1 01:00:03,900 --> 01:00:04,968 There's a bill which is 2 01:00:04,968 --> 01:00:05,635 now through the House. 3 01:00:06,169 --> 01:00:06,970 It is now with the Senate. 4 01:00:07,770 --> 01:00:09,672 That bill, as it's currently drafted, 5 01:00:09,672 --> 01:00:12,375 would bring back 100% bonus depreciation. 6 01:00:12,976 --> 01:00:15,478 Easiest way we can illustrate this is if 7 01:00:15,478 --> 01:00:16,713 a taxpayer goes out and 8 01:00:16,713 --> 01:00:17,981 buys a $10 million aircraft 9 01:00:17,981 --> 01:00:19,816 right now and we have 40% bonus 10 01:00:19,816 --> 01:00:21,884 depreciation, they get to 11 01:00:21,884 --> 01:00:23,987 take a $4 million deduction. 12 01:00:24,654 --> 01:00:25,188 Year one. 13 01:00:25,188 --> 01:00:25,888 Year one. 14 01:00:25,888 --> 01:00:28,524 If this new bill passes, they can 15 01:00:28,524 --> 01:00:29,659 depreciate the full $10 16 01:00:29,659 --> 01:00:32,195 million basis in the plane right 17 01:00:32,228 --> 01:00:33,196 away in year one. 18 01:00:33,596 --> 01:00:33,763 Nice. 19 01:00:33,963 --> 01:00:34,931 So the tax savings is 20 01:00:34,931 --> 01:00:37,066 substantially higher in year one. 21 01:00:38,267 --> 01:00:40,169 Welcome to Own the Jet by Aspen Aero 22 01:00:40,169 --> 01:00:41,337 Group, where we share 23 01:00:41,337 --> 01:00:42,372 perspectives from some of the 24 01:00:42,372 --> 01:00:44,240 leading voices in private jet ownership 25 01:00:44,240 --> 01:00:45,341 and business aviation. 26 01:00:46,109 --> 01:00:48,077 I'm your host, Derek Savage, along with 27 01:00:48,077 --> 01:00:49,412 my co-host, Jason Spoor, 28 01:00:49,746 --> 01:00:50,713 president of Aspen Aero 29 01:00:50,713 --> 01:00:51,047 Group. 30 01:00:51,914 --> 01:00:54,150 Our guest today is KJ McCarter from 31 01:00:54,150 --> 01:00:55,585 Aviation Tax Consultants. 32 01:00:55,885 --> 01:00:57,787 KJ specializes in tax planning for 33 01:00:57,787 --> 01:00:58,821 private jet owners and 34 01:00:58,821 --> 01:01:00,056 companies, helping clients 35 01:01:00,189 --> 01:01:01,424 maximize their deductions 36 01:01:01,424 --> 01:01:03,226 and minimize their liability. 37 01:01:03,960 --> 01:01:05,728 Join us as we dive deep into the 38 01:01:05,728 --> 01:01:07,864 mechanics, mindset, and moments that 39 01:01:07,864 --> 01:01:09,265 define jet ownership. 40 01:01:09,932 --> 01:01:11,267 And together, we'll learn 41 01:01:11,267 --> 01:01:13,302 what it takes to own the jet. 42 01:01:13,636 --> 01:01:14,971 Well thanks for joining us, KJ. 43 01:01:14,971 --> 01:01:15,705 Yeah, absolutely. 44 01:01:15,705 --> 01:01:16,673 Thank you guys for having me. 45 01:01:16,673 --> 01:01:19,842 So can you tell me a little bit about why 46 01:01:19,842 --> 01:01:21,444 somebody would need to reach 47 01:01:21,444 --> 01:01:23,946 out to an aviation-specific 48 01:01:24,147 --> 01:01:24,414 CPA? 49 01:01:25,715 --> 01:01:27,784 I'm playing the role of a rich guy. 50 01:01:27,784 --> 01:01:28,651 I'm going to buy a jet. 51 01:01:28,785 --> 01:01:30,019 I have a CPA. 52 01:01:30,953 --> 01:01:33,289 Why do I need to have 53 01:01:33,289 --> 01:01:34,824 somebody that's aviation-specific? 54 01:01:35,591 --> 01:01:36,125 Excellent question. 55 01:01:36,592 --> 01:01:38,528 And the answer is this area of the tax 56 01:01:38,528 --> 01:01:40,296 code is very nuanced and 57 01:01:40,296 --> 01:01:41,364 specific just to aircraft. 58 01:01:42,031 --> 01:01:45,535 So no matter how good your normal CPA is, 59 01:01:45,535 --> 01:01:46,436 they probably haven't 60 01:01:46,436 --> 01:01:48,137 dealt with any or very 61 01:01:48,137 --> 01:01:49,238 many aircraft before. 