Aircraft Partnership Operating Agreement

April 8, 2021 in Uncategorized by

Co-owners of aircraft using a co-ownership, partnership or limited liability company often have the option of using another method of taxation obtained through the choice of Sub-Chapter K. The choice under Chapter K eliminates the problem that a co-owner`s personal use does not impose on other partners, as well as certain anti-abuse provisions that may result in unintended adverse tax consequences. The decision must be made in close coordination with your tax advisor, but if a business or condominium is incorporated solely to retain ownership of the property for the benefit of its owners, it may be possible to treat each partner as an individual interest at all for the aircraft itself by choosing under Chapter K. Such treatment requires a choice under Regulation 1.761-2 of the Internal Income Code and prohibits the joint conduct of a business or transaction. This treatment will be particularly appropriate when a co-owner uses his share of the aircraft for commercial purposes and another co-owner personally uses the aircraft. The consideration would be allowed to devalue its share of the aircraft, while the individual user would retain its income tax base in order to minimize any profit on the final sale. If you create an LLC for your aircraft club, all of your members must be U.S. citizens. To this end, you can submit a declaration of support for registration by an LLC to the Federal Aviation Association. The individual is always responsible for his own negligence.

Under the partnership uniform, they are also responsible for the negligence of their partners. If the aircraft is in general partnership (whether the underlying partnership agreement is written or not), the partners are generally responsible for each other. Co-ownership can also be considered a partnership operation; As a result, it offers little or no increase in liability protection. The company`s stock market ownership and ownership offer considerable protection against the negligence of a co-owner. Since adequate liability insurance is generally not available for air operations, except for professional flight services, liability should play an important role in the design of the common aircraft owner. The sale of an interest in an aircraft-owned partnership normally results in a normal income treatment to the extent that the amortization of the aircraft tax is greater than an economic amortization. Subject to certain partnership elections, the purchaser of an interest in one company is generally entitled to strengthen the underlying aircraft interest base and begin to depreciate its proportionate costs regardless of the remaining bases of the other partners. It is important that a committee review and update the enterprise agreement on a regular basis. The guidelines will be modified based on operational improvements, effective problem-solving strategies and experience gained over time.

When an aircraft is in the possession of a group of people and is operated exclusively for personal use, the form of co-ownership has little impact on income tax. As a general rule, transactions do not result in deductions, depreciation is not permitted and a permanent loss available does not result in a tax deduction. If the aircraft is eventually sold profitably, it is subject to capital gains tax, as long as the final product exceeds both upfront costs and improvements. The sale of a condominium interest in real estate is treated as a sale of physical personal property and is generally subject to the state`s sales or use tax.