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#1
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Depreciating aircraft parts, dealing with taxes, etc.
Most owners, I assume, have corporations which do the actual owning and which provide a liability firewall. But how are taxes managed? The issue I think I'm facing is we pay money into the corporation against future events like overhaul, repainting, etc. These monies add up. But since this is really just a reserve that's going to be spent in a few years, I'm loath to have this considered "profit" and thereby become taxable. The answer, I'd imagine, is to depreciate those things against which the reserves are accumulating. For example, if I pay $25/hour into the bucket for engine reserve, I want to depreciate the engine by $25/hour. Can one do that? What [very!] little I know about taxes has calender-based depreciation schedules. Can one have a use-based schedule? Thanks, and any suggestions, corrections, pointers, or ideas would be welcome. - Andrew |
#2
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Depreciating aircraft parts, dealing with taxes, etc.
"Andrew Gideon" wrote in message news Most owners, I assume, have corporations which do the actual owning and which provide a liability firewall. But how are taxes managed? The issue I think I'm facing is we pay money into the corporation against future events like overhaul, repainting, etc. These monies add up. But since this is really just a reserve that's going to be spent in a few years, I'm loath to have this considered "profit" and thereby become taxable. IIUC, it should be set up as a reserve/expense account, not as income to the corporation. The only income to the corporation should be the management fees (??) The answer, I'd imagine, is to depreciate those things against which the reserves are accumulating. For example, if I pay $25/hour into the bucket for engine reserve, I want to depreciate the engine by $25/hour. Can one do that? What [very!] little I know about taxes has calender-based depreciation schedules. Can one have a use-based schedule? It sounds like you're trying to depreciate components, rather than the entire aircraft, on an hourly basis. I don't think that's a good idea. That takes much more work for your accountant. I can imagine doing a calendar-based depreciation, but not if the calendar is harder on your aircraft's value than useage is. Thanks, and any suggestions, corrections, pointers, or ideas would be welcome. Are you a "partner" to the corporation, or is it third party, such as a partnership or lease back? (My explanation here is probably NOT technically correct) My company (LLC) is the registered owner of my aircraft. We deduct expenses as incurred and take depreciation and make an entry in "Reserves" on an hourly basis for such things as recurring maintenance and overhaul. The LLC then "charges"me for any personal use I make of the aircraft. I then declare that as personal income, just as when I draw from our cash accounts for "personal income - cash". You can get into "trouble" if you try to expense your personal usage, so make DAMN sure you are really doing business and have documentation to back it up. This is probably (though not sure) more critical when you have corporate ownership. -- Matt Barrow Performace Homes, LLC. Colorado Springs, CO |
#3
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Depreciating aircraft parts, dealing with taxes, etc.
On May 10, 2:29 pm, Andrew Gideon wrote:
Most owners, I assume, have corporations which do the actual owning and which provide a liability firewall. But how are taxes managed? The issue I think I'm facing is we pay money into the corporation against future events like overhaul, repainting, etc. These monies add up. But since this is really just a reserve that's going to be spent in a few years, I'm loath to have this considered "profit" and thereby become taxable. The answer, I'd imagine, is to depreciate those things against which the reserves are accumulating. For example, if I pay $25/hour into the bucket for engine reserve, I want to depreciate the engine by $25/hour. Can one do that? What [very!] little I know about taxes has calender-based depreciation schedules. Can one have a use-based schedule? Thanks, and any suggestions, corrections, pointers, or ideas would be welcome. - Andrew What taxable income are you trying to defer with depreciation??? -Robert |
#4
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Depreciating aircraft parts, dealing with taxes, etc.
Andrew Gideon wrote: Most owners, I assume, have corporations which do the actual owning and which provide a liability firewall. Most owners do not as this provides no protection at all. |
#5
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Depreciating aircraft parts, dealing with taxes, etc.
"Newps" wrote in message . .. Andrew Gideon wrote: Most owners, I assume, have corporations which do the actual owning and which provide a liability firewall. Most owners do not as this provides no protection at all. Depends on "who" the corporation consists of, and for what purpose. |
#6
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Depreciating aircraft parts, dealing with taxes, etc.
A corporation with the aircraft as the only asset and only one officer,
the owner of the plane. Matt Barrow wrote: "Newps" wrote in message . .. Andrew Gideon wrote: Most owners, I assume, have corporations which do the actual owning and which provide a liability firewall. Most owners do not as this provides no protection at all. Depends on "who" the corporation consists of, and for what purpose. |
#7
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Depreciating aircraft parts, dealing with taxes, etc.
"Newps" wrote in message . .. A corporation with the aircraft as the only asset and only one officer, the owner of the plane. That's one scenario. Certainly not the only one. It sounds to me like Andrew's situation is one of an "Aircraft Management" corporation. That may or may not provide liability protection. In the case of an owned corporation owning the aircraft, it doesn't protect the corporation, but it does protect the pilot and his personal assets. If the prupose of corporate ownership is merely to avoid liability, that probably won't work. Most owners do not as this provides no protection at all. Depends on "who" the corporation consists of, and for what purpose. |
#8
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Depreciating aircraft parts, dealing with taxes, etc.
On Thu, 10 May 2007 18:33:24 -0600, Newps wrote:
A corporation with the aircraft as the only asset and only one officer, the owner of the plane. In my particular case, I'm speaking of a corporation owned by 45 members which owns four aircraft. But I'm guessing that the difference between this and other organizations is more of scale than anything else. Does single owner/single aircraft reduce the protection of the corporate veil? Is that very different from two owners, or twenty? - Andrew |
#9
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Depreciating aircraft parts, dealing with taxes, etc.
On Thu, 10 May 2007 16:14:30 -0700, Matt Barrow wrote:
IIUC, it should be set up as a reserve/expense account, not as income to the corporation. The only income to the corporation should be the management fees (??) I guess I'm confused about how payments into the company, to be used in some future year, are tracked as an expense. [...] It sounds like you're trying to depreciate components, rather than the entire aircraft, on an hourly basis. That's what I was thinking. I don't think that's a good idea. That takes much more work for your accountant. That's a good point. [...] Are you a "partner" to the corporation, or is it third party, such as a partnership or lease back? I'm one of the "shareholders", except that it's a corporation that doesn't issue shares. (My explanation here is probably NOT technically correct) My company (LLC) is the registered owner of my aircraft. We deduct expenses as incurred and take depreciation and make an entry in "Reserves" on an hourly basis for such things as recurring maintenance and overhaul. So you depreciate the value of the entire aircraft by the reserve amount each hour? And then, at engine overhaul time, you increase the value of the airplane by the value of the engine? The LLC then "charges"me for any personal use I make of the aircraft. I then declare that as personal income, just as when I draw from our cash accounts for "personal income - cash". I don't follow this paragraph at all, I'm afraid. If you're paying into the LLC, how is that personal income? - Andrew |
#10
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Depreciating aircraft parts, dealing with taxes, etc.
On Thu, 10 May 2007 16:18:34 -0700, Robert M. Gary wrote:
What taxable income are you trying to defer with depreciation??? I'm not sure that it's taxable income (which is part of my problem), but I'm envisioning this asset called a "reserve account" growing over the years until an overhaul is required. - Andrew |
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