Aircraft tax question

OK. I did not realize that *everything* gets added to the basis (even if it
was thrown away year ago and you arn't even selling it when you sell the
airplane.) I guess it makes some sense since the business user would have
deducted these costs over time.

Mike
MU-2


"TaxSrv" wrote in message
...
"Mike Rapoport" wrote:

I would definately add paint to the basis, particularly if it
was done recently. It definately adds value to the airplane.

The IRS has long ago ruled that paint on anything is not capital.
If a very fresh paint, one might argue on the concept of "fixing-up
expenses," if done after the intent to promptly sell was formed.

How much of the upgraded avionics value was "consumed" during
your
ownership? Normally one would depreciate the avionics and have a
basis for
them, but is is fair to add the entire avionics cost to the
airplane's basis
if the avionics were added 15yrs and 2000hrs ago?

Under long held principles of tax law -- yes. Add avionics from day
one to basis, even if a box is ripped out and sold on eBay for $1.
Even if gone thru 3 comms, trading in the old one each time.

If, the day before I sell the airplane, I replace the autopilot
servos that
were 15yrs old when I bought the airplane and 20yrs old now, does
that add
to the basis?

Depends if a repair was called for. Doesn't matter when done;
repairs do not add to basis. Else, a possible fixing up expense if
for purpose of sale. Don't know why somebody would replace working
servos just to better sell it, unless owner is an A&P maybe.

If, when the airplane was purchased, all the bushings in the
landing gear
pivots were worn out and replaced at the buyers expense,
shouldn't that
be factored into the basis?

No, it's a repair.

If you bought the airplane with a run out engine and overhauled
the engine
for $10K and TBO is 2000hrs and you have put 1000hrs on the
engine, what
should you do to the airplanes basis? If you just pro-rate you
get $5K

We don't prorate nuthin'. Even if you put 6,000 hours on the
plane, and did three majors at 2,000 hrs each, under tax law your
basis reflects a 4-engine airplane with one prop.

What if you had to do a top overhaul for $5K at 900hrs?

Sounds like a repair to me at only 900 on 2,000 TBO. No effect on
basis.

All these things are easy if the airplane was used for business
and all expenses were either expensed or capitalized and
depreciated leading to an unambigous basis.

No, the rules on what is capital vs. repair do not change, personal
or business asset. Tax law merely says no depreciation allowed for
personal use portion, including100% personal.

I think that there is so much ambiguity here.

No, it's very simple for a personal asset, because we don't worry
about the complexities of computing depreciation. For a personal
asset, you may capitalize basically big items not in the nature of
usual repairs. Except paint, which is a repair too.

Fred F.