End of corporate tax breaks for jets?

[atpcliff]

I don't think they should tax airplanes.

They should only tax bikes, scooters, motorcycles and cars. The people who buy these can afford the taxes, and the people who buy jets cannot.

cliff
GRB

 

[Pervis]

I don't think they should tax airplanes.

They should only tax bikes, scooters, motorcycles and cars. The people who buy these can afford the taxes, and the people who buy jets cannot.

cliff
GRB

Why don't you Google Warren Buffet's interview from Sun Valley a few weeks ago-CNBC I believe. He explains the myth of private jets avoiding taxes quite well, and he supports Obama. And BTW, I do pay taxes on bikes, cars, motor cycles, and any other toy I may purchase in the future.

 

[atpcliff]

While I do think that taxing private jets is a good idea, to me, it's not a big problem.

Here is where I have the big problem:
Corporate jets, when used solely for private purposes, but expensed as a business expense, and the recipient pays no tax on this income.

For example, 3X, inc. owns a G550. They allow the CFO (or whoever) to take his family to Aspen in it for a week long ski vacation. 3x inc. has it on the books as a business trip, and they pay for everything. It is TOTAL crap! It is a vacation, and the CFO should have the TOTAL cost of the G550 part of the trip added to his W2, and he should be paying taxes on the cost of the trip. However, this would cost the CFO a bunch of money, so 3X, inc., illegally expenses it as a business expense, and the company pays the bill.

We, the people of the US, lose legal tax revenue, and the CFO gets an illegal benefit. I don't see much difference between this and robbing a bank. But, of course, I am wrong, because this type of thing happens every day, and no one does anything about it.

cliff
GRB

 

[NJAowner]

Most "well governed" public companies do include the values of those "vacations" in the CEO's compensation. You may check out the copnesation section of the Proxy Statement of most larger companies. The includabkle amount varies -- due to a myriad of FAA and IRS regulations, if the company charges to CEO too much the company may need a 135 certificate. Thew costs are usually less than the costs of charter -- the theory being that whether flying or not, the company still owns the jet and pays certain costs. The executive usually pays all or a portion of the variable costs of the flight.

 

[BoilerUP]

Cliff, if the scenario you describe gets found in an audit of "3X"'s books, the IRS is going to *hammer* the corporation and the guy getting the benefit.

This, much like your beef about "illegal charters" under 91.501, is much ado about nothing.

 

[gunfyter]

We should also get rid of other tax loopholes ... like the Home Mortgage deduction and tax credits for having children, etc.. We lose tax revenue because of things like that. Why should people Rich enough to own their own home get a tax break, that those who live in apartments do not? And EITC ... Why should you get a tax credit for working?

All money should go to the government first, to be distributed fairly....

 

[gret]

Cliff, if the scenario you describe gets found in an audit of "3X"'s books, the IRS is going to *hammer* the corporation and the guy getting the benefit.

This, much like your beef about "illegal charters" under 91.501, is much ado about nothing.

You're right in a certain respect, but the problem is much bigger than most people think about "illegal charters".

Normally, a company includes the income in the executive's W-2 as it is close to nothing.

See the example here from April 2010 in BJT-

Understanding the tax advantage requires understanding the tax. Consider Mr. Big, the president of Big Co., who frequently uses the corporate Hawker 800XP to travel to company facilities and business meetings. He also uses the aircraft to fly to his vacation home in the Caribbean. Part of Mr. Big's deal with Big Co. is that those personal flights are free.

This creates a tax problem for Mr. Big. The IRS generally treats an executive's free travel on company aircraft for nonbusiness purposes as a taxable fringe benefit. So unless Mr. Big wants to pay fair value for his flights to the Caribbean, he has to include that value on his personal income tax return. But since he isn't being charged, how does he calculate the amount? The IRS gives him two choices: impute as income the cost to charter a Hawker 800XP for the trip or use the IRS's special valuation rule, called the Standard Industry Fare Level (SIFL), which provides a valuation based on first-class airfare.

To calculate the income under SIFL, you multiply the number of statute miles flown by the applicable SIFL rate, currently $0.2484 per mile. For a 500-mile flight, for example, the total would be $124.20. You then multiply that total by a factor that depends on the aircraft's maximum certified takeoff weight. In the case of Big Co.'s Hawker 800XP, the takeoff weight results in the highest multiplier: 400 percent. So Mr. Big's taxable income is $124.40 times 4, or about $498.

​

$498 income from using the corporate jet personally for, lets say, a one hour flight. Same flight on a charter would be >$3.5K if someone would let you fly one way. BTW, the amount included as income is the same if you are on G550.

Does this sound right or make anybody, other than the executive, feel good? It cost the executive less than $174 to do the trip. The $174 is the tax he paid on the income inclusion.

 

[gunfyter]

$498 income from using the corporate jet personally for, lets say, a one hour flight. Same flight on a charter would be >$3.5K if someone would let you fly one way. BTW, the amount included as income is the same if you are on G550.

Does this sound right or make anybody, other than the executive, feel good? It cost the executive less than $174 to do the trip. The $174 is the tax he paid on the income inclusion

Sounds good to me... enough trips like that and we are creating pilot jobs. Better than sending tax money to the government. Better would be ... if we don't even have to report the trip to the IRS. What business is it of theirs what trips a PRIVATE jet makes?

We have to stop taxing income and all this ridiculous reporting of income and benefits and private jet trips to the government. If a company gives trips to executives ... so what? The more the merrier and by the way ... spend that tax savings on pilot raises!

 

[gret]

Interesting approach...give away the trips, but then don't write off the aircraft. Can't have it both ways.

At the end, we (the working class) end up paying for it thru higher taxes because the corporation isn't paying anything and neither is the executive.

 

[gunfyter]

The proper corporate tax rate is ZERO ... ... no tax on any income so no need to write off aircraft or any other expense.

The cost of corporate taxes and corporate tax accounting is simply passed on to the public .... So you want to pay for it in higher tax or higher prices?