Territorial Limitations - Aviation Insurance & Risk Management ...
Territorial Limitations - Aviation Insurance & Risk Management ...
Territorial Limitations - Aviation Insurance & Risk Management ...
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KraftCPAs PLLC<br />
Author: Craig A. Max, IV, CTEP<br />
Technical Review:<br />
Valerie Shelton, CPA, PFS, CFP ®<br />
Lee S. Kraft, CPA, MBA<br />
KraftCPAs PLLC is one of the largest,<br />
independent certified public<br />
accounting firms in Tennessee.<br />
Headquartered in Nashville since<br />
its 1958 inception, the firm has over<br />
100 employees and six affiliated<br />
companies, providing services<br />
to businesses and high net worth<br />
individuals.<br />
An independently owned member<br />
of the RMS McGladrey Network,<br />
with affiliates worldwide, KraftCPAs<br />
offers clients the resources of a<br />
national firm, while maintaining the<br />
high-touch, personal service that is<br />
recognized as being synonymous<br />
with Kraft.<br />
With KraftCPAs, clients get<br />
the best of both worlds.<br />
For more information, call<br />
Lee S. Kraft, CPA, MBA<br />
Phillip N. Duncan, CPA, PFS<br />
Valerie Shelton, CPA, PFS, CFP ®<br />
Craig A. Max, IV, CTEP<br />
615-242-7351<br />
or visit us online:<br />
www.kraftcpas.com<br />
24 <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong><br />
AIRCRAFT TAX PLANNING<br />
Appreciating the Depreciation<br />
Tax Treatment for Business-Use Aircraft by Craig A. Max, IV<br />
In addition to the many logistical effi ciencies that business aircraft ownership can<br />
provide, an aircraft can also serve as an excellent tax-advantaged investment with a<br />
short depreciable tax life and signifi cant residual value.<br />
When a business or individual buys an aircraft to be used for business purposes,<br />
Generally Accepted Account Principles in the U.S. (GAAP) require that the acquisition<br />
cost be spread out for fi nancial reporting purposes over the estimated useful life of the<br />
aircraft, which may be 20 to 30 years or more. Therefore, only a relatively small portion<br />
of that cost will be charged against reported earnings in any one year. This expense<br />
recognition over time is classifi ed as depreciation expense. In contrast to the GAAP<br />
rules, the Internal Revenue Code allows taxpayers to deduct the cost of the aircraft for<br />
tax purposes over a much shorter recovery period.<br />
The following discussion reviews some of the major concepts of aircraft depreciation<br />
assuming 50% or more of the use of the aircraft is for business purposes. If your aircraft<br />
is used more for personal than business use, the Alternative Depreciation System<br />
(ADS) would apply. In either case, the regulations governing cost recovery can be<br />
complicated, and the mechanics of calculating your specifi c depreciation deduction are<br />
outside the scope of this article. Aircraft owners are encouraged to seek out a qualifi ed<br />
tax professional to review individual circumstances.