danielhv

danielhv

Well Known Member
Just curious if there is a way I can work this build to benefit me... To my knowledge, you cannot have an experimental aircraft "for hire"... so lets say I wanted to do some amature aerial photography in the future... Nothing I plan on making a living at, but just for fun... Could I claim my build as a tax write off? Just curious if anyone has done anything like that... I do not have a business of any kind, but would like to someday do something on the side aviation related... and Im spending a LOT of money here so far. :( This was all brought up by the guy who does my taxes... he asked if I could write off the plane.... So here I am.

Another point... I do plan on offering transition training when Im done... (I'll be a CFII by then)... and somehow someway someday want to follow in Mel's footsteps and become a DAR in the DFW area.
 
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Van's can write off their aircraft, but you can't just as easily. You would have to prove to the IRS, that your business is capable of making a profit, and that the plane just isn't a hobby.
That's the tough part, and they are sticklers on the subject. If it's deducted, and they prove otherwise, you'll be repaying with interest & penalty.

And BTW, my insurance policy has some limitations on aerial photography, but I don't have it front of me at the moment, to be specific. My policy also allows some incindental business use, should I use it to travel somewhere for business. However, I just can't legally justify the plane as a business deduction. Only some fuel and related costs.

L.Adamson --- RV6A
 
In short No. As L.Adamson said the IRS would likely classify that as a hobby business and they have pretty strict rules. Basically, you are only allowed to deduct your expenses to the extent of your income from that business. At least thats how I remeber my tax professor explaining it.
 
danielhv said:
Another point... I do plan on offering transition training when Im done... (I'll be a CFII by then)... and somehow someway someday want to follow in Mel's footsteps and become a DAR in the DFW area.
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IMHO this is a better / legitimate way to write the plane off. When you are a CFII and or a DAR you can depreciate it as a business asset. Simply transfer the plane into the business. All expenses would be deductible from the business income. Personally, I would not try the photography route. It has "red flag" written all over it.

I'm not a tax guy, but I did drive by a Holiday Inn Express last night. ;) Consult a good tax person before doing it. You want the deduction to be at least "defensible". The IRS is not fond of aggressive legal tax strategies, but they will live with them. They do not like fraudulent ones and will prosecute. Just to be clear, neither situation you describe is fraudulent, but one is more "defensible" than the other.
 
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I got a good laugh....

....from a good friend who is a fairly high-income tax accountant. My theory went like this:

1) The Federal Government (FAA) licenses experimental aircraft if they are built for EDUCATIONAL (and recreational) purposes. Therefore, building an experimental MUST be an educational exercise (the government says so!)....

2) The Federal Government (IRS) allows us to write off EDUCATIONAL expenses that make us better at our jobs, in our field, so long as it isn't trying to qualify us for a better job (I won't even pretend to understand that last part...). So Educational expenses in your field are a deduction.....

3) I am an Aeronautical Engineer - building an airplane is undoubtedly going to make me better at my job (just listen to any mechanic at he swears at engineers who don't know how to turn a wrench.....

THEREFORE.....get this....I should be able to write off the cost of my build as a professional, educational expense!

The laugh was long as hard before she said "OK, if you want to try it, I sure am not going to sign your taxes! If it smells of private airplane anywhere on the form, it is an instant audit flag. And no, they won't believe your theory...."

Ah well, it was a nice dream while it lasted!

What's that old saying - you can write off anything you want - as long as they don't catch you!:D

Paul
 
Ironflight said:
THEREFORE.....get this....I should be able to write off the cost of my build as a professional, educational expense!

The laugh was long as hard before she said "OK, if you want to try it, I sure am not going to sign your taxes! If it smells of private airplane anywhere on the form, it is an instant audit flag. And no, they won't believe your theory...."
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Paul, In your case a partial deduction would have been more appropriate, say 20% of the total cost of the project went towards education, 80% is for hobby / pleasure.

There is no rules about experimental aircraft not being deductible that I know of, in fact I know several people that write off experimental as a business asset if they use it for travel. Perfectly legal and defensible if set up right. Understand, if you claim it as an asset of a company you'll need to depreciate it. All of that depreciation goes back as income when the plane is sold. Expenses (fuel, oil, maintenance, condition inspections) are deductible.

The difference between your example and my example may be a profitable (tax paying) company owns the plane, and it is not being used as "educational purposes".
 
