Purchase Plane With Corporation

[aggiepilot87]

I'm considering buying a larger plane to haul around my family. I'd like to offset expenses by buying and operating the plane under a corporation. The purpose of the business would be flight instruction, which I would do in the plane part-time. I believe I could form the corp as a Sub S type, knowing it would result in a loss each year and I'd be able to offset my personal taxes with that loss.

A couple of quesions -

Anyone else done this? Please offer any comments you'd recommend.

Can a Sub S corp exist with a loss every year indefinitely?


Thanks

 

[vclean]

I used to own a Mooney with another pilot that we incorporated in Delaware. The purpose was aircraft rental. We would rent the plane from the corporation and would depreciate the asset every year a fixed amount plus maintenance, fuel, hanger, insurance, etc. This provided a write-off for your 1040, however when you sell the aircraft (in my case my half), your basis is now far less than the selling price (ie. 182 depreciated to $25,000, sold for $75,000 = $50,000 capital gain). I would consult with a good tax attorney to determine the best way to structure your S-corp.

The other benefit is a S-corp provides some protection from litigation stemming from an accident. The corporation can be sued, but usually not the principals (except in the case of gross negligence or criminal intent). The only asset the corporation has is the aircraft and any bank accounts. Your personal assets (house, cars, bank accounts, wages, etc) are not corporation assets. Again a tax attorney knows a LOT more than I.

Good luck,

 

[vclean]

I should have answered your last question regarding an indefinate loss.

If you research the tax requirements for a S-corp, the corporation is supposed to 'attempt' to generate a profit. Renting from the corporation generates revenue, but still shows a loss. If you (the corporation) were to be audited, you would need to prove the business was in good faith and intent on generating a profit.

As always consult a good tax attorney.

Your mileage may vary,

 

[AlbieF15]

How much in adminstrative and legal costs does it take to incorporate in Delaware?

thanks in advance,

Albie

 

[vclean]

I don't remember the exact costs of a Delaware corporation. I believe it was ~$350 first year, ~$125 per year thereafter.

Trade-A-Plane, AOPA and others frequently have ads from corporation companies.