62 01:01:50,173 --> 01:01:51,808 So they may not be familiar with, one, 63 01:01:51,808 --> 01:01:52,575 the sales and use tax 64 01:01:52,575 --> 01:01:53,409 planning involved with an 65 01:01:53,409 --> 01:01:55,011 aircraft transaction, but especially the 66 01:01:55,011 --> 01:01:56,446 income tax planning involved with an 67 01:01:56,446 --> 01:01:57,280 aircraft transaction. 68 01:01:58,081 --> 01:01:59,415 Because aircraft are different than 69 01:01:59,415 --> 01:02:00,550 another asset that a 70 01:02:00,550 --> 01:02:01,551 business owner has purchased 71 01:02:01,884 --> 01:02:02,485 in the past. 72 01:02:03,352 --> 01:02:05,154 They can be used for personal use. 73 01:02:05,655 --> 01:02:07,290 So when a business owner buys a 74 01:02:07,290 --> 01:02:09,192 construction crane, that's 75 01:02:09,192 --> 01:02:10,126 relatively straightforward to 76 01:02:10,126 --> 01:02:10,626 account for. 77 01:02:10,626 --> 01:02:11,294 You can't use a 78 01:02:11,294 --> 01:02:12,395 construction crane for fun, right? 79 01:02:12,628 --> 01:02:12,995 Right. 80 01:02:12,995 --> 01:02:13,362 But a plane. 81 01:02:13,696 --> 01:02:14,430 Well, I don't know. 82 01:02:15,064 --> 01:02:16,165 I shouldn't say that. 83 01:02:16,165 --> 01:02:17,633 I'll take on that challenge. 84 01:02:19,268 --> 01:02:22,171 But in aircraft, there's certainly a 85 01:02:22,171 --> 01:02:23,372 personal use element to it. 86 01:02:23,906 --> 01:02:26,142 So it's different than other assets that 87 01:02:26,142 --> 01:02:27,610 CPA may have accounted for. 88 01:02:27,877 --> 01:02:28,478 And that's where our 89 01:02:28,478 --> 01:02:29,645 expertise can be really valuable. 90 01:02:29,645 --> 01:02:30,746 You almost can't have one 91 01:02:30,746 --> 01:02:31,848 just for business, right? 92 01:02:31,848 --> 01:02:32,648 I mean, you've got to 93 01:02:32,648 --> 01:02:34,183 do something with it. 94 01:02:34,183 --> 01:02:34,383 Right. 95 01:02:34,951 --> 01:02:35,151 Yeah. 96 01:02:35,485 --> 01:02:36,986 Almost all of our clients will have some 97 01:02:36,986 --> 01:02:39,021 personal use for the aircraft. 98 01:02:39,288 --> 01:02:40,223 And that's actually a common 99 01:02:40,223 --> 01:02:41,190 misconception or a common 100 01:02:41,190 --> 01:02:43,693 question that we get is, if I 101 01:02:43,693 --> 01:02:44,894 buy this aircraft and I put it in my 102 01:02:44,894 --> 01:02:46,496 business, do I have to fly 103 01:02:46,496 --> 01:02:47,630 100% of the time for business? 104 01:02:47,964 --> 01:02:48,564 Or can I take a 105 01:02:48,564 --> 01:02:49,665 vacation flight with the plane? 106 01:02:49,665 --> 01:02:49,932 Because that's the way 107 01:02:49,932 --> 01:02:51,033 they look at cars, right? 108 01:02:51,267 --> 01:02:52,135 They're just like, hey, how 109 01:02:52,135 --> 01:02:53,369 much of this is business use? 110 01:02:53,369 --> 01:02:54,504 How do you log your miles? 111 01:02:54,504 --> 01:02:54,971 All that stuff. 112 01:02:55,471 --> 01:02:55,671 Yep. 113 01:02:55,872 --> 01:02:56,806 And with the plane, 114 01:02:57,106 --> 01:02:58,374 it's similar to a car. 115 01:02:58,374 --> 01:02:59,108 It can be prorated. 116 01:02:59,375 --> 01:03:00,910 And the IRS actually gives us specific 117 01:03:00,910 --> 01:03:02,044 rules to follow for how 118 01:03:02,044 --> 01:03:03,479 to calculate what should 119 01:03:03,479 --> 01:03:05,548 be deductible and what should not be 120 01:03:05,548 --> 01:03:06,716 deductible based on that 121 01:03:06,716 --> 01:03:07,984 business versus entertainment 122 01:03:07,984 --> 01:03:08,651 use breakdown. 