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In between....

Paul, An engineer with common sense is a machinist. A builder with a tax write off is a futuer prisoner.
 
May be...............

Airplanes are written off every year with a more substantial cost than the RV series. The key is to set it up in a profitable business. The IRS says you must turn a profit in a business within 5 years or it may be considered a "hobby". Although this has been disputed with positive result.

I could clearly see Doug Reeves writing his RV's off as these are central to his website. I could see anyone who is developing parts for RV's writing it off as their airplane becomes their "test bed" for development. Anyone using it for business travel could at least write off a portion of the cost & related expenses as you would a car.

I have owned a large RC Hobby shop in Houston for over twenty years as one of my businesses and when I finish mine you can be sure that it will have a Big Company Logo on it, so when I fly over RC flyin's it will be advertising for my store. After all isn't it just a "Big Model Airplane"?

I didn't stay at a "Holiday Inn" last night, but I am a CPA in the State of Texas. It can be done in many cases, but you do have to make a case for it.
Doesn't have to make great business sense. Press the envelope, but follow the law.
 
According to my accountant/ tax man, YES, building an RV and operating it under some very specific conditions will allow the cost of building it and all business use operating expenses to be fully tax deductable.

You must be self employed
You must have an office in one location and do your work in another location
You make your RV a company asset,(company owned) then you can:

Once the airplane completed and is put into service, (can not deduct anything during construction) and listed as a company asset, the cost of building it can be depreciated over a specific number of years, and the operating expenses, gas, oil, insurance and maintainence, to the extent used for business, will become yearly deductions.

My wife and I are self employed photographers (38 years). Our business is our only source of income. Our office is located at home in the Sierra foothills near Yosemite and all of our shooting is done between San Francisco and San Jose,CA, a distance of 150 to 170 miles one way. Travel between the office and shooting location is NOT a commute, it is business travel and is fully deductable for gas, oil, maintainence, insurance, etc. The airplane will be a company asset, owned by our two person company.

All use, directy for business is fully deductable. As a photographer I always carry a camera and am always scouting new photo locations, etc. Our airplane once built, with careful documentation of business use should be 100% tax deductable.

We now spend 3 to 4 hours each way, about 150 days a year and write off about 50,000 miles a year. Our RV-7 when completed will make the trip in 45 minutes. We will have a van at an airport and will then drive 5 to 25 miles to get to our shooting location. My wife is 100% behind the RV-7 after having taken a demo ride at Van's last year. We had a Cessna 170 for 19 years and the RV-7 blew her socks off. She knows she will shoot a lot of rivets and can't wait to get started.

Wil Heslin
 
John,

The criteria that my wife and I must meet for our business are the three listed, self employed, home office with at least some work being done in another location and the airplane being a company asset, IE. company owned.

Meeting these three will allow us to deduct most if not all expenses, from the cost of building to the cost of operating. I don't claim this is the only awy to write an airplane off, but it will work for us. All we must do is to build the airplane on our dime and once put into service then it becomes deductable.

Wil Heslin
 
OK then...

wil said:
John,

The criteria that my wife and I must meet for our business are the three listed, self employed, home office with at least some work being done in another location and the airplane being a company asset, IE. company owned.

Meeting these three will allow us to deduct most if not all expenses, from the cost of building to the cost of operating. I don't claim this is the only awy to write an airplane off, but it will work for us. All we must do is to build the airplane on our dime and once put into service then it becomes deductable.

Wil Heslin
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...how does this criteria, and the others mentioned earlier, fit in with your legally required Operating Limitations?

Don't you have this, or a similar statement, in your FAR required Experimental Operating Limitations?

b. The following operating limitations shall be prescribed to experimental amateur-built aircraft:
(1) No person may operate this aircraft for other than the purpose of meeting the requirements of ?91.319(b) during phase I flight testing, and for recreation and education after meeting these requirements as stated in the program letter (required by 14 CFR, part 21.193) for this aircraft. In addition, this aircraft shall be operated in accordance with applicable air traffic and general operating rules of part 91 and all additional limitations herein prescribed under the provisions of part 91.319(e). These operating limitations are a part of the FAA Form 8130-7, special airworthiness certificate, and are to be carried in the aircraft at all times for availability to the pilot in command of the aircraft.

Does your criteria meet the highlighted portion?

