California corp.

Single entity LLC's (one director, me) are treated *exactly* like sole
proprietorships by the IRS. However, they are still afforded the same legal
protections as a C-Corporation. It *used* to be that LLC's were treated as
partnerships, or the LLC could elect to be treated as a C-Corp for tax
purposes. Those regulations changed a few years ago.

I file a 1040, along with a Schedule C (profit/loss from business) just as
any other sole proprietorship would.

Just a side note, all of my income is produced through my LLC, so it's not
just a holding company for an aircraft. I know some people set them up that
way, but just wanted to point out that mine is not setup that way.

r.

"Tony Cox" wrote in message
hlink.net...
"Rob Thomas" wrote in message
...
Absolutely.

The $800 goes directly on Schedule C of my personal tax return. My LLC
is
treated as a sole-proprietership by California because I'm the only
member.
So, I get the legal protection of a C-Corp and the paperwork ease of a
sole-proprietership.

r.


How does that work exactly? I'm not familiar with LLC's, except
that from what I remember you can opt to have them treated as
either partnerships or corporations for tax purposes.

I don't understand how you can pass the $800 back to your individual
return unless you're treated as an S-corp for tax purposes.

"Rob Thomas" wrote in message
...
Single entity LLC's (one director, me) are treated *exactly* like sole
proprietorships by the IRS. However, they are still afforded the same
legal
protections as a C-Corporation. It *used* to be that LLC's were treated
as
partnerships, or the LLC could elect to be treated as a C-Corp for tax
purposes. Those regulations changed a few years ago.

I file a 1040, along with a Schedule C (profit/loss from business) just as
any other sole proprietorship would.

Just a side note, all of my income is produced through my LLC, so it's not
just a holding company for an aircraft. I know some people set them up
that
way, but just wanted to point out that mine is not setup that way.


Thanks for the clear response. BTW, do you use your
aircraft for business or do you just use your LLC to hold
title?

I've been advised *not* to mix my aircraft (which is used
very occasionally for business) with the corporation. My
CPA says it attracts attention from the IRS. Not that I'd
be worried about the attention per se, but of course the
costs involved in even a successful audit are time, effort,
and paperwork frustration.

Did the FAA require further info on the LLC to register
your plane? Like proof of LLC ownership, conditions
for ownership transfer etc? I had the devils own trouble
attempting to register the plane to a revocable living
trust & finally gave up on the buggers and reregistered
in my own name.

Tony,

I'm actually going through the process of buying a plane right now. I did
have a C-Corporation a few years back in which the corporation did own a
Cessna 172. I shut that company down and sold the aircraft and now I have
this LLC. I actually haven't decided whether to hold the aircraft in the
LLC's name or not, as in my specific case (single entity LLC), it may not
matter (this is one of the questions on my list next time I talk to my tax
advisor). The gentleman that I sold my last aircraft to did register it to
his LLC and, to my knowledge, there weren't any problems. In fact, he was
hurriedly setting up the LLC from scratch so that the transaction could
complete.

The aircraft I will be purchasing will be used for approximately 80%
business flights, which from case law, appears to be enough useage to
withstand an audit. There is some interesting cases that deal with writing
off 100% of your aircraft, and then paying yourself back SIFL rates in the
form of "fringe benefits" on a W-2 for any personal use (again, more
questions that I'm going to be asking my tax advisor).

From all the reading I've done, it's clear to me that anyone that is using a
light aircraft for business is waving red flags in front of the IRS.
However, I've adopted the position of learning as much as I can, getting
sound advice, and documenting every last detail.

I know I will be audited. It's going to happen. Not only am I going to use
a light aircraft for business purposes, but I'm an independent contractor
(software programmer) and that profession garners a lot of interest from the
IRS all by itself. I spend a ridiculous amount of time on documenting
everything right now so that my files are in condition that if an audit were
next week, I'd have little preparation to do.