123 01:03:09,185 --> 01:03:10,887 So you absolutely can use the plane for 124 01:03:10,887 --> 01:03:11,988 personal and own it in your business. 125 01:03:12,188 --> 01:03:13,156 What if you're a public company? 126 01:03:13,656 --> 01:03:16,092 Public company, those rules can vary. 127 01:03:16,526 --> 01:03:18,027 So it's important that they 128 01:03:18,027 --> 01:03:19,929 talk to their tax advisors. 129 01:03:20,062 --> 01:03:21,664 We mostly deal with non-public companies 130 01:03:21,664 --> 01:03:23,299 in our practice, but 131 01:03:23,299 --> 01:03:24,634 the rule set is different 132 01:03:24,634 --> 01:03:24,834 there. 133 01:03:25,268 --> 01:03:28,304 What are some things that if I'm owning a 134 01:03:28,304 --> 01:03:29,071 jet, or if I'm 135 01:03:29,071 --> 01:03:31,407 planning on buying a jet, what 136 01:03:31,407 --> 01:03:33,709 are some things that I need to know about 137 01:03:33,709 --> 01:03:35,344 the tax implications of that? 138 01:03:35,344 --> 01:03:36,612 Because we were talking earlier about 139 01:03:36,612 --> 01:03:37,313 some stuff where it's 140 01:03:37,313 --> 01:03:38,714 like, where you do the thing 141 01:03:38,915 --> 01:03:41,150 makes a difference and 142 01:03:41,150 --> 01:03:42,285 timing makes a difference. 143 01:03:42,285 --> 01:03:45,454 There's all kinds of potential landmines 144 01:03:45,454 --> 01:03:46,455 that someone like me 145 01:03:46,455 --> 01:03:47,657 would not know about. 146 01:03:47,657 --> 01:03:47,890 Yep. 147 01:03:48,357 --> 01:03:48,658 Yeah. 148 01:03:49,659 --> 01:03:52,962 So the high level topics to be evaluated 149 01:03:52,962 --> 01:03:53,863 before an aircraft 150 01:03:53,863 --> 01:03:54,864 transaction, and that's a key 151 01:03:55,031 --> 01:03:55,231 point. 152 01:03:55,231 --> 01:03:56,032 This should be done before 153 01:03:56,032 --> 01:03:57,033 you close on the aircraft. 154 01:03:57,967 --> 01:04:00,336 Optimally well ahead of closing, but 155 01:04:00,336 --> 01:04:01,504 closing location matters. 156 01:04:01,871 --> 01:04:04,006 So the aircraft needs to be sitting in a 157 01:04:04,006 --> 01:04:04,807 sales tax friendly 158 01:04:04,807 --> 01:04:07,243 location when closing occurs. 159 01:04:07,543 --> 01:04:08,444 There's a number of states 160 01:04:08,444 --> 01:04:09,679 that can meet that criteria. 161 01:04:10,746 --> 01:04:12,215 But it's on a state by state basis. 162 01:04:12,215 --> 01:04:13,583 State by state basis, correct. 163 01:04:14,116 --> 01:04:15,084 Based on that state's laws. 164 01:04:15,251 --> 01:04:16,519 Yes, based on that state's laws. 165 01:04:16,652 --> 01:04:17,720 There's some states that don't have sales 166 01:04:17,720 --> 01:04:19,422 and use tax, so those can work well. 167 01:04:19,755 --> 01:04:20,790 There's other states that have what we 168 01:04:20,790 --> 01:04:21,524 call a flyway 169 01:04:21,524 --> 01:04:23,392 exemption, meaning you can close 170 01:04:23,593 --> 01:04:25,094 there, pick up the plane and leave. 171 01:04:25,394 --> 01:04:27,230 And because you're not basing the plane 172 01:04:27,230 --> 01:04:28,164 there, using the plane 173 01:04:28,164 --> 01:04:29,865 there, they don't impose sales 174 01:04:29,865 --> 01:04:30,867 tax on that transaction. 175 01:04:31,167 --> 01:04:31,901 There's a lot of states 176 01:04:31,901 --> 01:04:33,202 that have that exemption. 