"The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread."
Ruling Clears Way for Tax Breaks on Company Aircraft Use
QUOTE
By Albert B. Crenshaw
Washington Post Staff Writer
Tuesday, January 20, 2004; Page E01
Looking for a business tax break? Forget the Hummer. Deduct the Learjet.
While much attention has been devoted to the new law allowing small businesses to write off the purchase of big sport-utility vehicles, a federal court decision and the Internal Revenue Service's recent extended interpretation of it have opened the door for businesses to allow their owners and employees to make extensive personal use of company aircraft -- while the company continues to take a full deduction for the costs of owning and operating the plane.
Owners and employees who use company planes for pleasure instead of business are required to report the value of their trips as taxable income, though under a long-standing formula that does not necessarily reflect the actual cost. The result of an IRS ruling made public last fall -- and just being noticed by sharp-eyed tax lawyers and corporate jet salesmen -- could be deductions that are substantially larger than the reported income.
Under the IRS interpretation, the new freedom even extends to owners of so-called Subchapter S corporations -- a business structure that passes profits and losses through to its owners. That means the owner of such a businesses could report the income under the formula while receiving an even bigger deduction as his share of the company's gains and losses.
The effect \"could be a substantial windfall\" for private jet owners, wealthy families and family businesses, said attorney Jarrett T. Bostwick of Gardner, Carton & Douglas in Chicago. While the recent IRS interpretation was specific to an S corporation, it may also reflect the agency's views for other \"pass-through entities,\" such as partnerships and limited liability companies, he said.
For example, said David R. Fuller of McDermott, Will & Emery, an S corporation shareholder who used the plane for travel that produced $5,000 in taxable income might receive $100,000 in deductions as his share of the plane's cost, for a net deduction of $95,000. \"It's a great benefit,\" he said.
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Washington Post Staff Writer
Tuesday, January 20, 2004; Page E01
Looking for a business tax break? Forget the Hummer. Deduct the Learjet.
While much attention has been devoted to the new law allowing small businesses to write off the purchase of big sport-utility vehicles, a federal court decision and the Internal Revenue Service's recent extended interpretation of it have opened the door for businesses to allow their owners and employees to make extensive personal use of company aircraft -- while the company continues to take a full deduction for the costs of owning and operating the plane.
Owners and employees who use company planes for pleasure instead of business are required to report the value of their trips as taxable income, though under a long-standing formula that does not necessarily reflect the actual cost. The result of an IRS ruling made public last fall -- and just being noticed by sharp-eyed tax lawyers and corporate jet salesmen -- could be deductions that are substantially larger than the reported income.
Under the IRS interpretation, the new freedom even extends to owners of so-called Subchapter S corporations -- a business structure that passes profits and losses through to its owners. That means the owner of such a businesses could report the income under the formula while receiving an even bigger deduction as his share of the company's gains and losses.
The effect \"could be a substantial windfall\" for private jet owners, wealthy families and family businesses, said attorney Jarrett T. Bostwick of Gardner, Carton & Douglas in Chicago. While the recent IRS interpretation was specific to an S corporation, it may also reflect the agency's views for other \"pass-through entities,\" such as partnerships and limited liability companies, he said.
For example, said David R. Fuller of McDermott, Will & Emery, an S corporation shareholder who used the plane for travel that produced $5,000 in taxable income might receive $100,000 in deductions as his share of the plane's cost, for a net deduction of $95,000. \"It's a great benefit,\" he said.
....