Steve Foley wrote:
:

#1) Could I set up everything on a schedule C and claim a business - sole
proprietor ?

If you operate the plane as a business, you can do that. More
deductions are available to you then. The capital gains treatment
however is essentially the same.

#2) Can you apply a 1031 tax exchange to an aircraft? , ie roll the $50,000
into a $75,000 aircraft and defer the taxes until I sell the $75,000 one.

Yes, if it is a depreciable business property you can do the 1031 exchange.

Note that you have to really have a business motive. You can't just
claim the plane as a business and continue to use it personally and
expect preferred tax status.