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The personal-use rules have changed dramatically in recent years.  Legislation passed in 2004 create a distinction between two varieties of personal use: personal entertainment (PE) and personal non-entertainment (PNE).  Personal entertainment use includes any travel that is primarily for personal entertainment or recreation.  (Some cases of “business entertainment” are excluded from this, as their primary purpose is business, with the entertainment being secondary.)  Personal non-entertainment is personal use other than of an entertainment or recreational nature. When personal non-entertainment use is provided through a fringe-benefit structure as part of a reasonable compensation package, the expenses of that travel may be deductible to the company paying for the fringe-benefit flights.  The same is true for personal entertainment, fringe-benefit flights provided to employees who are not high-up in the company, or related to people high-up in the company (under complicated rules set forth in the definition of the term, “specified individual”).  Under rules published in 2012, personal entertainment flights provided to “specified individuals” (or people invited by specified individuals) results in per-capita (i.e., based on percentage of entertainment passengers) disallowance of deductions to the company paying for the flights.

In addition, the fringe-benefit recipient needs to recognize income based upon having received something of value.  We recommend calculating this fringe-benefit income using the IRS-published “standard industry fare level” formula (SIFL).

An effective aviation tax plan must be integrated with the rest of a client’s business planning in order to be effective. Because our practice is restricted to the area of aviation, working with core professionals is essential. All of our planning and documentation is available for review by these core professionals and through teamwork we can provide benefits of specialized knowledge appropriate and helpful to your other business needs.

The key to successful aviation tax planning follows not only the creation of a well designed plan, but also its implementation, follow-through, and modification where appropriate to changing business needs as well as regulatory and tax requirements.

After the three year period, your aircraft structure will have been established, and you should have familiarity with the mechanics of continuing it–although you will still need ongoing calculations. You may choose to take responsibility for continued compliance on your own or choose to renew your agreement. Generally, clients renew due to the inherent complexity of aircraft operations.

Our agreement automatically terminates at the close of the year following the sale of the aircraft. We will assist you in final aircraft tax issues and help you “button up” your aircraft operations.

You will enter into a new three year agreement, but will be given credit of the unexpired portion of the agreement on your current aircraft.

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