Depreciating aircraft parts, dealing with taxes, etc.

On May 10, 2:29 pm, Andrew Gideon wrote:
Most owners, I assume, have corporations which do the actual owning and
which provide a liability firewall. But how are taxes managed?

The issue I think I'm facing is we pay money into the corporation against
future events like overhaul, repainting, etc. These monies add up. But
since this is really just a reserve that's going to be spent in a few
years, I'm loath to have this considered "profit" and thereby become
taxable.

The answer, I'd imagine, is to depreciate those things against which the
reserves are accumulating. For example, if I pay $25/hour into the bucket
for engine reserve, I want to depreciate the engine by $25/hour.

Can one do that? What [very!] little I know about taxes has
calender-based depreciation schedules. Can one have a use-based schedule?

Thanks, and any suggestions, corrections, pointers, or ideas would be
welcome.

- Andrew

What taxable income are you trying to defer with depreciation???

-Robert

On Thu, 10 May 2007 16:18:34 -0700, Robert M. Gary wrote:

What taxable income are you trying to defer with depreciation???

I'm not sure that it's taxable income (which is part of my problem), but
I'm envisioning this asset called a "reserve account" growing over the
years until an overhaul is required.

- Andrew

"Andrew Gideon" wrote in message
news
On Thu, 10 May 2007 16:18:34 -0700, Robert M. Gary wrote:

What taxable income are you trying to defer with depreciation???

I'm not sure that it's taxable income (which is part of my problem), but
I'm envisioning this asset called a "reserve account" growing over the
years until an overhaul is required.


It's not an asset, it's a pre-paid expense.

The money is "spent", it just hasn't been distributed yet.
--
Matt Barrow
Performace Homes, LLC.
Colorado Springs, CO

Matt Barrow wrote:
"Andrew Gideon" wrote in message
news
On Thu, 10 May 2007 16:18:34 -0700, Robert M. Gary wrote:

What taxable income are you trying to defer with depreciation???
I'm not sure that it's taxable income (which is part of my problem), but
I'm envisioning this asset called a "reserve account" growing over the
years until an overhaul is required.


It's not an asset, it's a pre-paid expense.

The money is "spent", it just hasn't been distributed yet.

As far as taxes in a corporation is concerned, it's an asset.
It doesn't matter that it's been allocated for a particular
purpose, if it's still sitting in the bank account it ain't
spent.

"Ron Natalie" wrote in message
m...
Matt Barrow wrote:
"Andrew Gideon" wrote in message
news
On Thu, 10 May 2007 16:18:34 -0700, Robert M. Gary wrote:

What taxable income are you trying to defer with depreciation???
I'm not sure that it's taxable income (which is part of my problem), but
I'm envisioning this asset called a "reserve account" growing over the
years until an overhaul is required.


It's not an asset, it's a pre-paid expense.

The money is "spent", it just hasn't been distributed yet.

As far as taxes in a corporation is concerned, it's an asset.
It doesn't matter that it's been allocated for a particular
purpose, if it's still sitting in the bank account it ain't
spent.

Written against a liability, rather than Earnings.

On May 10, 7:00 pm, Andrew Gideon wrote:
On Thu, 10 May 2007 16:18:34 -0700, Robert M. Gary wrote:
What taxable income are you trying to defer with depreciation???

I'm not sure that it's taxable income (which is part of my problem), but
I'm envisioning this asset called a "reserve account" growing over the
years until an overhaul is required.

- Andrew

Only the interest is taxable. Money put in by the owners to cover
expenses (now or future) shouldn't be taxable. If you owned a lunch
truck and needed to write a personal check to make payroll one month
you wouldn't tax that either.
However, depending on your state, you may owe a minimum state income
tax. In California the minimum tax for a corporation or LLC that has
an operation (i.e. airplane) in the state is $800/yr. I believe New
York and a few other states also have this "minimum franchise tax", so
watch out.

-robert

Andrew Gideon wrote:

Most owners, I assume, have corporations which do the actual owning and
which provide a liability firewall.


Most owners do not as this provides no protection at all.

"Newps" wrote in message
. ..


Andrew Gideon wrote:

Most owners, I assume, have corporations which do the actual owning and
which provide a liability firewall.


Most owners do not as this provides no protection at all.

Depends on "who" the corporation consists of, and for what purpose.

A corporation with the aircraft as the only asset and only one officer,
the owner of the plane.





Matt Barrow wrote:

"Newps" wrote in message
. ..


Andrew Gideon wrote:


Most owners, I assume, have corporations which do the actual owning and
which provide a liability firewall.


Most owners do not as this provides no protection at all.


Depends on "who" the corporation consists of, and for what purpose.

"Newps" wrote in message
. ..
A corporation with the aircraft as the only asset and only one officer, the
owner of the plane.



That's one scenario. Certainly not the only one.

It sounds to me like Andrew's situation is one of an "Aircraft Management"
corporation.

That may or may not provide liability protection. In the case of an owned
corporation owning the aircraft, it doesn't protect the corporation, but it
does protect the pilot and his personal assets. If the prupose of corporate
ownership is merely to avoid liability, that probably won't work.





Most owners do not as this provides no protection at all.


Depends on "who" the corporation consists of, and for what purpose.