Is your insurance valid if you are violating a FAR?
 
I can write of our Rv (fifth wheel camper) as a second home according to my accountant.
So, if you list your plane as an RV, you think they will know what it is?:D:D

I not suggesting this, just dreaming.
 
Quote:
Originally Posted by wil
The criteria that must be met to have the government allow a full write off are:

Are what?
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Ploughing it into the side of a mountain shoudl do it! :D

If you use it for business claim some fair and reasonable hourly expenses for flights you actually take on business, I do, and our tax laws down here would be similar. As for claiming a heap of private flying..... well thats just dishonest dreaming and you may as well claim space travel to Mars because I am sure you did that too ;) ....didn'y you :rolleyes:

DB
 
Easy now!!

As most know, I am a self employed practicing CPA:

Client: Can I deduct this?

Me: Sure, you can deduct anything.

Client: Great!!

Me: Will it fly (no pun intended), NOT A CHANCE

Sorry, there is some serious stretching, not withstanding the FARs, going on in this thread:eek:
 
Dana, Take 10 certified public accountants specializing in tax preparation and 1 business tax return. One thing is for sure, with the wonderfully simple and easy to understand tax code we have there will be 10 different answers on what the company owes in taxes.
 
Despite my somewhat tongue-in-cheek attempt at finding a "Creative" way to write off airplane expenses, I really think that if you have a definite, distinct, and clearly business-related reason for owning an RV, a good accountant can find the legal means to write off parts of those expenses. If you built your RV like many (most?) of us as a private flying machine, and are then looking for a "back-door" way to get some tax relief, the IRS is just sitting there, waiting for you to poke your head up so they can shoot it off.

Paul
 
Ironflight said:
Despite my somewhat tongue-in-cheek attempt at finding a "Creative" way to write off airplane expenses, I really think that if you have a definite, distinct, and clearly business-related reason for owning an RV, a good accountant can find the legal means to write off parts of those expenses. If you built your RV like many (most?) of us as a private flying machine, and are then looking for a "back-door" way to get some tax relief, the IRS is just sitting there, waiting for you to poke your head up so they can shoot it off.

Paul
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Absolutely right.

If you buy a flying RV and register it in a profitable company name it is a legitimate deductible asset. The question then becomes can you build it, then sell it business.

Part of the frustration expressed in this thread is due to the current tax code. It has too many "loop holes". It is okay to deduct an airplane under some circumstances benefiting some, but others can't due to the complexity if the tax code. Some tax accounts will take the deduction while others won't due to the fear and intimidation techniques employed by the IRS.

The other frustration is the way the tax laws are enforced. The IRS is used as a political weapon where "snitching" is a major way to "turn in" violators....or political / business enemies. :cool:

I have personally seen a legitimate business (50+ employees) destroyed by the IRS. They came into the business, shut it down, confiscated all of the records and computers, froze all banks accounts. After a 3 year audit it was found the company was doing absolutely nothing wrong, and owed zero taxes, infact they over paid and were entitled to a small refund (oops! :rolleyes:). A competitor had made a false accusation about federal road taxes not being withheld. No, this was the USSR, it was in the USA.
 
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Larry...

Geico266 said:
Absolutely right.

If you buy a flying RV and register it in a profitable company name it is a legitimate deductible asset. The question then becomes can you build it, then sell it business.

Part of the frustration expressed in this thread is due to the current tax code. It has too many "loop holes". It is okay to deduct an airplane under some circumstances benefiting some, but others can't due to the complexity if the tax code. Some tax accounts will take the deduction while others won't due to the fear and intimidation techniques employed by the IRS.

The other frustration is the way the tax laws are enforced. The IRS is used as a political weapon where "snitching" is a major way to "turn in" violators....or political / business enemies. :cool:

I have personally seen a legitimate business (50+ employees) destroyed by the IRS. They came into the business, shut it down, confiscated all of the records and computers, froze all banks accounts. After a 3 year audit it was found the company was doing absolutely nothing wrong, and owed zero taxes, infact they over paid and were entitled to a small refund (oops! :rolleyes:). A competitor had made a false accusation about federal road taxes not being withheld. No, this was the USSR, it was in the USA.
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...you still did not address the seperate issue of those pesky FARs....:)

How can a business (other than transition training, which has a special exception) comply with the - recreation and education after meeting these requirements - of the FARs?

see post #12

My stretch would be if it was an "employees flying club" - but that would sort of rule out business trips due to the recreation bit.....

