Homebuilt tax writeoff

So much has been said about tax writeoff for certified new plane
purchases.
Any possibility for homebuilts? When the kit is purchased? When
completed
and registered?

wrote:
So much has been said about tax writeoff for certified new plane
purchases.
Any possibility for homebuilts? When the kit is purchased? When
completed
and registered?


None of the above.


First, the writeoff is only for business expenses. Are you going to
use it for business purposes.

But notwithstanding that, the bonus depreciation requires you to
actually PUT THE EQUIPMENT INTO SERVICE before the cut off date.

wrote in message
oups.com...
So much has been said about tax writeoff for certified new plane
purchases.
Any possibility for homebuilts? When the kit is purchased? When
completed
and registered?


Business use of a homebuilt is rather limited, so the rest of the questions
are moot. Still, assuming you could find a business use, it is when the
airplane is placed in service.

On Fri, 24 Dec 2004 08:05:11 -0800, "C J Campbell"
wrote:

wrote in message
roups.com...
So much has been said about tax writeoff for certified new plane
purchases.
Any possibility for homebuilts? When the kit is purchased? When
completed
and registered?

Business use of a homebuilt is rather limited, so the rest of the questions
are moot. Still, assuming you could find a business use, it is when the
airplane is placed in service.

Have to admit I've wondered whether I could write off the cost of a kit if I
wrote a series of articles about its construction. The amount one would make on
the articles is probably quite a bit less than the kit and engine would cost,
but one could avoid IRS trouble with careful planning.

The IRS wants to see a profit in three out of five years. Buy the kit in year
one and take a loss. Claim a profit from the articles written in years two and
three. Buy the engine in year four and take a loss. Claim a profit in year
five from the completion articles, and more profit in year six from articles
related to test-flying.

That is, if you can get any flying in while playing a seven-year game of
rock-hockey at Leavenworth for tax evasion. :-)

Ron Wanttaja

I am self employed and from all these comments, the least I see is
that I can use it for business transportation - just like travel
expense deduction on a car. If I claim no more deduction than
equivalent airlines expenses I don't see how IRS would object. I use
about 5gal/hr at 125kts IAS in my SQ2000 canard which can cruise even
faster at higher altitudes. Considering straight line advantage over
autos and waiting period at airports the fuel expenses are as good
compared to car and cheaper than airlines - and I already got the
bird.
-----------------------------------------
SQ2000 canard: http://www.abri.com/sq2000

Ron Wanttaja wrote:
On Fri, 24 Dec 2004 08:05:11 -0800, "C J Campbell"
wrote:
.......
Have to admit I've wondered whether I could write off the cost of a
kit if I
wrote a series of articles about its construction. The amount one
would make on
the articles is probably quite a bit less than the kit and engine
would cost,
but one could avoid IRS trouble with careful planning.

The IRS wants to see a profit in three out of five years. Buy the
kit in year
one and take a loss. Claim a profit from the articles written in
years two and
three. Buy the engine in year four and take a loss. Claim a profit
in year
five from the completion articles, and more profit in year six from
articles
related to test-flying.

That is, if you can get any flying in while playing a seven-year game
of
rock-hockey at Leavenworth for tax evasion. :-)

Ron Wanttaja

wrote:

I am self employed and from all these comments, the least I see is
that I can use it for business transportation - just like travel
expense deduction on a car. If I claim no more deduction than
equivalent airlines expenses I don't see how IRS would object. I use
about 5gal/hr at 125kts IAS in my SQ2000 canard which can cruise even
faster at higher altitudes. Considering straight line advantage over
autos and waiting period at airports the fuel expenses are as good
compared to car and cheaper than airlines - and I already got the
bird.

Last I knew, you had to use actual expenses, not an "equivalent"
expense. The only exception is road vehicles which have the mileage
based deduction to simplify things. I don't recall ever reading a
similar arrangement for aircraft so I believe you would have to track
actual expenses pro rated to your business use vs. personal use.
Definitely a question to pose to a good tax accountant or lawyer before
filing your return.


