Aircraft tax question

So if I bought a damaged aircraft for $5000, repaired it, painted it, and
sold it for $50,000, I would be liable for taxes $45,000?

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

"Sense" has little to do with tax law, which has to also operate
its own way for practical enforcement, and timing tax receipts
today vs. tomorrow if Congress so desires.

Say you originally bot the plane with a Loran, and it stopped
working, so you removed and tossed it. Whether business or not,
there's no accounting loss, since you can't establish the % of
purchase price which was in the Loran. So Loran stays forever in
the basis.

However, if you bot plane and then added Loran for $1500, and sold
it for $100, then you have a business loss if this separate Loran
asset was not fully depreciated. Otherwise a taxable ordinary
gain. For a personal plane, you similarly take the Loran back out
of basis, but with no tax effect ever as to the $100.

However, if the Loran in a personal plane which you installed
stopped working, and you ripped it out and tossed, you're actually
supposed to take it back out of basis (purchase price of plane).

Back to if Loran was in the plane when you bot it, but you sold
working Loran for $100. Whether biz or not, just subtract $100
from basis of plane which forever includes the Loran. It really
all follows a few simple rules.

Fred F.

Steve Foley wrote:
So if I bought a damaged aircraft for $5000, repaired it, painted it, and
sold it for $50,000, I would be liable for taxes $45,000?

That's pretty much the way it works. If you hold it for a year, you are
taxed at the capital gains rate of 15% (plus whatever gouge your state
wants). If you sell it in under a year, you pay whatever your top
tax bracket is one the income.

That figgers.

Note: I'm not selling my plane.

2 More questions:

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

#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.



"Ron Natalie" wrote in message
m...
Steve Foley wrote:
So if I bought a damaged aircraft for $5000, repaired it, painted it,
and
sold it for $50,000, I would be liable for taxes $45,000?

That's pretty much the way it works. If you hold it for a year, you are
taxed at the capital gains rate of 15% (plus whatever gouge your state
wants). If you sell it in under a year, you pay whatever your top
tax bracket is one the income.

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.

I'm talking about the specific case where I buy a basket-case with the
intention of fixing it and selling it.

As I stated, I have no current plans to do that. It's just something I've
dreamed about.


"Ron Natalie" wrote in message
m...
Steve Foley wrote:


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.

All other things being equal, Yes.


"Steve Foley" wrote in message
news:J54ef.456$Rb.274@trndny01...
So if I bought a damaged aircraft for $5000, repaired it, painted it, and
sold it for $50,000, I would be liable for taxes $45,000?

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

"Sense" has little to do with tax law, which has to also operate
its own way for practical enforcement, and timing tax receipts
today vs. tomorrow if Congress so desires.

Say you originally bot the plane with a Loran, and it stopped
working, so you removed and tossed it. Whether business or not,
there's no accounting loss, since you can't establish the % of
purchase price which was in the Loran. So Loran stays forever in
the basis.

However, if you bot plane and then added Loran for $1500, and sold
it for $100, then you have a business loss if this separate Loran
asset was not fully depreciated. Otherwise a taxable ordinary
gain. For a personal plane, you similarly take the Loran back out
of basis, but with no tax effect ever as to the $100.

However, if the Loran in a personal plane which you installed
stopped working, and you ripped it out and tossed, you're actually
supposed to take it back out of basis (purchase price of plane).

Back to if Loran was in the plane when you bot it, but you sold
working Loran for $100. Whether biz or not, just subtract $100
from basis of plane which forever includes the Loran. It really
all follows a few simple rules.

Fred F.

"Steve Foley" wrote:
So if I bought a damaged aircraft for $5000, repaired it, painted
it, and
sold it for $50,000, I would be liable for taxes $45,000?


Negative. An exception to the rules about capital vs. repair is
that in a planned program of renovation, just about every stinkin'
thing can be capitalized until the project is done and all signed
off. So your basis would be $50,000 if not a bit less.

Fred F.

Steve Foley wrote:
So if I bought a damaged aircraft for $5000, repaired it, painted it, and
sold it for $50,000, I would be liable for taxes $45,000?

No, because you would have spent money on parts to repair it. That
money spent would be added to the $5000 for your basis. And since this
is aviation, no doubt that amount would now be MORE than $50,000. :-)