AOPA Plane Giveaway and Taxes

What if the recipient's s-corp purchased the aircraft for the business?
Wouldn't that establish a basis?

BTW: In California we have a minimum tax for S-corps, C-corps, LLC, etc
of $800/yr. You would have to pay the $800/yr for the privilege of
being incorporated.

-Robert

"Robert M. Gary" wrote:

BTW: In California we have a minimum tax for S-corps, C-corps, LLC, etc
of $800/yr. You would have to pay the $800/yr for the privilege of
being incorporated.

If incorporated in CA, or incorporated in any state? Without knowing the
answer, my guess would be the latter, right?

--
Peter

Depends on the state you live in. Each winner would have to look at the
incorporation cost of their own state. In California its $800/yr. I
believe New York is similar. AZ and NV don't tax it at all. In
otherwords, as an example, California charges $800/yr, you may want to
check your state.

Robert M. Gary wrote:
Depends on the state you live in. Each winner would have to look at the
incorporation cost of their own state. In California its $800/yr. I
believe New York is similar. AZ and NV don't tax it at all. In
otherwords, as an example, California charges $800/yr, you may want to
check your state.

I'm still unsure what you mean, so I'll get specific. What if a Californian
incorporates in Delaware? Will California still assess the $800/year tax?

George Patterson
Coffee is only a way of stealing time that should by rights belong to
your slightly older self.

George Patterson wrote in
news:AmRif.565$gi3.458@trndny09:

Robert M. Gary wrote:
Depends on the state you live in. Each winner would have to look at
the incorporation cost of their own state. In California its $800/yr.
I believe New York is similar. AZ and NV don't tax it at all. In
otherwords, as an example, California charges $800/yr, you may want
to check your state.

I'm still unsure what you mean, so I'll get specific. What if a
Californian incorporates in Delaware? Will California still assess the
$800/year tax?

George Patterson
Coffee is only a way of stealing time that should by rights
belong to your slightly older self.

If you conduct business in California (like base the aircraft in the
state), you will have to register as a "foreign" corporation which incurs
the same $800 tax. When we incorporated our aircraft, we looked into doing
it in Nevada, but found out we would still have to pay this tax and would
also need to maintain a Nevada address.

--
Marty Shapiro
Silicon Rallye Inc.

(remove SPAMNOT to email me)

Yes. California has "like taxes" for all our residence taxes. So if you
have a California corp you pay $800/yr "minimum franchise tax". If you
have an out of state company but do business in California we have a
"Foreign Corp" tax of....guess what.... $800/yr minimum.

Its just like sales tax. If you buy something in California you pay
about 8% sales tax. If you buy it out of state but bring it to
California you pay about 8% "use tax".

They'll get you either way. There are lots of stories of people setting
up corps in California and then not using them for anything. At some
point the state finds out about them and goes after them for $800/yr
plus interest/penalities/etc. Even though the corp never actually did
business in California.

BTW: All this applies the same for LLCs and the old fashion, never used
anymore, s-corps.

-Robert

Peter R. wrote:
wrote:

Since you can only take depreication against the basis (or cost to put
into service), and since her basis would be $0 since she got the plane
for free, I can't see the point of this strategy.

What if the recipient's s-corp purchased the aircraft for the business?
Wouldn't that establish a basis?


Sure, for the s-corp. But the recipient will still have to pay taxes
on the FMV of the plane that she received for free and sold to the
s-corp. That FMV will be what the s-corp paid her for it, unless that's
obviously a sham price below book value in which case she would
probably have to pay taxes on book value.

..

wrote:

Sure, for the s-corp. But the recipient will still have to pay taxes
on the FMV of the plane that she received for free and sold to the
s-corp.

I agree that the owner will owe taxes on the winning aircraft.

However, assuming the winning recipient of the AOPA aircraft is also the
owner of the s-corp, then any tax benefit (aka tax over-payment refund)
that the s-corp receives from accelerated aircraft depreciation can be
passed through to the recipient's individual return, thus negating most of
the income tax owed on winning the aircraft, correct?

I am looking at the overall net affect (check sent to the IRS) of such a
transaction, not the impact of each tax event taken separately.

--
Peter

The legal term for that is "arm's lenght transaction". A corp must
report the sale as if you had sold or bought it from a stranger (i.e.
special prices between friends don't effect the reporting).