California corp.

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.

Yes, but there is a description of the asset for depreication. While it's
been recommended that you don't use the word "aircraft" in that description
and use something more technical to describe it, it does have to be
identified. Whether the IRS knows that your description is an aircraft, I
wouldn't know.

r.

"Mike Rapoport" wrote in message
link.net...
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.

"Mike Rapoport" wrote in message
link.net...

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)

Form 4562 (depreciation) does not say aircraft are "Listed"
property. I think you could hide one as general MACRS
5-year property. Perhaps they'd think it was a big computer!

Tony (not a CPA, but who has had to wrestle with all this crap
thanks to the incompetence of those who have claimed to be).