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.

Matt Barrow wrote:
"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.

This is true. If it weren't the case no corporation would ever pay taxes.
They'd just say the money they earned was going to be spent for widgets at
some time in the future.

"Gig 601XL Builder" wrDOTgiaconaATsuddenlink.net wrote in message
...
Matt Barrow wrote:
"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.

This is true. If it weren't the case no corporation would ever pay taxes.
They'd just say the money they earned was going to be spent for widgets at
some time in the future.

That's not how a pre-paid expense works.

On May 11, 1:08 pm, "Gig 601XL Builder" wrDOTgiaconaATsuddenlink.net
wrote:
Matt Barrow wrote:
"Ron Natalie" wrote in message
om...
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.

This is true. If it weren't the case no corporation would ever pay taxes.
They'd just say the money they earned was going to be spent for widgets at
some time in the future.- Hide quoted text -

- Show quoted text -

Money put in the corporation to prop up the corporation is not
"earnings".

-robert

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