Taxes and Flying Clubs

I'm hoping folks on this newsgroup can give me some ideas to take back to my
flying club. We currently have 24 members and 3 aircraft. Through years of
less than stellar management the officers the club has found itself in the
position of facing some very expensive upgrades. As a result the membership
has commission a group to look at how the club funds itself. One of the
recommendations that the review group is going to put forth is that the
hourly rate charged members while flying include reserves for upgrades as
well as an amount to offset the costs of overhauls.

In the past these things have been done by borrowing money and then using
the monthly dues to make the payments in addition to insurance, hangar
etc...

The club's accountant has pointed out that changing how we are handling the
funds will make us subject to taxes on the money being set aside for
overhauls and upgrades. What have other folks/clubs done to get around
this?

If it helps our club has one share per member.

Thanks for any input.

Chris

Depends on how the club is registered with the state and the feds as a
legal entity (or not registered)... You need the advice of an attorney
in your state, not a beating from usenet (though you will likely get
one anyway

Denny

Denny,

I've found that having some prior knowledge often helps to keep the attorney
focused. I'm hopeful that others have explored this and can lend advice.
We certainly aren't set up as a non profit nor do I think we would
necessarily qualify.

Chris

"Denny" wrote in message
oups.com...
Depends on how the club is registered with the state and the feds as a
legal entity (or not registered)... You need the advice of an attorney
in your state, not a beating from usenet (though you will likely get
one anyway

Denny

Yes you can qualify. The club I belong to is a non-profit corp. chartered
under sec 501 (c) (7), social clubs.

Here's the link to the IRS: http://www.irs.gov/irm/part7/ch10s10.html

The key is an organization of members with a common social purpose (to fly).
As long as all your income is from members (dues and rentals) and is used
for the benefit of all the members (keeping the planes flying), you've met
the requirements. The most likely disqualifier would be to allow rentals to
non-members, thus generating non-member income.

Talk to a lawyer to set it up. It's not a complicated process.

Gerry


"CHRISTOPHER SPIERINGS" wrote in message
news:gmeOd.22822$uc.12371@trnddc09...
Denny,

I've found that having some prior knowledge often helps to keep the
attorney focused. I'm hopeful that others have explored this and can lend
advice. We certainly aren't set up as a non profit nor do I think we would
necessarily qualify.

Chris

"Denny" wrote in message
oups.com...
Depends on how the club is registered with the state and the feds as a
legal entity (or not registered)... You need the advice of an attorney
in your state, not a beating from usenet (though you will likely get
one anyway

Denny

Hi everyone,

[ CAUTION - I'm not an accountant or lawyer, let alone a tax lawyer, and
I don't even play one on TV... ]

The way I read the IRS pages referred to below and the Revenue rulings
they mention (you can get the texts at www.taxlinks.com), under the 1970
ruling (Rev. rule 70-32)

"A flying club providing economical flying facilities
for its members but having no organized social and
recreation program does not qualify for exemption under
section 501(c)(7) of the Code."

In a later 1974 ruling (Rev. rule 74-30) a flying club whose charter
expressly included opportunities for members to get together to fly,
wash, and maintain the plane WAS ruled to qualify:

"In order for a club to meet the requirements for exemption
under section 501(c)(7) of the Code, there must be an established
membership of individuals, personal contacts, and fellowship.
Furthermore, a commingling of members must play a material part
in the activities of the organization. See Rev. Rul. 58-589,
1958-2 C.B. 266, and Rev. Rul. 69-635, 1969-2 C.B. 126."

So besides everything else your flying club has to be a SOCIAL club to
qualify for the "social and recreational club" exemption under 501(c)(7).

Hope that helps,
-Patrick.

In article ,
"Gerry Caron" wrote:

Yes you can qualify. The club I belong to is a non-profit corp. chartered
under sec 501 (c) (7), social clubs.

Here's the link to the IRS: http://www.irs.gov/irm/part7/ch10s10.html

The key is an organization of members with a common social purpose (to fly).
As long as all your income is from members (dues and rentals) and is used
for the benefit of all the members (keeping the planes flying), you've met
the requirements. The most likely disqualifier would be to allow rentals to
non-members, thus generating non-member income.

Talk to a lawyer to set it up. It's not a complicated process.

Gerry


"CHRISTOPHER SPIERINGS" wrote in message
news:gmeOd.22822$uc.12371@trnddc09...
Denny,

I've found that having some prior knowledge often helps to keep the
attorney focused. I'm hopeful that others have explored this and can lend
advice. We certainly aren't set up as a non profit nor do I think we would
necessarily qualify.

