DeltaRomeo

DeltaRomeo

doug reeves: unfluencer
Staff member
...this was posted in the VAF yahoo group by <cvn_21 'at' yahoo.com> and is being duplicated here (because more people will see it. dr)


"I am considering buying an RV8 kit, and was wondering if anyone knows whether kit planes receive the same tax treatment as commercially manufactured airplanes, if purchased, built, and used for a legitimate business travel purpose. Thank you."
Ron
 
I'm not sure about deducting the kit price but it sounds reasonable if bought by your business and used only for business. My accountant advised me to own my plane outside the business and charge the company for the cost of the business trips based on a reasonable hourly fee. He said having the company own and maintain the aircraft raises red flags to the IRS. You are much more likely to be audited. Since I used the plane for both pleasure and business I opted for this route.
Jim Wright RV-9A wings 90919 Arkansas
 
Be careful about your accountants advice to charge your company for the cost of business trips based on a reasonable hourly fee. That would be using the aircraft for compensation or hire.

FAR 91.319 says "No person may operate an aircraft that has an experimental certificate--- Carrying persons or property for compensation or hire."

The FAA is serious about this. Your insurance company will be as well.
 
While not flying yet, I've given this some thought myself.
I already take the standard 34.5 cents per mile deduction for business mileage I put on my privately owned Dodge Ram.

So lets say for example that I visit a customer exactly 100 miles away.
That's a 200 mile round trip that I would be able to take the expense deduction of $69.00 if traveling in my pickup.

If I make that same trip in my RV, and therefore take the same mileage deduction, I would pay for my fuel figuring 200mph for one hour flight time at a fuel burn of 10gph at $3.00/gal approx. fuel cost = $30.00 for the fuel.
So at a worse case scenario, and if I don't want to do anything that will "flag" a computer at the IRS, I figure I can at least pay for my fuel expenses (and then some) on business trips if I simply take a standard automotive deduction for the trip based on "road" miles (which is always more than actual miles traveled by air).
Of course, I wouldn't be able to deduct the cost of a rent car at the destination ("Why did you rent a car if you drove there in your own car in the first place?"), but I figure I can avoid that cost since my customer will get a kick out of picking me up and being able to check out the RV. ;) (He might even get a ride if he spends enough money with me :D )

Tax deduction for aircraft, especially privately owned, is a terribly confusing and messy proposition. I figure that if a person has only an occasional need to use their private aircraft for business use, then taking the auto deduction at least pays for the basic expense of fuel and has the benefit of keeping the IRS off your back.

That's my take, anyway.
 
The mileage deduction has changed to $.405/mile for 2005.
I know several people who have tried to use their amateur-built for business purposes. It just doesn't fly! pun intended.
Mel
 
Two more cents worth of info...

This is a moot point unless you first, itemize deductions; and second, your business expenses exceed 2% of your adjusted gross income. If not, then you can't claim the transportation expense deduction anyway.

For more information, reference IRS Pub 463-Travel, Entertainment, Gift, and Car Expenses; specifically chapter 4 which starts out with, "This chapter discusses expenses you can deduct for business transportation when you not traveling away from home as defined in chapter 1. These expenses include the cost of transportation by air, rail, bus, taxi, etc., and the cost of driving and maintaining your car." http://www.irs.gov/pub/irs-pdf/p463.pdf

Hope this helps.

-Jim
o=\o
 
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I stand corrected. Thanks for the information. I was flying my 172 at the time.
I wonder how people like manufacturers of autopilots and other airplane related products that use experimantal planes to test their products and go to shows on business, expense their planes? I own a machine shop and make the cast aluminum brake pedals for RV's and was sure hoping to be able to deduct expenses for traveling to events to show my products.
Jim RV-9A wings 90919
www.aero-mold.com
 
My Experience

I am no accountant nor ex-IRS auditor, but my experience with the IRS is that there are few black & white areas and everything is really shades of gray. The bottom line is that if challenged by the IRS; you, your accountant, or your lawyer better be able to make your case more black and white than the IRS's case.

In the case of airplanes and business, I would think the burden of proof would be on the owner showing that the airplane is an integral part of the business and paramount to the success of the business. At the extremes, it would be pretty easy for Vans to say that his demo aircraft are integral to his business and that travel by RV is instrumental to selling them at airshows. For the person who makes lighting covers or sells RV accessorries or, in this case, brake products might have a more difficult time convincing the IRS and the courts that an RV is integral to the business.

One would have to show that the total cost and deductions of the aircraft are reasonable, and that the plane is a reasonable method of conducting business. If you are making $10K or $20K per year selling your product and writing off $40 per hour plus depreciation on your plane to make it, you might be in trouble. Or if the IRS can demonstrate that you might be better off taking commercial flights or driving or a combination of the two then you might have a hard time. On the other hand, if you are making money and can reasonably show that having the RV for business is helping drive your profits, then you will probably be OK.

I think it all comes down to two things: 1) Is what you are doing reasonable, prudent, and rational for what most people in your situation would do, 2) Is your lawyer or accountant bigger than the IRS's?
 
for hire

I think the irs stuff has been covered pretty well.

As far as the FAA is concerned I would say you could do in an experimental pretty much the same thing a part 91 corporate operator could do with their aircraft.

With some exceptions:

A 91 operator with a standard/restricted category aircraft could do the things that are specifically excluded from part 119/135 (ie part 91 for hire ops), an experimental either could not, or it would be so grey that you wouldn't want to mess with it.
http://ecfr.gpoaccess.gov/cgi/t/tex...v8&view=text&node=14:2.0.1.4.18.1.9.1&idno=14

Some tests I think the faa uses to determine what is for hire and what is not; Something like whether the aircraft is incidental to the operation being conducted.

and, people flying in the aircraft are allowed to contribute towards the expense of operating the aircraft as long as ALL (including the pilot) people have an interest in making the trip other than getting some compensation.
------
This is somewhat off-topic but,
I remember reading about one case where a pilot (certified aircraft, not operating under 135) got caught. While he was not getting 'paid' to fly a package somewhere, the ntsb ruled that the flight time he was getting was 'compensation'.
 
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