KR netters. It seems that forming an LLC or S corporation can have substantial tax benefits, even if the corporation aircraft is a KR and even if the benefits are abusive. Of course any such decisions should only be determined after counsel with professional help. And yes, we should all get out of the shop and vote, always.
Dana, you said ....... "Example, you use the corporate airplane for personal use. It doing so you are receiving compensation via usage and must receive a 1099 for income in excess of $600 yearly. So, if you form a corporation to avoid sales tax, whether it is Delaware, NC or Timbucktoo the IRS is still going to see to it you are income taxed at the fair market value of the asset usage. So lets think about this; you use the airplane for 200 hours per year. The average retail rate is $65. You just "earned" in excess of 12000.00 in taxable income on your personal tax return. Now, let think about fuel. If you buy it, it must go into the corporated as donated capital, if the corporation buys it and you use it for personnal usage............income to you. Distributable income, just where did this corporation get it's money to buy all this "stuff" for the shareholder to use.............follow me here......you donate the fuel money, insurance money, property tax money then have to report it as income on your personal tax return just to save some up front sales tax money????? " This article, (please read the whole thing, it's not long) http://www.ainonline.com/issues/02_04/02_04_IRSusep6.html says in part, "Owners and employees who use company airplanes for pleasure instead of business are required to report the value of their trips as taxable income," the Post said, "though under a long-standing formula that does not necessarily reflect the actual cost." That formula is the Transportation Department's own standard industry fare level (SIFL) and is determined by aircraft weight and distance flown. According to the Post, the IRS ruling could result in deductions that are substantially larger than the reported income. In cases of S corporations, which pass profits and losses through to the owners, "That means the owner of such a business could report the income under [the SIFL] formula while receiving an even bigger deduction as his share of the company's gains and losses," it said. As one aviation tax advisor explained to AIN, "I'm the guy using the airplane and I own the company, and so all of the deductions flow through to me. They reduce the amount of taxes that I pay." He admitted that it could lead to abuses and shows that the IRS is willing to countenance that abuse. Keith Swirsky of Galland, Kharasch, Greenberg, Fellman & Swirsky, a specialist in aircraft taxation, told AIN that in the case of an S-corporation shareholder using the aircraft for a very high percent of personal use, those expenses are being deducted by the company although they relate to personal use. "So the net is a huge tax benefit," he said, equating it to tax shelters in the 1980s. In the federal court case that started all of this, there was a high percentage of personal use of a corporate aircraft, which was computed as personal income using SIFL. But the IRS thought the deduction for operating the aircraft should be limited to the SIFL calculation. The federal court disagreed, and ruled that all of the aircraft operating costs could be deducted. The Post claimed that the effect of the memo "could be a substantial windfall" for private jet owners, wealthy families and family businesses. And, while the recent IRS interpretation was specific to an S corporation, it could also reflect the agency's views for other "pass-through entities," such as partnerships and limited-liability companies, he said. According to the article, "it is too early to estimate how much the new interpretation might cost the government, but several attorneys and accountants who advise wealthy clients said they expect personal use of corporate airplanes to rise sharply."