Chris

"Denny" wrote in message
oups.com...
Depends on how the club is registered with the state and the feds as a
legal entity (or not registered)... You need the advice of an attorney
in your state, not a beating from usenet (though you will likely get
one anyway

Denny

Patrick,

Excellent info. Thanks!

Chris

"Patrick Dirks" -please wrote in message
news:No-Spam-To-pwd-D0C720.10531909022005@localhost...
Hi everyone,

[ CAUTION - I'm not an accountant or lawyer, let alone a tax lawyer, and
I don't even play one on TV... ]

The way I read the IRS pages referred to below and the Revenue rulings
they mention (you can get the texts at www.taxlinks.com), under the 1970
ruling (Rev. rule 70-32)

"A flying club providing economical flying facilities
for its members but having no organized social and
recreation program does not qualify for exemption under
section 501(c)(7) of the Code."

In a later 1974 ruling (Rev. rule 74-30) a flying club whose charter
expressly included opportunities for members to get together to fly,
wash, and maintain the plane WAS ruled to qualify:

"In order for a club to meet the requirements for exemption
under section 501(c)(7) of the Code, there must be an established
membership of individuals, personal contacts, and fellowship.
Furthermore, a commingling of members must play a material part
in the activities of the organization. See Rev. Rul. 58-589,
1958-2 C.B. 266, and Rev. Rul. 69-635, 1969-2 C.B. 126."

So besides everything else your flying club has to be a SOCIAL club to
qualify for the "social and recreational club" exemption under 501(c)(7).

Hope that helps,
-Patrick.

In article ,
"Gerry Caron" wrote:

Yes you can qualify. The club I belong to is a non-profit corp.
chartered
under sec 501 (c) (7), social clubs.

Here's the link to the IRS: http://www.irs.gov/irm/part7/ch10s10.html

The key is an organization of members with a common social purpose (to
fly).
As long as all your income is from members (dues and rentals) and is used
for the benefit of all the members (keeping the planes flying), you've
met
the requirements. The most likely disqualifier would be to allow rentals
to
non-members, thus generating non-member income.

Talk to a lawyer to set it up. It's not a complicated process.

Gerry


"CHRISTOPHER SPIERINGS" wrote in message
news:gmeOd.22822$uc.12371@trnddc09...
Denny,

I've found that having some prior knowledge often helps to keep the
attorney focused. I'm hopeful that others have explored this and can
lend
advice. We certainly aren't set up as a non profit nor do I think we
would
necessarily qualify.

Chris

"Denny" wrote in message
oups.com...
Depends on how the club is registered with the state and the feds as a
legal entity (or not registered)... You need the advice of an attorney
in your state, not a beating from usenet (though you will likely get
one anyway

Denny

Patrick Dirks -please writes:


So besides everything else your flying club has to be a SOCIAL club to
qualify for the "social and recreational club" exemption under 501(c)(7).


So, hold plane-wash picnics and a Christmas social. Have a fly-out somewhere,
and so forth..

But I have to wonder -- what's the rules on "educational" clubs? Our Linux
group falls in that bucket. Is a large part of your club to help people
learn to fly/improve the flying?


--
A host is a host from coast to
& no one will talk to a host that's close........[v].(301) 56-LINUX
Unless the host (that isn't close).........................pob 1433
is busy, hung or dead....................................20915-1433

"David Lesher" wrote in message
...
Patrick Dirks -please writes:


So besides everything else your flying club has to be a SOCIAL club to
qualify for the "social and recreational club" exemption under 501(c)(7).


So, hold plane-wash picnics and a Christmas social. Have a fly-out
somewhere,
and so forth..

But I have to wonder -- what's the rules on "educational" clubs? Our Linux
group falls in that bucket. Is a large part of your club to help people
learn to fly/improve the flying?


How about sex clubs?

Do you have sex after owning an airplane? :-)

Jon Kraus
PP-ASEL-IA
Mooney 201 4443H

Matt Barrow wrote:

"David Lesher" wrote in message
...

Patrick Dirks -please writes:



So besides everything else your flying club has to be a SOCIAL club to
qualify for the "social and recreational club" exemption under 501(c)(7).


So, hold plane-wash picnics and a Christmas social. Have a fly-out

somewhere,

and so forth..

But I have to wonder -- what's the rules on "educational" clubs? Our Linux
group falls in that bucket. Is a large part of your club to help people
learn to fly/improve the flying?



How about sex clubs?

"Jon Kraus" wrote in message
...
Do you have sex after owning an airplane? :-)

Mile High Club....if you can still afford it.


Jon Kraus
PP-ASEL-IA
Mooney 201 4443H

Matt Barrow wrote:


How about sex clubs?