Your case is a bit different. The line between my business and personal
assets is there, but it's not as exacting as yours (Corporation and
personal). I would imagine that if you want to use the 100% business
deduction on the plane and then use SIFL method, then your Corporation is
probably going to need to own the aircraft. But your CPA is probably right,
it will be a red flag is you do it that way.

By the way, I'd recommend taking a look at http://www.atisgroup.com.
There's some excellent articles there that are specific to California.

r.



"Tony Cox" wrote in message
ink.net...
"Rob Thomas" wrote in message
...
Single entity LLC's (one director, me) are treated *exactly* like sole
proprietorships by the IRS. However, they are still afforded the same
legal
protections as a C-Corporation. It *used* to be that LLC's were treated
as
partnerships, or the LLC could elect to be treated as a C-Corp for tax
purposes. Those regulations changed a few years ago.

I file a 1040, along with a Schedule C (profit/loss from business) just
as
any other sole proprietorship would.

Just a side note, all of my income is produced through my LLC, so it's
not
just a holding company for an aircraft. I know some people set them up
that
way, but just wanted to point out that mine is not setup that way.


Thanks for the clear response. BTW, do you use your
aircraft for business or do you just use your LLC to hold
title?

I've been advised *not* to mix my aircraft (which is used
very occasionally for business) with the corporation. My
CPA says it attracts attention from the IRS. Not that I'd
be worried about the attention per se, but of course the
costs involved in even a successful audit are time, effort,
and paperwork frustration.

Did the FAA require further info on the LLC to register
your plane? Like proof of LLC ownership, conditions
for ownership transfer etc? I had the devils own trouble
attempting to register the plane to a revocable living
trust & finally gave up on the buggers and reregistered
in my own name.

Where have you read that expensing aircraft expenses is a "red flag"? An
aircraft is not a red flag if use of private aircraft is "ordinary and
nessisary" in the particular type of business and the cost if reasonable in
light of the size of the business..

Mike
MU-2

"Rob Thomas" wrote in message
...
Tony,

I'm actually going through the process of buying a plane right now. I did
have a C-Corporation a few years back in which the corporation did own a
Cessna 172. I shut that company down and sold the aircraft and now I have
this LLC. I actually haven't decided whether to hold the aircraft in the
LLC's name or not, as in my specific case (single entity LLC), it may not
matter (this is one of the questions on my list next time I talk to my tax
advisor). The gentleman that I sold my last aircraft to did register it
to
his LLC and, to my knowledge, there weren't any problems. In fact, he was
hurriedly setting up the LLC from scratch so that the transaction could
complete.

The aircraft I will be purchasing will be used for approximately 80%
business flights, which from case law, appears to be enough useage to
withstand an audit. There is some interesting cases that deal with
writing
off 100% of your aircraft, and then paying yourself back SIFL rates in the
form of "fringe benefits" on a W-2 for any personal use (again, more
questions that I'm going to be asking my tax advisor).

From all the reading I've done, it's clear to me that anyone that is using
a
light aircraft for business is waving red flags in front of the IRS.
However, I've adopted the position of learning as much as I can, getting
sound advice, and documenting every last detail.

I know I will be audited. It's going to happen. Not only am I going to
use
a light aircraft for business purposes, but I'm an independent contractor
(software programmer) and that profession garners a lot of interest from
the
IRS all by itself. I spend a ridiculous amount of time on documenting
everything right now so that my files are in condition that if an audit
were
next week, I'd have little preparation to do.

Your case is a bit different. The line between my business and personal
assets is there, but it's not as exacting as yours (Corporation and
personal). I would imagine that if you want to use the 100% business
deduction on the plane and then use SIFL method, then your Corporation is
probably going to need to own the aircraft. But your CPA is probably
right,
it will be a red flag is you do it that way.

By the way, I'd recommend taking a look at http://www.atisgroup.com.
There's some excellent articles there that are specific to California.

r.



"Tony Cox" wrote in message
ink.net...
"Rob Thomas" wrote in message
...
Single entity LLC's (one director, me) are treated *exactly* like sole
proprietorships by the IRS. However, they are still afforded the same
legal
protections as a C-Corporation. It *used* to be that LLC's were
treated
as
partnerships, or the LLC could elect to be treated as a C-Corp for tax
purposes. Those regulations changed a few years ago.