177 01:04:34,103 --> 01:04:37,206 So closing location does matter, but the 178 01:04:37,206 --> 01:04:39,375 more, not important, 179 01:04:39,375 --> 01:04:40,476 but typically a little bit 180 01:04:40,476 --> 01:04:42,545 more involved part of the planning is 181 01:04:42,545 --> 01:04:43,913 called use tax planning. 182 01:04:44,981 --> 01:04:46,782 And that concept is when the plane 183 01:04:46,782 --> 01:04:47,984 returns home to where 184 01:04:47,984 --> 01:04:49,018 it's going to be base hanger 185 01:04:49,018 --> 01:04:52,188 and utilized, that state can impose use 186 01:04:52,188 --> 01:04:53,055 tax on the aircraft. 187 01:04:53,990 --> 01:04:55,224 And use tax is kind of 188 01:04:55,224 --> 01:04:56,792 brother sister with sales tax. 189 01:04:56,792 --> 01:04:59,295 It's that one time upfront tax on the 190 01:04:59,295 --> 01:05:00,396 purchase price of the plane. 191 01:05:00,930 --> 01:05:02,465 So like a California base buyer, for 192 01:05:02,465 --> 01:05:04,066 example, if they bought a 193 01:05:04,066 --> 01:05:04,867 plane and they closed in 194 01:05:04,867 --> 01:05:06,736 Montana, that's great. 195 01:05:06,736 --> 01:05:08,804 Montana doesn't have sales tax, but when 196 01:05:08,804 --> 01:05:09,639 they bring the plane back 197 01:05:09,639 --> 01:05:11,374 to California, California 198 01:05:11,374 --> 01:05:12,174 would like to impose 199 01:05:12,174 --> 01:05:13,376 use tax on the aircraft. 200 01:05:14,243 --> 01:05:17,346 So roughly 10% typically upfront on the 201 01:05:17,346 --> 01:05:17,980 purchase price of the 202 01:05:17,980 --> 01:05:19,415 aircraft, and that can catch 203 01:05:19,415 --> 01:05:21,083 a lot of buyers off guard. 204 01:05:21,083 --> 01:05:22,184 So it's very important that buyers 205 01:05:22,184 --> 01:05:23,586 understand, even if you 206 01:05:23,586 --> 01:05:24,487 close in a sales tax friendly 207 01:05:24,620 --> 01:05:27,056 spot, you still have a use tax obligation 208 01:05:27,056 --> 01:05:28,624 unless you meet some sort of exemption. 209 01:05:29,191 --> 01:05:30,860 What kind of thing would you have to do 210 01:05:30,860 --> 01:05:31,494 to meet an exemption? 211 01:05:31,827 --> 01:05:33,462 Varies widely from state to state. 212 01:05:33,796 --> 01:05:35,364 So California, for example, and this is 213 01:05:35,364 --> 01:05:37,300 unique to California, they 214 01:05:37,300 --> 01:05:38,267 have what we call an interstate 215 01:05:38,334 --> 01:05:39,235 commerce exemption. 216 01:05:39,235 --> 01:05:40,503 It's one of the main exemptions that 217 01:05:40,503 --> 01:05:42,305 taxpayers can potentially 218 01:05:42,305 --> 01:05:43,906 qualify for that involves 219 01:05:43,906 --> 01:05:45,207 utilizing the aircraft for 220 01:05:45,207 --> 01:05:46,542 out of state business use. 221 01:05:47,443 --> 01:05:48,811 Every state is different though. 222 01:05:49,078 --> 01:05:50,146 Texas has its own exemptions. 223 01:05:50,379 --> 01:05:51,514 Florida has its own exemptions. 224 01:05:52,214 --> 01:05:53,382 The most important thing that the buyer 225 01:05:53,382 --> 01:05:54,250 needs to do is connect 226 01:05:54,250 --> 01:05:55,952 with the aviation tax planner 227 01:05:56,686 --> 01:05:58,120 to explain to them, "Hey, 228 01:05:58,187 --> 01:05:59,322 here's the plane I'm buying. 229 01:05:59,322 --> 01:06:01,157 I'm going to base it in this state or 230 01:06:01,157 --> 01:06:02,191 these states if they're 231 01:06:02,191 --> 01:06:03,259 basing it in multiple states 232 01:06:03,759 --> 01:06:05,094 and come up with a game plan." 233 01:06:05,728 --> 01:06:07,229 And this goes back to what 234 01:06:07,229 --> 01:06:08,030 we were discussing about. 