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Plan Ahead for 2010

by David Wyndham 1. September 2009 00:00
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We are two-thirds through 2009 and generally appear to be bottoming out of our recession. There is little to support a speedy recovery. But, we are seeing a little more acquisition activity. If you are looking to upgrade your current aircraft or acquire a new one in the next 6 to 12 months, you may want to look at doing it sooner versus later.

Caveat Emptor: This next two paragraphs are not tax advice, but merely for information purposes. Consult an aviation tax expert before taking any tax-related action.

The American Recovery and Reinvestment Act of 2009 (ARRA) continues bonus depreciation into 2009. This has business tax planning implications for 2009 and 2010. If applicable, the 50% bonus depreciation allows an immediate deduction of 50% of the cost, followed by accelerated depreciation on a five-year tax depreciation schedule. Many folks take think it only applies to a new aircraft acquisition. This also applies to capital improvements to your current business aircraft.

If you are looking at re-engining your aircraft, doing a major avionics upgrade or otherwise "improving" the aircraft substantially, and if the improvement qualifies as a depreciable capital expense, you may wish to do this in 2009. Then you may be able to take advantage of the bonus tax depreciation. So if the upgrade is $500,000, and it meets the requirements of the ARRA, you may get a $250,000 write-off for 2009's taxes. If you'd like more information on this, I recommend contacting my partner, Ms Nel Stubbs - she can set you straight on the ins and outs of this act.

Are you doing any major maintenance or refurbishment soon? In addition to getting it scheduled, look at other aircraft-related items that you may want to have done at the same time. Get the aircraft inspection done prior to any interior work - even if it means doing the inspection early. No sense messing up the new interior work. If you have flexibility in scheduling the major work, use that as a bargaining tool in negotiating a better price. Many shops are not as busy as they want (and need) to be. Schedule well in advance, and if you can wait a bit longer than "ASAP," the shop may provide a discount as they can avoid overtime in their labor force. And while the aircraft is down for maintenance, that is a good time to get in some refresher training.

If you are acquiring any aircraft this year, don't forget to do your other pre-delivery planning as well. Planning ahead for the delivery can save headaches and money. Tax-deferred exchanges force you to plan ahead, but even a "simple" transaction requires some advance consideration. What paperwork is required? Is there a sale-for-resale exemption in the state? Have you considered all your tax exposure: Federal, State and Local? Scheduled the pre-buy (see last month's article)? Is the money in the bank ready for the transfer? After the acquisition occurs, you have no recourse left. Planning in advance means weeks in advance, and for complicated transactions, a month or more.

© 2009 David Wyndham

Do you have additional experience with this topic? Tips, Tricks, or Advice? Please discuss it with us!


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