Matt

"Ron Wanttaja" wrote in message
...

The IRS wants to see a profit in three out of five years.

This is no longer true. The IRS lost a series of court cases on this one,
most notably because huge corporations such as Amazon.com, airlines, and
investment real estate would have been treated as hobby losses. Going after
only small businesses was unconstitutional under the equal protection
clause. Now the IRS uses other tests to determine if an entity is a
business.

Basically, you must demonstrate that the entity has "the trappings" of a
business and is operated like a business; that is, the business should have
its own bank accounts, pay its employees, charge for its services, have a
business address, be registered as a business under local laws, pay business
taxes, not mix business expenses with personal expenses, etc.

So, yes. If you bought a kit for the purpose of writing a book about
assembling it, the kit would probably be deductible if you actually wrote
and published a book and did all the other stuff. You should get a good tax
lawyer or accountant to set it up for you and make sure all your t's and i's
are crossed and dotted.

"C J Campbell" wrote:
The IRS wants to see a profit in three out of five years.

This is no longer true. The IRS lost a series of court cases on this
one,
most notably because huge corporations such as Amazon.com, airlines,
and
investment real estate would have been treated as hobby losses.
Going after
only small businesses was unconstitutional under the equal
protection
clause. Now the IRS uses other tests to determine if an entity is a
business.


I've been in tax practice for 40 yrs now. Sorry, but all of the above
is a complete fabrication.

Fred F.

"TaxSrv" wrote in message
...
"C J Campbell" wrote:
The IRS wants to see a profit in three out of five years.

This is no longer true. The IRS lost a series of court cases on this
one,
most notably because huge corporations such as Amazon.com, airlines,
and
investment real estate would have been treated as hobby losses.
Going after
only small businesses was unconstitutional under the equal
protection
clause. Now the IRS uses other tests to determine if an entity is a
business.


I've been in tax practice for 40 yrs now. Sorry, but all of the above
is a complete fabrication.

I guess you are entitled to your opinion, but I also have been in tax
practice for over 40 years.

"TaxSrv" wrote in message
...
"C J Campbell" wrote:
The IRS wants to see a profit in three out of five years.

This is no longer true. The IRS lost a series of court cases on this
one,
most notably because huge corporations such as Amazon.com, airlines,
and
investment real estate would have been treated as hobby losses.
Going after
only small businesses was unconstitutional under the equal
protection
clause. Now the IRS uses other tests to determine if an entity is a
business.


I've been in tax practice for 40 yrs now. Sorry, but all of the above
is a complete fabrication.

I should expand a little on my explanation. IRC 183 says that any activity
that makes a profit 3 out of 5 years is presumed to be a for profit venture.
However, this rule does not determine whether the activity is for profit; it
basically is a safe haven which says that if you do this you are presumed to
be in business for a profit. This is different than years ago when it was
pretty much presumed that if you did not make a profit 3 out of 5 years then
you were not engaged in a profit-making venture.

If the activity does not make a profit 3 out of 5 years, then the IRS uses
other rules to determine whether you are engaged in a business for profit.

I am not sure what you are claiming is a fabrication. Are you saying that
Amazon.com and real estate tax shelters would not fail the 3 out of 5 test?
Are you suggesting that the rules for taxpayers are different on the basis
of size of the business? Are you telling me that the IRS wins in court using
the 3 out of 5 test as the sole basis for determining whether the business
is for profit? Because if you are saying these things, then what you are
saying is a complete fabrication.

It is pretty easy to dismiss a complex issue by saying it is "a complete
fabrication" without backing it up with any evidence and while using an
anonymous handle. I seriously question whether you have been in tax practice
for any time at all, let alone 40 years, or you would know better than to
make such sweeping generalizations. Unless you are an IRS auditor, of
course.

Bottom line is that if you can establish a profit motive for your business,
then the 3 out of 5 year rule (or 2 out of 7 in some cases) does not apply.