Depreciating aircraft parts, dealing with taxes, etc.

On May 10, 7:14 pm, "Matt Barrow"
wrote:
"Andrew Gideon" wrote in message

news


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.

IIUC, it should be set up as a reserve/expense account, not as income to the
corporation. The only income to the corporation should be the management
fees (??)



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?

It sounds like you're trying to depreciate components, rather than the
entire aircraft, on an hourly basis. I don't think that's a good idea. That
takes much more work for your accountant. I can imagine doing a
calendar-based depreciation, but not if the calendar is harder on your
aircraft's value than useage is.

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

Are you a "partner" to the corporation, or is it third party, such as a
partnership or lease back?

(My explanation here is probably NOT technically correct)
My company (LLC) is the registered owner of my aircraft. We deduct expenses
as incurred and take depreciation and make an entry in "Reserves" on an
hourly basis for such things as recurring maintenance and overhaul.

The LLC then "charges"me for any personal use I make of the aircraft. I then
declare that as personal income, just as when I draw from our cash accounts
for "personal income - cash".

You can get into "trouble" if you try to expense your personal usage, so
make DAMN sure you are really doing business and have documentation to back
it up. This is probably (though not sure) more critical when you have
corporate ownership.

Reading this I don't think you and the OP are talking about the same
concept. You're talking about your business (which is primarily
building homes, right?) owning an airplane for business use.

Andrew is talking about owning an airplane for personal use, but
owning it in a corporation that exists only own the plane -- as a
liability firewall. He's not trying to make airplane usage deductible
or a business xpense, he just wants to know how to account for the
money that is deposited to pay for future airplane expenses.

"xyzzy" wrote in message
ups.com...
On May 10, 7:14 pm, "Matt Barrow"
wrote:
"Andrew Gideon" wrote in message
You can get into "trouble" if you try to expense your personal usage, so
make DAMN sure you are really doing business and have documentation to
back
it up. This is probably (though not sure) more critical when you have
corporate ownership.

Reading this I don't think you and the OP are talking about the same
concept. You're talking about your business (which is primarily
building homes, right?) owning an airplane for business use.

Andrew is talking about owning an airplane for personal use, but
owning it in a corporation that exists only own the plane -- as a
liability firewall. He's not trying to make airplane usage deductible
or a business xpense, he just wants to know how to account for the
money that is deposited to pay for future airplane expenses.

Well, his first issue was taking depreciation, which is why I used the
examples I did. Only later did he bring up the liability issue, which in his
case, was no protection for HIS mistakes.

In my case, I have some liability protection for my PERSONAL assets, but our
company may take a hit. In that case, I'm out of a job, but not homeless
(just homely).


--
Matt Barrow
Performace Homes, LLC.
Colorado Springs, CO