CAN YOUR AIRPLANE MAKE YOU MONEY? Written by Pat Redmond
If you can view your airplane as a "tool" and you've got income to support an airplane payment. . . a "leaseback" may be right for you! A leaseback is an arrangement in which an individual purchases an airplane and allows a flight school to manage and operate airplane in his or her flight school. Properly structured, a "win, win, win" situation is created. Win #1: A flight school, which is generally cash strapped can now attract new students more effectively and be more competitive in market place while retaining capital for advertising and other operating expenses.
Win #2: The owner of airplane who has no other business use for airplane, now has legitimate business use and ability to depreciate equipment and benefit from tax benefit that comes from this depreciation. This can be very significant and depreciation can be as much as 42% of aircraft value in first year!
AIRCRAFT OWNERSHIP: IS THE TIME RIGHT?Written by Pat Redmond
In hours and days immediately following tragic attacks on America of 9/11, there was much speculation about effects on general aviation industry. While events of September 11, 2001 have had a significant impact on economy as a whole, sales of personal aircraft in Michigan have experienced a surprising boost. Certainly, convenience of personal transportation has played a major role in this increase as airport lines and security have become more time consuming. The reduction of flights resulting from airline cost-cutting have limited flexibility for business person and affected productivity of companies relying on commercial transportation. These factors alone can’t explain surge of people joining flying community for more than just pleasure. Rebates, low and 0% interest rates, training allowances, and yes, even IRS played a role in creating an environment that has introduced more people to benefits of aircraft ownership and had an effect similar to that seen after passage of General Aviation Revitalization Act of 1995.
The IRS is here to help you? Well, believe it or not, a new tax law passed earlier this year represents a renewed attempt by our nation’s leaders to jumpstart economic recovery. The bill applies to new airplanes acquired after September 10, 2001, and before September 11, 2004, and provides tax savings from economic stimulus provisions included in Internal Revenue Code designed to encourage investment in capital assets. Visit your local airport and you’re sure to see plenty of forty and fifty year old aircraft operating for both business and pleasure. Even prior to new tax law, Congress recognized that capital investment is an important part of our economy, and therefore allowed a five year depreciation of these assets. To further encourage investments, they do not require depreciation to be spread evenly over five years, but through a concept know as “double declining balance,” greatly accelerate depreciation during first two years of ownership. Now with additional incentives of 30% bonus depreciation on new airplanes, tax deferral opportunities are greatly expanded.