235 01:06:08,597 --> 01:06:10,266 The buyer already has their normal CPA, 236 01:06:10,900 --> 01:06:12,101 but their normal CPA 237 01:06:12,101 --> 01:06:13,169 probably doesn't know about 238 01:06:13,235 --> 01:06:14,737 the sales and use tax exemptions for 239 01:06:14,737 --> 01:06:16,772 aircraft in all 50 states. 240 01:06:17,106 --> 01:06:18,040 So that's part of the 241 01:06:18,040 --> 01:06:18,774 value that we can bring. 242 01:06:19,709 --> 01:06:22,945 Jason, you work in the 243 01:06:22,945 --> 01:06:25,614 brokerage of aircraft, of jets. 244 01:06:26,415 --> 01:06:29,185 What are some things that you'd be like, 245 01:06:29,785 --> 01:06:31,153 "Oh, shit, we can't land 246 01:06:31,153 --> 01:06:32,922 here and do business here," 247 01:06:33,990 --> 01:06:34,924 that you'd want to call KJ 248 01:06:34,924 --> 01:06:35,992 and make sure that that was- 249 01:06:35,992 --> 01:06:37,994 The biggest is the closing. 250 01:06:39,295 --> 01:06:41,731 We want to make sure that the client, the 251 01:06:41,731 --> 01:06:43,199 buyer, is closing 252 01:06:43,199 --> 01:06:44,367 that airplane in a state 253 01:06:44,400 --> 01:06:46,535 that is going to be good for them. 254 01:06:46,836 --> 01:06:48,104 And that's where he comes in to say, 255 01:06:48,104 --> 01:06:49,071 "Okay, looking at their 256 01:06:49,071 --> 01:06:51,140 accounting and how the taxes 257 01:06:51,207 --> 01:06:53,309 work, we would like to close in Montana." 258 01:06:54,377 --> 01:06:56,345 To be clear too, that doesn't mean that 259 01:06:56,345 --> 01:06:57,446 the buyer has to try to 260 01:06:57,446 --> 01:06:58,748 track down a plane that's 261 01:06:58,881 --> 01:07:00,783 currently in a tax-friendly state. 262 01:07:00,783 --> 01:07:02,151 Well, because I know that's what I'm 263 01:07:02,151 --> 01:07:03,552 like, "Okay, if I'm in 264 01:07:03,552 --> 01:07:05,354 Dallas, do I only shop for 265 01:07:05,354 --> 01:07:06,655 planes in Montana now?" 266 01:07:06,655 --> 01:07:06,856 Yeah. 267 01:07:07,723 --> 01:07:08,724 Any planes are in Montana. 268 01:07:09,191 --> 01:07:10,226 Go ahead, KJ, the plane. 269 01:07:10,659 --> 01:07:12,495 Yeah, so the aircraft can be anywhere. 270 01:07:12,695 --> 01:07:14,296 And really, when we're determining where 271 01:07:14,296 --> 01:07:15,131 the aircraft should be 272 01:07:15,131 --> 01:07:16,032 positioned when closing 273 01:07:16,032 --> 01:07:18,034 occurs, we'll actually base that on where 274 01:07:18,034 --> 01:07:19,034 it's going for its 275 01:07:19,034 --> 01:07:20,669 pre-buy inspection typically. 276 01:07:20,936 --> 01:07:21,237 Okay. 277 01:07:21,237 --> 01:07:22,671 So we want to pick the most operationally 278 01:07:22,671 --> 01:07:24,273 convenient spot that 279 01:07:24,273 --> 01:07:25,641 is still tax-friendly. 280 01:07:26,208 --> 01:07:28,077 So let's say the buyer tracks down a 281 01:07:28,077 --> 01:07:29,111 plane that they'd like to 282 01:07:29,111 --> 01:07:30,379 acquire, and it's sitting 283 01:07:30,379 --> 01:07:33,215 in a state that doesn't have an exemption 284 01:07:33,215 --> 01:07:34,350 from sales tax, and the 285 01:07:34,350 --> 01:07:35,117 pre-purchase inspection 286 01:07:35,117 --> 01:07:36,352 is going to occur there as well. 287 01:07:37,119 --> 01:07:37,486 That's fine. 288 01:07:37,486 --> 01:07:38,454 The aircraft just needs to be 289 01:07:38,454 --> 01:07:40,289 repositioned before closing would occur. 290 01:07:40,923 --> 01:07:42,091 Okay, I'm going to test your knowledge. 291 01:07:42,925 --> 01:07:44,627 Oklahoma, good place or bad place? 