Discussion:LLC for airplane
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Discussion Forum Index --> Tax Questions --> LLC for airplane
| 20 November 2008 | |
| Client is an LLC (owned by 2 married couples) which bought an airplane. Airplane at this point is primarily personal use. Expenses include hangar rent, maintenance, inspection fees etc. There is no income. When the fuel has been purchased, it has been purchased on a personal credit card by one of the members. This obviously is going to operate at a loss each year. Questions are: 1. Is this a valid business? (could it be classified as a hobby) 2. Would depreciation be allowed on the airplane if it were 100% business use? 3. Excise tax implications...the rules are confusing as to whether this LLC would be excluded -any advice?
Thank you! | |
| November 20, 2008 | |
| ?? Lr, what part of this: "at this point is primarily personal use" makes you wonder about biz? Just because it's an LLC has nothing to do with anything else. | |
RoyDaleOne (talk|edits) said: | 20 November 2008 |
| "There is no income." JR, what do make of this statement? | |
| November 20, 2008 | |
| I'm putting that sign up on my house and writing that sucker off. If he can, then I sure can, too! | |
| 20 November 2008 | |
| Mr. Rosenblatt thought he had a for profit business but the Tax Court didn't agree. (T.C. Summary 2008-137). | |
Death&Taxes (talk|edits) said: | 20 November 2008 |
| So how does one do a hobby loss on a 1065? Or God forbid that they checked the box and elected to be an S Corp! | |
Beangrinder (talk|edits) said: | 20 November 2008 |
| I think if the word airplane is replaced with the word car, it becomes very clear... if you could write-off personal use of an auto through a 1065, everyone would have an auto partnership...
I wonder how big the plane is, those things can burn money faster than the government. However, no more waiting in line with your shoes off. | |
| November 20, 2008 | |
| WAIT! Hold everything! *lightbulb* So...If I put my vehicles into an LLC, heck, you folks can even put yours in, if you want, and we'll be LOSING money! Then, we can go ask for a bailout. The big 3 have no sales either, so what's the diff? Yeah, baby!!!!!!!!!!!!!!!!!!! | |
Death&Taxes (talk|edits) said: | 21 November 2008 |
| I am sure the original intent of the LLC was asset protection, but idle minds are the tax devils playground. | |
| 22 November 2008 | |
| I spoke again with my client. They said setting up the LLC was a recommendation for joint ownership of an aircraft by the AOPA (Aicraft Owners and Pilots Association). There will be some business use of the plane by the members in 2009 and going forward, but there hasn't been any in 2008. I will not be doing the taxes for the LLC (I am just doing the taxes for one of the members) but I assume that their accountant will pass through the operating expenses of the airplane in 2008 and since the airplane will be 0% business use, there won't be any depreciation for 2008. In 2009, should they rent the plane to themselves personally and/or their businesses, this would generate income for the business -enought to at least cover costs and then some so that it will be a legitimate business? | |
| 22 November 2008 | |
| I think the answer should be pretty clear, no profit motive = no tax writeoff. If there's no income and the airplane is personal use, how do you show that you're doing everything in your power to generate a profit?
I would understand that they might've set up an LLC for liability protection purposes, in case their airplane damages somebody's property, they don't want to be personally liable, but I doubt that they either fly it within their state or if they foreign register into all of the other states they overfly. Plus, wouldn't insurance cover it anyway? | |
| 22 November 2008 | |
| I was discussing this very problem with my preacher the other day. We decided that if Jesus came back, he would permit us to put a sinning eye, or offending hand into an LLC, rather than plucking it out, or cutting it off.
I plan to teach a Sunday school class on that very subject tommorrow since I am part-time assistant unpaid* pastor of our church. *Yes, last week my salary was stripped as part of our church's new austerity plan. I'm down to one snake now as well; I sold my other ones to a Jehovah's Witness who came by my house yesterday. What's even more disturbing is that the Watchtower, priced at a dime since 1931, has now gone up to 50 cents. It seems that the poor have been priced out of heaven as well. Though I understand that Walmart plans to print the entire Bible on their receipts, a verse at a time, over the coming two years. So, if you shop often enough and save your receipts, you can accumulate you a pretty nice Bible for no cost. | |
| 22 November 2008 | |
the only cost is the jobs exported to the Chinese every time you buy at Wal-Mart.
Hey, do they kill kittens there? The running joke around here is that you never see any cats in Chinatown, but boy, does that chop suey taste good! | |
| 22 November 2008 | |
| Kevin, that's the reason those Walmart boys can hand out the Bible so freely, they don't believe a word of it. But, they do attend church every week, religiously.
Yes, you won't see a lot of stray cats in Chinatown. They are beloved by the Japanese, but conidered bad luck by the Chinese. However, I have noticed that my chop suey does seem to have nine lives at times. By the way, are we taking bets on whether the bad three: GM, Ford, Cerebrum, will sell their areoplanes? lol. I doubt it, since now even single unit hospital corps. feel they should have a jet timeshare arrangement. Hubris before the fall. | |
| 24 November 2008 | |
| Check out Treas. Reg. 1.183-2(b) for the nine non-exclusive factors considered when determining whether an activity is engaged in for a profit. Here are my thoughts on pertinent questions:
Is your client or any of the other LLC members a pilot? Are they renting the plane when not using it? Any past experience in the aviation industry? Do they have a business plan of some sorts? Are they keeping adequate records? If by chance you do pass the test, the LLC is only entitled a deduction equal to the income generated by the activity Sec. 183(b).It's a pretty stringent test though, and it doesn't sound like they have a chance. | |
