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Tax Advantage of Business Aviation in Chicago

Learn about income and sales tax planning for business aircraft owners and compliance with FAA regulations. Discover the benefits of bonus depreciation, Section 179 expensing, and sales and use tax planning strategies. Expert advice from Aviation Tax Consultants LLC.

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Tax Advantage of Business Aviation in Chicago

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  1. Tax Advantage of Business Aviation Chicago May 9, 2019 Aviation Tax Update Daniel Cheung CPA Aviation Tax Consultants LLC

  2. About ATC • Founded in 2003 • Offices in Columbus, Indiana and Scottsdale, Arizona • Specializes in income and sales and use tax planning for business aircraft owners • Helps clients and their advisors navigate the myriad of regulations between IRS, state tax laws and FAA Regulations

  3. Topics of Discussion • Income tax planning • Sales and use tax planning • FAA regulations compliance

  4. Income Tax Planning

  5. Candidates for a Business Aircraft • Those who need to travel for their businesses • Business owners and self-employed individuals • Not retirees or W-2 earners

  6. Availability of Bonus Depreciation • 5 year depreciable life for business aircraft • 7 year depreciable life for commercial aircraft • 100% immediate write off in 2019

  7. 100% Bonus Depreciation • Increased from 50% to 100% since TCJA in December 2017 • Applies to all business aircraft • Planning required to address other tax codes • Hobby loss • Passive activity loss • Related party leasing • Personal use

  8. Section 179 Expensing as an Alternative • Applies to business aircraft up to $3.5 million purchase price • Expensing can be any amount up to $1,020,000 for 2019

  9. 100% Bonus Depreciation Examples

  10. Sales and Use Tax Planning

  11. Sales / Use Tax • Sales tax can be due at closing location • Use tax can be due at the home base of the aircraft • Where the LLC is set up is irrelevant • However, use tax can be due to more than one jurisdiction, for example second home, second office, etc.

  12. Sales / Use Tax Planning • Rental & leasing exemption • Interstate commerce exemption • Commercial use exemption • Casual sale exemption

  13. Sales / Use Tax Planning Example - Illinois • Client lives in downtown Chicago and considers hangering in Palwaukee, Illinois or Gary, Indiana • Rental and leasing exemption not available in Illinois, so sales tax is due on full purchase price • Rental and leasing exemption is available in Indiana, and sales tax is due on the monthly rental revenue

  14. FAA Regulations Compliance

  15. FAA Part 91 Regulations • Regulate most of our clients’ aircraft operations • Dictate type of ownership structure, citizenship requirement • Trust is an ownership entity is possible • Specific requirements for aircraft leasing

  16. How Do We Work Together?

  17. Buying and writing off a business aircraft is a big red flag and you will be audited by IRS

  18. IRS Audit Risk • A big myth • Certain ownership structures can indeed draw unnecessary IRS attention • One important planning objective is to mitigate IRS audit risk

  19. Adding Value • Complement your client’s existing team of advisors • Provide expertise knowledge of the interaction of tax and aviation regulations • Experience in tailoring an ownership structure that best suits a client’s overall financial and tax planning objectives

  20. Office: 812-342-9589 www.aviationtaxconsultants.com Contact Us Daniel Cheung: 317-716-3388 (cell) daniel@aviationtaxconsultants.com @danielcheungATC Fred McCarter: 812-371-5322 (cell) fmccarter@aviationtaxconsultants.com Kyle Kamman: 812-350-2147 (cell) kyle@aviationtaxconsultants.com

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