292 01:07:45,027 --> 01:07:45,594 It depends. 293 01:07:45,861 --> 01:07:48,364 So they have a flyaway exemption, but the 294 01:07:48,364 --> 01:07:49,365 aircraft has to be 295 01:07:49,365 --> 01:07:50,733 above a certain purchase 296 01:07:50,766 --> 01:07:51,734 price in order for that 297 01:07:51,734 --> 01:07:54,603 flyaway exemption to apply. 298 01:07:54,937 --> 01:07:55,471 Okay, lightning round. 299 01:07:55,471 --> 01:07:56,005 Let's keep going. 300 01:07:56,005 --> 01:07:56,205 Michigan. 301 01:07:56,705 --> 01:07:58,207 Michigan has a flyaway exemption. 302 01:07:59,008 --> 01:08:01,844 However, both parties need to be 303 01:08:01,844 --> 01:08:03,212 out-of-state parties. 304 01:08:03,579 --> 01:08:05,915 So its flyaway exemption is a little bit 305 01:08:05,915 --> 01:08:06,949 more limited than other states. 306 01:08:07,716 --> 01:08:07,917 California. 307 01:08:08,584 --> 01:08:09,985 California has a flyaway exemption. 308 01:08:10,319 --> 01:08:12,388 However, one of its requirements is that 309 01:08:12,388 --> 01:08:13,456 the aircraft cannot 310 01:08:13,456 --> 01:08:15,291 come back to California for 311 01:08:15,291 --> 01:08:17,626 12 months following closing. 312 01:08:18,294 --> 01:08:21,230 So generally, we prefer not to use it. 313 01:08:21,230 --> 01:08:21,797 We want to leave that 314 01:08:21,797 --> 01:08:22,965 option open for the taxpayer. 315 01:08:23,466 --> 01:08:24,033 This guy's good. 316 01:08:24,467 --> 01:08:25,868 Yeah, we did a lot of practice. 317 01:08:26,969 --> 01:08:29,071 Do I care as much if I'm selling it? 318 01:08:29,071 --> 01:08:30,306 Do these things affect me? 319 01:08:30,906 --> 01:08:31,307 Good question. 320 01:08:32,241 --> 01:08:33,342 Generally, the obligation for 321 01:08:33,342 --> 01:08:35,010 sales tax falls on the buyer. 322 01:08:35,578 --> 01:08:37,046 So it's not generally 323 01:08:37,046 --> 01:08:38,514 not the seller's problem. 324 01:08:38,848 --> 01:08:41,150 However, in some cases it can be, 325 01:08:41,784 --> 01:08:43,085 especially if the seller 326 01:08:43,085 --> 01:08:44,787 has a dealer's license or a 327 01:08:44,787 --> 01:08:45,721 sales tax account. 328 01:08:46,155 --> 01:08:47,923 Let's say they live in Florida and they 329 01:08:47,923 --> 01:08:49,258 have a Florida sales tax account. 330 01:08:49,925 --> 01:08:51,427 They may have obligation to collect 331 01:08:51,427 --> 01:08:52,528 Florida sales tax from 332 01:08:52,528 --> 01:08:53,596 the buyer when they sell it 333 01:08:53,596 --> 01:08:56,398 to them unless the buyer presents them 334 01:08:56,398 --> 01:08:57,700 with evidence of an exemption. 335 01:08:58,767 --> 01:09:00,836 So sellers do need to be aware of that. 336 01:09:00,936 --> 01:09:01,904 They need to make sure they don't have 337 01:09:01,904 --> 01:09:03,239 some obligation to collect. 338 01:09:03,239 --> 01:09:05,107 If they do collect evidence from the 339 01:09:05,107 --> 01:09:05,908 buyer of a sales tax 340 01:09:05,908 --> 01:09:08,344 exemption being met, but generally 341 01:09:08,344 --> 01:09:09,712 it falls on the buyer. 342 01:09:10,179 --> 01:09:10,546 Gotcha. 343 01:09:11,046 --> 01:09:11,981 Gotcha. 344 01:09:12,448 --> 01:09:13,115 Jason, you had something? 345 01:09:13,449 --> 01:09:14,850 Moving into depreciation. 346 01:09:15,518 --> 01:09:15,718 Yeah. 347 01:09:15,851 --> 01:09:18,854 So exciting news on that front is there's 348 01:09:18,854 --> 01:09:20,456 a bill, which is now through the House. 349 01:09:21,490 --> 01:09:22,291 It is now with the Senate. 