Ron Natalie wrote:
J.Kahn wrote:

I don't think capital gains applies there. The materials weren't
purchased as an "investment".

Makes no difference in the US.

I believe that the IRS or (Revenue Canada
up here) would have to see a pattern of construction and sales of
aircraft that would indicate that the activity is professional in
nature before they would consider the profits from the sale as income.

Absolutely false.

Don explained it pretty good.

Is it possible to have the aircraft appraised upon completion to
establish a base line value, then pay gains tax on the increase from
that upon sale? It seems grossly unfair to be taxed on the full
difference between the original materials cost and the later sale price.

For example, in Canada you don't pay capital gains tax on a personal
residence but you do on income property. If you live in a house and
then move out and rent it, capital gains applies only to the increase in
value while it was a rental, not the whole time you owned it. Upon
sale you have to have an appraiser do an historical appraisal to
establish the house's market value at the time it became an income
property. In the case of an aircraft you would establish the market
value at the time it was completed and pay tax on the increase from that.

John