AOPA Plane Giveaway and Taxes

"Robert M. Gary" wrote:

I then sell it to my corp, receive a check from my
corp and pay the tax. I guess I don't see the difference. If you are
trying to sell it to your corp for less than FMV then I believe the IRS
provides jail terms for such fancy book work designed to avoid paying
tax.

Robert, the goal here is not to avoid the income tax and tread illegal
waters as you deduced, but rather to legally use the tools of the tax code
to create an expense (accelerated depreciation) large enough to offset most
of the income tax due on the winnings.

Again, the big picture goal is to significantly reduce the size of the
check that the winner has to send to the IRS on April 15th of the following
year.

Of course, come the date of the sale of aircraft some time in the future,
any accelerated depreciation will be recaptured by the IRS in the form of a
capital gains tax, but this is only a straight 20% tax versus an individual
income tax bracket of normally a 32% to 40% tax (depending on one's taxable
income).

--
Peter

"Peter R." wrote:
... any accelerated depreciation will be recaptured by the IRS in
the
form of a capital gains tax, but this is only a straight 20% tax
versus
an individual income tax bracket of normally a 32% to 40% tax.

Any and all depreciation, not just accelerated, is recaptured at
ordinary rates, not capital gains rates. Also, the aircraft has to
be used in an actual trade or business in order to depreciate it.

Fred F.

TaxSrv wrote:

Any and all depreciation, not just accelerated, is recaptured at
ordinary rates, not capital gains rates.

And what is the ordinary rate? A fixed rate or one that is variable based
on income?

Also, the aircraft has to
be used in an actual trade or business in order to depreciate it.

Of course. Again, I was never proposing anything illegal. Actually, my
original proposal was followed by a smiley, implying I wasn't overly
serious about it, but I and others quickly discarded or ignored that
intention.

--
Peter

"Peter R." wrote:
Any and all depreciation, not just accelerated, is recaptured
at
ordinary rates, not capital gains rates.

And what is the ordinary rate? A fixed rate or one that is
variable based
on income?

Same as on other income like wages, and depending upon one's
taxable income. The marginal tax rates vary between 10 and 35%.

Fred F.

TaxSrv wrote:

Same as on other income like wages, and depending upon one's
taxable income. The marginal tax rates vary between 10 and 35%.

Ok, how about this: When it comes time to sell the winning aircraft (and
face potential capital gains and depreciation recapture, of which I was
previously unaware - tnx, Fred), the winner purchases another business
aircraft that qualifies for a 1031 like-kind aircraft exchange, then does
not aggressively depreciate the second aircraft.

Would that indefinitely defer the depreciation recapture of the winning
aircraft?

--
Peter

"Peter R." wrote:
...the winner purchases another business aircraft that
qualifies for a 1031 like-kind aircraft exchange, then
does not aggressively depreciate the second aircraft.

Would that indefinitely defer the depreciation recapture
of the winning aircraft?


Yes it will, if one finds a "qualified intermediary" for purpose of
section 1031 willing to get involved in aircraft deals and seller
doesn't mind that complication. However, there may be little to
aggressively depreciate after the exchange.

Fred F.

"Peter R." wrote in message
...
TaxSrv wrote:

Same as on other income like wages, and depending upon one's
taxable income. The marginal tax rates vary between 10 and 35%.

Ok, how about this: When it comes time to sell the winning aircraft (and
face potential capital gains and depreciation recapture, of which I was
previously unaware - tnx, Fred), the winner purchases another business
aircraft that qualifies for a 1031 like-kind aircraft exchange, then does
not aggressively depreciate the second aircraft.

Would that indefinitely defer the depreciation recapture of the winning
aircraft?

--
Peter

Why wouldn't you depreciate that airplane too?

Mike
MU-2