350 01:09:23,092 --> 01:09:24,994 That bill, as it's currently drafted, 351 01:09:24,994 --> 01:09:25,961 would bring back 100% 352 01:09:26,495 --> 01:09:29,598 bonus depreciation from January 353 01:09:29,932 --> 01:09:34,737 20th, 2025 through 2029 if purchased 354 01:09:34,737 --> 01:09:36,805 after that date, on or 355 01:09:36,805 --> 01:09:38,040 after that date through 356 01:09:38,040 --> 01:09:41,477 2029, which currently we 357 01:09:41,477 --> 01:09:43,045 have 40% bonus depreciation. 358 01:09:43,679 --> 01:09:44,547 So it's a huge jump. 359 01:09:44,747 --> 01:09:47,783 And why that matters is one, the tax 360 01:09:47,783 --> 01:09:48,918 savings that that provides 361 01:09:48,918 --> 01:09:50,052 in year one for an aircraft 362 01:09:50,052 --> 01:09:52,621 purchaser is far more substantial, 60% 363 01:09:52,855 --> 01:09:53,856 more substantial almost. 364 01:09:55,090 --> 01:09:57,593 So easiest way we can illustrate this is 365 01:09:57,593 --> 01:09:59,528 if a taxpayer goes out 366 01:09:59,528 --> 01:10:00,396 and buys a $10 million 367 01:10:00,396 --> 01:10:02,731 aircraft right now, and we have 40% bonus 368 01:10:02,731 --> 01:10:04,433 depreciation, they 369 01:10:04,433 --> 01:10:06,268 get to take a $4 million 370 01:10:06,602 --> 01:10:06,902 deduction. 371 01:10:07,503 --> 01:10:08,070 Year one. 372 01:10:08,070 --> 01:10:09,705 Year one plus the first 373 01:10:09,705 --> 01:10:10,606 year of five year maker. 374 01:10:10,606 --> 01:10:11,707 So a little bit over 40%. 375 01:10:13,309 --> 01:10:15,844 If this new bill passes, they can 376 01:10:15,844 --> 01:10:16,946 depreciate the full $10 377 01:10:16,946 --> 01:10:19,548 million basis in the plane right 378 01:10:19,548 --> 01:10:20,416 away in year one. 379 01:10:21,350 --> 01:10:22,284 So the tax savings is 380 01:10:22,284 --> 01:10:24,386 substantially higher in year one. 381 01:10:25,287 --> 01:10:27,990 Now Jason, with your business, you talk 382 01:10:27,990 --> 01:10:29,124 about once a plane has 383 01:10:29,124 --> 01:10:30,492 been depreciated, that might 384 01:10:30,492 --> 01:10:31,794 be an impetus to sell. 385 01:10:32,995 --> 01:10:35,030 So what does that mean in terms of the 386 01:10:35,030 --> 01:10:39,401 velocity of people potentially upgrading? 387 01:10:40,002 --> 01:10:41,070 If they can, right. 388 01:10:41,070 --> 01:10:43,205 If they can depreciate the entire thing 389 01:10:43,205 --> 01:10:45,307 year one, and then the 390 01:10:45,307 --> 01:10:46,775 next year they're like, 391 01:10:46,775 --> 01:10:48,177 you know what, we had another good year. 392 01:10:48,611 --> 01:10:49,845 What else is out there? 393 01:10:49,845 --> 01:10:50,045 Yep. 394 01:10:51,347 --> 01:10:51,680 Yeah. 395 01:10:51,680 --> 01:10:53,148 It sounds like to me that this is going 396 01:10:53,148 --> 01:10:54,483 to open up the floodgates 397 01:10:54,483 --> 01:10:57,152 on aviation transactions. 398 01:10:57,987 --> 01:10:58,087 Yeah. 399 01:10:58,087 --> 01:10:59,822 It should incentivize some first time 400 01:10:59,822 --> 01:11:00,623 buyers to come into the 401 01:11:00,623 --> 01:11:01,957 space and get a substantial 402 01:11:02,024 --> 01:11:05,461 tax benefit in 2025, but also it can free 403 01:11:05,461 --> 01:11:08,364 up current aircraft owners to upgrade. 404 01:11:08,964 --> 01:11:11,166 And the reason that it may do that is we 405 01:11:11,166 --> 01:11:12,134 don't have like kind 406 01:11:12,134 --> 01:11:13,302 exchange for aircraft right 407 01:11:13,302 --> 01:11:15,004 now, like we have with real estate. 