I file a 1040, along with a Schedule C (profit/loss from business)
just
as
any other sole proprietorship would.

Just a side note, all of my income is produced through my LLC, so it's
not
just a holding company for an aircraft. I know some people set them
up
that
way, but just wanted to point out that mine is not setup that way.


Thanks for the clear response. BTW, do you use your
aircraft for business or do you just use your LLC to hold
title?

I've been advised *not* to mix my aircraft (which is used
very occasionally for business) with the corporation. My
CPA says it attracts attention from the IRS. Not that I'd
be worried about the attention per se, but of course the
costs involved in even a successful audit are time, effort,
and paperwork frustration.

Did the FAA require further info on the LLC to register
your plane? Like proof of LLC ownership, conditions
for ownership transfer etc? I had the devils own trouble
attempting to register the plane to a revocable living
trust & finally gave up on the buggers and reregistered
in my own name.

Mike, you're correct. There are no red flags.

r.

"Mike Rapoport" wrote in message
link.net...
Where have you read that expensing aircraft expenses is a "red flag"? An
aircraft is not a red flag if use of private aircraft is "ordinary and
nessisary" in the particular type of business and the cost if reasonable
in
light of the size of the business..

Mike
MU-2

"Rob Thomas" wrote in message
...
Tony,

I'm actually going through the process of buying a plane right now. I
did
have a C-Corporation a few years back in which the corporation did own a
Cessna 172. I shut that company down and sold the aircraft and now I
have
this LLC. I actually haven't decided whether to hold the aircraft in
the
LLC's name or not, as in my specific case (single entity LLC), it may
not
matter (this is one of the questions on my list next time I talk to my
tax
advisor). The gentleman that I sold my last aircraft to did register it
to
his LLC and, to my knowledge, there weren't any problems. In fact, he
was
hurriedly setting up the LLC from scratch so that the transaction could
complete.

The aircraft I will be purchasing will be used for approximately 80%
business flights, which from case law, appears to be enough useage to
withstand an audit. There is some interesting cases that deal with
writing
off 100% of your aircraft, and then paying yourself back SIFL rates in
the
form of "fringe benefits" on a W-2 for any personal use (again, more
questions that I'm going to be asking my tax advisor).

From all the reading I've done, it's clear to me that anyone that is
using
a
light aircraft for business is waving red flags in front of the IRS.
However, I've adopted the position of learning as much as I can, getting
sound advice, and documenting every last detail.

I know I will be audited. It's going to happen. Not only am I going to
use
a light aircraft for business purposes, but I'm an independent
contractor
(software programmer) and that profession garners a lot of interest from
the
IRS all by itself. I spend a ridiculous amount of time on documenting
everything right now so that my files are in condition that if an audit
were
next week, I'd have little preparation to do.

Your case is a bit different. The line between my business and personal
assets is there, but it's not as exacting as yours (Corporation and
personal). I would imagine that if you want to use the 100% business
deduction on the plane and then use SIFL method, then your Corporation
is
probably going to need to own the aircraft. But your CPA is probably
right,
it will be a red flag is you do it that way.

By the way, I'd recommend taking a look at http://www.atisgroup.com.
There's some excellent articles there that are specific to California.

r.



"Tony Cox" wrote in message
ink.net...
"Rob Thomas" wrote in message
...
Single entity LLC's (one director, me) are treated *exactly* like
sole
proprietorships by the IRS. However, they are still afforded the
same
legal
protections as a C-Corporation. It *used* to be that LLC's were
treated
as
partnerships, or the LLC could elect to be treated as a C-Corp for
tax
purposes. Those regulations changed a few years ago.

I file a 1040, along with a Schedule C (profit/loss from business)
just
as
any other sole proprietorship would.

Just a side note, all of my income is produced through my LLC, so
it's
not
just a holding company for an aircraft. I know some people set them
up
that
way, but just wanted to point out that mine is not setup that way.


