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Article Excerpt
In post-September 11 reality, many companies are contemplating private aviation. For companies that can afford it, private aviation offers some compelling advantages, such as a better safety record in recent years than commercial airlines, and convenience and time savings.
CPAs may be called for advice on the tax implications. If a company or a client starts by chartering (as most do), there is not much to plan for, other than showing the expense is ordinary and necessary. Once the company moves to ownership, whether through buying a plane outright or entering into a joint ownership agreement or a fractional share program, a plethora of tax pitfalls and planning opportunities arise.
Proper Reporting
In Sutherland-Lumber Southwest, Inc., 255 F3d 495 (8th Cir. 2001), the Eighth Circuit sided with the taxpayer, allowing it to deduct the full cost of operating a private plane, even though executives making personal use of the plane had only the much lower standard industry fare level (SIFL)-based amount included as compensation. After years of disagreeing with courts and taxpayers over this issue, the IRS acquiesced to Sutherland in IRB 2002-6. The victory, however, could quickly turn hollow for those...
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