AOPA Plane Giveaway and Taxes

In article et,
"Roy Page" wrote:

This is an interesting discussion I would like to see what the consensus
think this AOPA bird is really worth.

The lower powered 112 does not sell as well as the 114 but just a few hours
since SMOH, new paint and nice new interior may have the AOPA birds value up
to around $100,000.
Now add the turbo normalize, and all the fancy new instruments and avionic
glass might add say $50,000.
So I will start the ball rolling and say it will be worth about $150,000 on
the open market.

Too high!
$110k - $120k

"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

But if its a holding company designed simply to own the airplane (as
was the original thread) then you already own all the stock. I just
don't see incorporating helping you in anyway other than actually using
the plane for a business and being able to capture the depreciation
quicker (Time Value of Money gain, i.e. its better to have a dollar
today than tomorrow ).

-Robert

"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.

Robert M. Gary wrote:
Depends on the state you live in. Each winner would have to look at the
incorporation cost of their own state. In California its $800/yr. I
believe New York is similar. AZ and NV don't tax it at all. In
otherwords, as an example, California charges $800/yr, you may want to
check your state.

I'm still unsure what you mean, so I'll get specific. What if a Californian
incorporates in Delaware? Will California still assess the $800/year tax?

George Patterson
Coffee is only a way of stealing time that should by rights belong to
your slightly older self.

john smith wrote:

Too high!
$110k - $120k

You guys remind me of the airport bums who argued vehemently that Cessna would
never be able to get $125,000 for a new 172.

George Patterson
Coffee is only a way of stealing time that should by rights belong to
your slightly older self.

George Patterson wrote in
news:AmRif.565$gi3.458@trndny09:

Robert M. Gary wrote:
Depends on the state you live in. Each winner would have to look at
the incorporation cost of their own state. In California its $800/yr.
I believe New York is similar. AZ and NV don't tax it at all. In
otherwords, as an example, California charges $800/yr, you may want
to check your state.

I'm still unsure what you mean, so I'll get specific. What if a
Californian incorporates in Delaware? Will California still assess the
$800/year tax?

George Patterson
Coffee is only a way of stealing time that should by rights
belong to your slightly older self.

If you conduct business in California (like base the aircraft in the
state), you will have to register as a "foreign" corporation which incurs
the same $800 tax. When we incorporated our aircraft, we looked into doing
it in Nevada, but found out we would still have to pay this tax and would
also need to maintain a Nevada address.

--
Marty Shapiro
Silicon Rallye Inc.

(remove SPAMNOT to email me)