Thanks for the clear response. BTW, do you use your
aircraft for business or do you just use your LLC to hold
title?

I've been advised *not* to mix my aircraft (which is used
very occasionally for business) with the corporation. My
CPA says it attracts attention from the IRS. Not that I'd
be worried about the attention per se, but of course the
costs involved in even a successful audit are time, effort,
and paperwork frustration.

Did the FAA require further info on the LLC to register
your plane? Like proof of LLC ownership, conditions
for ownership transfer etc? I had the devils own trouble
attempting to register the plane to a revocable living
trust & finally gave up on the buggers and reregistered
in my own name.

"Rob Thomas" wrote in message
...

Mike, you're correct. There are no red flags.

How would you know?

Each year (as I understand it), the IRS top brass have a
meeting to decide exactly what criteria will be used to
decide who gets audited. This is in addition to the 'base
rate' random auditing. Anything 'unusual' can only increase
your chance of being audited if it is statistically worth
devoting the auditors time to it. Tax fairness be damned;
its the $$$'s they want.

A one-man LLC grossing (say) $250K while expensing
25% of that in travel expenses (depreciation, operating
expenses, recurrent training) is certainly 'unusual', and
likely to yield the 'low hanging fruit' that the IRS auditors
love to munch on.

"Tony Cox" wrote in message
hlink.net...
"Rob Thomas" wrote in message
...

Mike, you're correct. There are no red flags.

How would you know?

Each year (as I understand it), the IRS top brass have a
meeting to decide exactly what criteria will be used to
decide who gets audited. This is in addition to the 'base
rate' random auditing. Anything 'unusual' can only increase
your chance of being audited if it is statistically worth
devoting the auditors time to it. Tax fairness be damned;
its the $$$'s they want.

A one-man LLC grossing (say) $250K while expensing
25% of that in travel expenses (depreciation, operating
expenses, recurrent training) is certainly 'unusual', and
likely to yield the 'low hanging fruit' that the IRS auditors
love to munch on.



Depreciation, maitenance, operating expense (travel)and training are all on
different lines and, except for depreciation, there is no mention of an
airplane at all. I agree that there needs to be a real basis for using a
private airplane for travel but since there is no mention of the word
"airplane" anywhere on a tax return, I can't see how expensing the business
use of an airplane could be a "red flag".

Mike
MU-2

Wow. It'd be great in these groups if folks would just relax a little bit.

I said there are no red flags, because I really didn't want to get involved
in a circular argument with Mike. It's clear that the IRS identifies
certain ratios and expenses and increases the likelyhood of an audit. Does
anyone abosultely know exactly what every one of these are? No. And I
didn't want to have to go through all of that. It was easier just to answer
with tougue in cheek.

r.

"Tony Cox" wrote in message
hlink.net...
"Rob Thomas" wrote in message
...

Mike, you're correct. There are no red flags.

How would you know?

Each year (as I understand it), the IRS top brass have a
meeting to decide exactly what criteria will be used to
decide who gets audited. This is in addition to the 'base
rate' random auditing. Anything 'unusual' can only increase
your chance of being audited if it is statistically worth
devoting the auditors time to it. Tax fairness be damned;
its the $$$'s they want.

A one-man LLC grossing (say) $250K while expensing
25% of that in travel expenses (depreciation, operating
expenses, recurrent training) is certainly 'unusual', and
likely to yield the 'low hanging fruit' that the IRS auditors
love to munch on.

Tony Cox wrote:
Each year (as I understand it), the IRS top brass have a
meeting to decide exactly what criteria will be used to
decide who gets audited. This is in addition to the 'base
rate' random auditing. Anything 'unusual' can only increase
your chance of being audited if it is statistically worth
devoting the auditors time to it. Tax fairness be damned;
its the $$$'s they want.

The above description does not remotely describe how IRS annually
manges its enforcement programs. They do not do random audits, nor
does "top brass" decide on minute matters such as private aircraft
usage to be a target. The potential effect of claiming private
aircraft expenses is that they tend to be large, inflating travel
expense deductions relative to size and scope of the business. If
selected for audit, it would be on that basis.

