cost basis, there is a taxable gain on the delta between the sales price and the cost basis. So assuming the plane sells for more than zero, there is recapture.
Thanks. Please cite the code section that covers that so I may review it.
@@tedgarcia Aircraft like other equipment has a usable lifespan. (depletion) I have seen some posts five years power plant/engine, 10 to 25 year frame. Which is most used for aircraft depreciation lifespan? I see GA aircraft much older than this in use obviously. If you know? It seems to be two different types of IRS depreciation schedules depending on the use. I assume careful tax planning means you should never repay depreciation if you are selling below original basis as you have expenses in repairs to keep a aircraft flying?
Finally an aircraft can be exchanged via section 1031 exchange. I am not sure about aircraft procedures as this is a new area for me not REI 1031 exchanges. In a real estate the motto is you "exchange until you drop" upon death there is a step up in the basis of the real estate asset and the estate's heirs do not pay any capital gains or depreciation, cost segregation recapture. In addition, in real estate you may 1031 exchange the relinquished property for the target property and use the new target property for two years as a rental income property. (works best for a 2nd home/vacation home obviously) After the requisite 1031 two year time-frame, you may transfer the acquired property (target) to yourself as your "forever" home as your primary residence. The end results is your never pay the capital gain from sale of prior exchange properties, nor any of the depreciation, cost segregation. A 1031 exchange can defer capital gains and depreciation recapture; or with careful planning you may avoid them. Do the same exchange principles apply to aircraft?
@@dewholdingsllc1050 The reference I was given is this - Exchanges after 2017. Pursuant to section 13303 of Public Law 115-97 (131 Stat. 2054), for exchanges beginning after December 31, 2017, section 1031 and §§ 1.1031(a)-1, 1.1031(b)-2, 1.1031(d)-1T, 1.1031(d)-2, 1.1031(j)-1, 1.1031(k)-1, and references to section 1031 in §§ 1.1031(b)-1, 1.1031(c)-1, and 1.1031(d)-1, apply only to qualifying exchanges of real property (within the meaning of § 1.1031(a)-3) that is held for productive use in a trade or business, or for investment, and that is not held primarily for sale.
And real property is defined as - The term real property under section 1031 and §§ 1.1031(a)-1 through 1.1031(k)-1 means land and improvements to land, unsevered natural products of land, and water and air space superjacent to land. Under paragraph (a)(5) of this section, an intangible interest in real property of a type described in this paragraph (a)(1) is real property for purposes of section 1031 and this section. Property that is real property under State or local law as provided in paragraph (a)(6) of this section is real property for purposes of section 1031 and this section.
An aircraft is not real property under that definition. I consulted with two CPAs and an aviation tax attorney - perhaps they were all wrong. Aircraft depreciate on the IRS schedule out of synch with the market value of the asset. So a sale often triggers a gain - and gains are taxable. Business aircraft are typically 5 year schedules.
I actually did a leaseback through an LLC and took all of the depreciation - when the flight school closed and I chose to sell the plane at a 40% gain over purchase price, well, that triggered recapture and cap gains since I did not buy another plane. If I had bought another plane in the same year, the new asset depreciation would have likely offset the old asset recapture.
My point at the start could have been clearer. If you start down the asset/depreciation path but then want to "cash out" you will likely owe some tax. Check with your tax pros...
Thank you for going over this! Great video!!
Of course! Glad you enjoyed it!
100% business use……….RIGHT !
Sure. Seen insurance companies flying to the Bahamas and Tahiti. I’m sure very important insurance work to do there.
Meanwhile, many of the homeowners in our area had their taxes jump 85%.
Glad the wealthy get their write offs .
Man, I did the same thing with my 20 year old Corolla. I fly in that thing, my speeding tixs prove it.
Pro tip, the IRS is the largest growth aspect in Federal Government and things like airplanes and boats are the first direction they go when looking for tax revenue. This is an invitation for them to start digging into your financial situation, not a place I want to be.
Correction, they were the biggest growth factor, but with Trump it might be scaled back.
Here is to hoping, make the Founding Fathers proud.
I am on here as I have a new interest in aviation and reviving abandoned aircraft to help the next generation pursue their goals in an aviation career. Boomers are aging out of aviation so we need to help the next generation take over. Rental income real estate, aircraft, big boats all share similarities and share some tax benefits so long as they are used for business purposes. All are risky assets and should be owned as such. I think that is what this author is saying. Never own risky assets in your own name, and with aggressive tax planning with help of tax planning experts a person or their company can obtain max tax benefits. It is not about how much money you are earning its about how much money you are keeping pursuant to the law and the tax code of where the asset is located. Long time REI and licensed real estate attorney. My 2 cents.
Okay, but then why would you even watch this video? Are you just here to warn people away?
The wealthy always create these loopholes. I still remember when Horses could be depreciated - so Kenny Rogers, Arman Hammer, Wayne Newton all jumped into the Arabian Horse world. Certain stallions were worth $10M and above. Then they were depreciated over like 5 years - although they lived 25 years. Breeding generated millions and millions. Then poof - Tax Law changed.
Slipping dangerously close from tax avoidance to tax evasion… uncle Sammie does not take kindly to not gettin his cut
Sure would love to sit down with this guy. Got my own airplane and trucking business and my tax lady shook her head "no" when i asked her if I could write it off. 🙄
That's bull. You can write of depreciation
Your tax lady can work with our aviation tax experts! Give us a call (406) 359-1669
You totally can. You can bonus depreciate the asset entirely in one year also.
Ahh, another "I read the statues one time and interpreted them without reviewing treasury guidelines or case law social media tax guy" who isn't a CPA or tax attorney.
This would be a better comment if you understood how to use the quotation marks you misused.
IRS to Lifestyle Aviation: I’m going to audit you, your business, and anybody affiliated with you, and anybody you’ve ever sold an airplane to, or managed for them.
Lifestyle Aviation: Do I still get my 10% reward for turning in folks that have cheated on their taxes?
Just adding a little humor, but while the information presented in this video is based on merit, the inferences explained should be vetted by your tax advisor. And, the IRS does have a reward program.
Morally questionable
IRS doesn’t care about morals. It is very black and white. Legal or illegal and this guy is talking about legal ways.
Morals have little to do with tax code, everyone pays what that tax code says they must and no more.
Also legally questionable. I wouldn't want to be sitting across the table from an IRS guy explaining this.
Are taxes moral to begin with?
@@connorhale599Yes, if you want to live in a civilization!