Below is information for both taxes and accounting treatments. We advise that you consult with your tax advisor and legal counsel to make sure any ownership splits and usage agreements are documented appropriately.
- Aircraft ownership: Legal & Tax Guide: is a reference book on these aspects of owning an aircraft. The estimated useful life will depend on the type of aircraft and what the industry indicates is reasonable. In this guide it refers to an estimated useful life of 7 years for a Beechcraft A-36.
- Accounting for shares purchased: by this we assume you mean that either your company or one of your executives is buying a fractional share of an airplane. In this case you should receive a document indicating your ownership share of the plane and how the tax treatment will occur based on the set up of the entity holding the plane as an asset (an LLC, S-Corp, C-Corp..). How you document the ownership of the asset in your financial records you will want to get the advice of your tax advisor. Generally, the value that you paid for the fractional share, assuming its paid by the company, would be a long term investment asset on your books. Click here for fractional ownership with definitions and FAQs.
Tax Issues of an airplane
Use of a corporate jet for legitimate business purposes is fully deductible. Although corporate jets are not discussed specifically, Internal Revenue Code Section 162(a) states businesses can deduct travel expenses while away from home in the pursuit of business. Business use of a corporate jet is considered a business travel expense.
We were able to find several online publications referencing business use of a private jet that include valuable information. "Deductibility of Business Aircraft," published by The Journal of Accountancy provides information on ensuring you can deduct corporate jet expenses.
It describes that you must be able to prove to the IRS that the plane is for business purposes. You should maintain detailed flight logs and document the cost of fuel, maintenance, hanger costs, staff, training and licenses. The article also describes several court cases that guarantee deductibility of corporate aircraft.
Another article, also published in Journal of Accountancy, is an extensive description of how a business should approach the purchase and use of a corporate plane. The article, titled "Taking Flight: Tax Aspects of Corporate Aircraft Ownership," is written for the company CPA.