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![]() "Andrew Gideon" wrote in message news ![]() On Thu, 10 May 2007 16:14:30 -0700, Matt Barrow wrote: IIUC, it should be set up as a reserve/expense account, not as income to the corporation. The only income to the corporation should be the management fees (??) I guess I'm confused about how payments into the company, to be used in some future year, are tracked as an expense. In accounting they're called a "Pre-paid Expense" [...] It sounds like you're trying to depreciate components, rather than the entire aircraft, on an hourly basis. That's what I was thinking. It sounds like you don't quite understand "Depreciation". Depreciation is a reduction in value, there is not periodic cash flow. The only cash DIFFERENCE is when you sell the asset (in this case, an aircraft) and the difference is in how much less you get for it than you GAVE for it. I don't think that's a good idea. That takes much more work for your accountant. That's a good point. [...] Are you a "partner" to the corporation, or is it third party, such as a partnership or lease back? I'm one of the "shareholders", except that it's a corporation that doesn't issue shares. (My explanation here is probably NOT technically correct) My company (LLC) is the registered owner of my aircraft. We deduct expenses as incurred and take depreciation and make an entry in "Reserves" on an hourly basis for such things as recurring maintenance and overhaul. So you depreciate the value of the entire aircraft by the reserve amount each hour? No, the reserve is for periodic maintenance, such as overhauls, annuals, etc. For depreciation, it's strictly an accounting/tax entry. And then, at engine overhaul time, you increase the value of the airplane by the value of the engine? Possibly. Some aircraft appreciate in value, some depreciate. The LLC then "charges"me for any personal use I make of the aircraft. I then declare that as personal income, just as when I draw from our cash accounts for "personal income - cash". I don't follow this paragraph at all, I'm afraid. If you're paying into the LLC, how is that personal income? I'm not paying into the LLC, all company revenue flows INTO the LLC and the LLC holds certain assets, one of which is my aircraft. At the same time, all expenses are paid by the LLC, such as construction costs, fees, materials, aircraft expenses, etc., and cash that we withdraw as our income. That way, the value of the company keeps growing nad does not require "leverage". We've done some small projects that we capitalized (ie, paid for) ourselves, rather than using banks for cost of construction loans. If you are not using your aircraft for business, you can't depreciate your share of it. If you are, you can only depreciate that portion that you use it for business, but you must use it for business 50% of the hours you use it in total. Such are the benefits of operating as a corporate entity, rather than as an individual: you pay expenses out of pre-tax dollars rather than out of after-tax $$. -- Matt Barrow Performace Homes, LLC. Colorado Springs, CO |
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