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What happens when I sell a depreciated aircraft?



The sale of a depreciated aircraft usually results in a gain, taxable as ordinary income, rather than capital gains. In fact, any excess of tax depreciation over economic depreciation will be taxed as ordinary income unless the sale falls into a special category of transaction such as a 1031 exchange where you don’t have to recognize the gain. When you purchase an aircraft, the price you pay becomes your basis in it. Any depreciation you claim or could claim becomes subtracted from this basis to give you your adjusted basis. When you sell the plane, this adjusted basis is subtracted from the sale price to determine your gain. Gain that results from tax depreciation will be taxed as ordinary income. The excess due to the plane economically increasing in value will likely be treated as capital gain.

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