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The Acquisition
Taking flight: Tax Aspects of Aircraft Ownership

by Victor C. Anvick, MST, EA, Atis Group LLC, copyright March 2007

Greenacre decides to purchase a jet in the $5 million to $10 million range and enters into purchase negotiations. It's also time for Greenacre to get its financing in order. Acquisition consultants can help here as they typically have several financing sources.

A company's CPA should analyze a draft of the aircraft purchase contract as soon as it is available to calculate a proper income and property tax basis. Items such as pilot and mechanic training normally are included in the price of new business aircraft. These items should not be depreciated as long as they are separately stated on the purchase invoice. They also are not subject to property taxes in most jurisdictions.

Planning tip. Ask the manufacturer to "unbundle" the sales price as a condition of sale. This helps uncover items the company can expense vs. capitalize.

Timing can have a material effect on the purchase price. The aircraft industry is managed on a quarterly basis. Salespeople who have not met their quotas may be more willing to negotiate at the end of a quarter, especially at yearend, for qualified prospects ready to "buy now." Depending on the make and model, you also may save by purchasing a nearly new aircraft--complete with all factory warranties--instead of a new one if you can move quickly.

Planning tip. Due to the increase in private aircraft ownership since 9/11, many popular models are sold out for 12 to 18 months or longer. Companies should be prepared to make a deposit promptly to avoid losing their desired aircraft.