Fred F.

Excepting depreciation, on the return itself, most aircraft expenses are
recorded on lines that don't specify that the expense relates to an airplane
at all. (Maitenance, travel, rent, interest)

Mike
MU-2


"Rob Thomas" wrote in message
...
Mike, you're correct. There are no red flags.

r.

"Mike Rapoport" wrote in message
link.net...
Where have you read that expensing aircraft expenses is a "red flag"?
An
aircraft is not a red flag if use of private aircraft is "ordinary and
nessisary" in the particular type of business and the cost if reasonable
in
light of the size of the business..

Mike
MU-2

"Rob Thomas" wrote in message
...
Tony,

I'm actually going through the process of buying a plane right now. I
did
have a C-Corporation a few years back in which the corporation did own
a
Cessna 172. I shut that company down and sold the aircraft and now I
have
this LLC. I actually haven't decided whether to hold the aircraft in
the
LLC's name or not, as in my specific case (single entity LLC), it may
not
matter (this is one of the questions on my list next time I talk to my
tax
advisor). The gentleman that I sold my last aircraft to did register
it
to
his LLC and, to my knowledge, there weren't any problems. In fact, he
was
hurriedly setting up the LLC from scratch so that the transaction
could
complete.

The aircraft I will be purchasing will be used for approximately 80%
business flights, which from case law, appears to be enough useage to
withstand an audit. There is some interesting cases that deal with
writing
off 100% of your aircraft, and then paying yourself back SIFL rates in
the
form of "fringe benefits" on a W-2 for any personal use (again, more
questions that I'm going to be asking my tax advisor).

From all the reading I've done, it's clear to me that anyone that is
using
a
light aircraft for business is waving red flags in front of the IRS.
However, I've adopted the position of learning as much as I can,
getting
sound advice, and documenting every last detail.

I know I will be audited. It's going to happen. Not only am I going
to
use
a light aircraft for business purposes, but I'm an independent
contractor
(software programmer) and that profession garners a lot of interest
from
the
IRS all by itself. I spend a ridiculous amount of time on documenting
everything right now so that my files are in condition that if an
audit
were
next week, I'd have little preparation to do.

Your case is a bit different. The line between my business and
personal
assets is there, but it's not as exacting as yours (Corporation and
personal). I would imagine that if you want to use the 100% business
deduction on the plane and then use SIFL method, then your Corporation
is
probably going to need to own the aircraft. But your CPA is probably
right,
it will be a red flag is you do it that way.

By the way, I'd recommend taking a look at http://www.atisgroup.com.
There's some excellent articles there that are specific to California.

r.



"Tony Cox" wrote in message
ink.net...
"Rob Thomas" wrote in message
...
Single entity LLC's (one director, me) are treated *exactly* like
sole
proprietorships by the IRS. However, they are still afforded the
same
legal
protections as a C-Corporation. It *used* to be that LLC's were
treated
as
partnerships, or the LLC could elect to be treated as a C-Corp for
tax
purposes. Those regulations changed a few years ago.

I file a 1040, along with a Schedule C (profit/loss from business)
just
as
any other sole proprietorship would.

Just a side note, all of my income is produced through my LLC, so
it's
not
just a holding company for an aircraft. I know some people set
them
up
that
way, but just wanted to point out that mine is not setup that way.


Thanks for the clear response. BTW, do you use your
aircraft for business or do you just use your LLC to hold
title?

I've been advised *not* to mix my aircraft (which is used
very occasionally for business) with the corporation. My
CPA says it attracts attention from the IRS. Not that I'd
be worried about the attention per se, but of course the
costs involved in even a successful audit are time, effort,
and paperwork frustration.

Did the FAA require further info on the LLC to register
your plane? Like proof of LLC ownership, conditions
for ownership transfer etc? I had the devils own trouble
attempting to register the plane to a revocable living
trust & finally gave up on the buggers and reregistered
in my own name.