I also see Paul D. didn't mention the pesky FARs and Operating Limitations either...:)

I think a lot of the previous comments are really applicable to certified planes, not our Experimental - Amateur Built ones.
 
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I've heard secondhand that in order to deduct airplane expenses, the aircraft must be operated a majority of time for the business, not for pleasure. Is this true? Or perhaps was this person just trying to help appease any possible IRS audit by showing that the intention was to operate for business and not find creative ways to deduct expenses?
 
All depends on circumstances.

Wonder if Alex D can write off his planes.

Wonder if Vans can write off the factory demo planes.
 
There are...

Mike S said:
Wonder if Alex D can write off his planes.

Wonder if Vans can write off the factory demo planes.
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....specific allowances for use of Experimental aircraft for transition training - and airworthiness rules (such as 100hr inspections). This is actually an example of a good move by the FAA to promote safety....:)

http://www.airmen.org/Documents/N8700-47- LODA 91-319.pdf

IIRC based on this NTSB recommendation.

http://www.ntsb.gov/Recs/letters/1997/A97_42.pdf

Note that this is transitional training only - regular training in an Experimental by Alex or Vans would not be legal - unless they did it for free...:)

Charging would make it definitely business related - doing it for free would sort of ruin the business aspect...:)

None of the other cases cited come anywhere near close to operating within the Experimental Operating Limitations - which is a specific FAR requirement.

Sheesh... doesn't anyone read their Operating Limitations?
 
Opps Specs

az_gila said:
None of the other cases cited come anywhere near close to operating within the Experimental Operating Limitations - which is a specific FAR requirement.

Sheesh... doesn't anyone read their Operating Limitations?
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Sadly Gil, I don't think they do. One needs to understand how to read the FARs. I recently had a heated discussion with a newbie over annual/condition inspections. He had read 91.409 (c) (1) and decided that there was no inspection required. As you know, the Opps Specs change the name to "condition inspection" and put the requirement right back in with a reference back to the same section.

But back to the point of this thread. Although Van's company airplanes are registered as experimental, they are not registered as "amateur built" they are "Crew Training," Research & Development," and "Market Survey." If you think about it, how could they be "amateur built?" people were paid to build them. The IRS would smile on this as a very normal business expense.

John Clark
RV8 N18U "Sunshine"
KSBA
 
Sadly not enough.

az_gila said:
Sheesh... doesn't anyone read their Operating Limitations?
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Gil, Many of the questions I receive can be answered with "Read your operating limitations."
When I certificate an aircraft, I read aloud the operating limitations while the applicant reads along with me. I point out the most commonly "overlooked" points and make sure that he/she understands them. I then have them sign the op lims stating that they have read and understand them.
 
That sounds like a really good...

Mel said:
Gil, Many of the questions I receive can be answered with "Read your operating limitations."
When I certificate an aircraft, I read aloud the operating limitations while the applicant reads along with me. I point out the most commonly "overlooked" points and make sure that he/she understands them. I then have them sign the op lims stating that they have read and understand them.
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...approach Mel.

I just wonder how much actually sinks in....:)
 
Mike S said:
Wonder if Alex D can write off his planes.

Wonder if Vans can write off the factory demo planes.
Click to expand...

He would be a fool not too and I am sure he does. It is a true business expense. If you own a company there are legal ways to write the stuff off.
 
similar situation

CNEJR said:
I have owned a large RC Hobby shop in Houston for over twenty years as one of my businesses and when I finish mine you can be sure that it will have a Big Company Logo on it, so when I fly over RC flyin's it will be advertising for my store. After all isn't it just a "Big Model Airplane"?

It can be done in many cases, but you do have to make a case for it.
Doesn't have to make great business sense. Press the envelope, but follow the law.
Click to expand...

I have also been involved in RC most of my life. I write the Soaring Column for Model Aviation the publication of the Academy of Model Aeronautics. I use my RV7 to travel to a few model airplane contests every year. If they are contests that I feature in my column, I deduct the costs of the trip. I do not abuse this and have the appropriate paper trail and the article to match the dates and times.

As noted above, there are probably situations when expenses can be deducted but they are probably very limited.

[This last sentence removed by dr. political. dr]
 
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