408 01:11:16,005 --> 01:11:17,940 So when you sell, let's say an aircraft 409 01:11:17,940 --> 01:11:18,807 owner owns a $10 million 410 01:11:18,807 --> 01:11:20,476 aircraft, and they sell 411 01:11:20,509 --> 01:11:21,243 it for $10 million. 412 01:11:22,077 --> 01:11:23,479 They have to recognize, and let's assume 413 01:11:23,479 --> 01:11:24,313 they fully depreciated 414 01:11:24,313 --> 01:11:25,247 the plane, so their base 415 01:11:25,247 --> 01:11:25,748 is in a zero. 416 01:11:26,548 --> 01:11:27,783 They have $10 million of 417 01:11:27,783 --> 01:11:29,952 income from that sale in 2025. 418 01:11:30,886 --> 01:11:33,555 When we have 40% bonus depreciation, when 419 01:11:33,555 --> 01:11:34,289 they go and buy their 420 01:11:34,289 --> 01:11:35,224 next plane, let's say 421 01:11:35,224 --> 01:11:37,926 that's also a $10 million aircraft, and 422 01:11:37,926 --> 01:11:38,994 they take 40% bonus, 423 01:11:39,528 --> 01:11:40,562 they just got a $4 million 424 01:11:40,896 --> 01:11:42,464 deduction, but that cannot fully offset 425 01:11:42,464 --> 01:11:43,465 the $10 million of 426 01:11:43,465 --> 01:11:45,234 ordinary income from the sale, 427 01:11:45,234 --> 01:11:45,901 the previous aircraft. 428 01:11:46,535 --> 01:11:47,136 We have $6 million 429 01:11:47,136 --> 01:11:48,871 leftover is the napkin math. 430 01:11:48,971 --> 01:11:50,272 We have to pay tax on. 431 01:11:51,273 --> 01:11:52,107 That's suboptimal, obviously. 432 01:11:53,175 --> 01:11:54,943 When we get 100% bonus depreciation back, 433 01:11:55,444 --> 01:11:57,012 now we can take the 434 01:11:57,012 --> 01:11:58,013 full $10 million deduction 435 01:11:58,013 --> 01:12:01,150 on the next aircraft in 2025 and offset 436 01:12:01,150 --> 01:12:02,051 the $10 million of 437 01:12:02,051 --> 01:12:03,052 income from the sale of the 438 01:12:03,052 --> 01:12:04,820 previous aircraft, those net out. 439 01:12:05,187 --> 01:12:05,754 That's zero. 440 01:12:05,954 --> 01:12:06,889 You do that in the same year, right? 441 01:12:06,889 --> 01:12:07,923 In the same tax year. 442 01:12:08,390 --> 01:12:08,590 Right. 443 01:12:09,024 --> 01:12:09,224 Okay. 444 01:12:10,726 --> 01:12:12,027 So that's the way the 445 01:12:12,027 --> 01:12:13,095 game is played, apparently. 446 01:12:15,431 --> 01:12:15,631 Nice. 447 01:12:16,231 --> 01:12:18,267 Now there's the way the 448 01:12:18,267 --> 01:12:19,168 bill is written current. 449 01:12:20,336 --> 01:12:20,736 That expires. 450 01:12:21,303 --> 01:12:22,204 So can you talk about that? 451 01:12:22,871 --> 01:12:23,005 Yeah. 452 01:12:23,005 --> 01:12:24,306 As the bill's currently drafted, it's set 453 01:12:24,306 --> 01:12:26,275 to expire at the end of 2029. 454 01:12:26,642 --> 01:12:28,977 Now things may change before this bill is 455 01:12:28,977 --> 01:12:29,912 enacted, before it gets 456 01:12:29,912 --> 01:12:31,380 to the Senate, or they may 457 01:12:31,380 --> 01:12:32,948 change in a couple of years. 458 01:12:32,948 --> 01:12:35,317 There may be a new tax bill, but for now, 459 01:12:35,317 --> 01:12:37,286 that's set to expire in 2029. 460 01:12:37,586 --> 01:12:39,555 I mean, it sounds like there hasn't been 461 01:12:39,555 --> 01:12:40,355 a better time in a little 462 01:12:40,355 --> 01:12:42,491 while to do this outside 463 01:12:42,491 --> 01:12:43,525 of like maybe like 464 01:12:43,525 --> 01:12:44,526 just post COVID, right? 465 01:12:44,993 --> 01:12:46,628 Or everybody was buying and selling. 466 01:12:48,030 --> 01:12:49,431 But this sounds like a good 467 01:12:49,431 --> 01:12:51,200 time to be good at about it. 468 01:12:51,333 --> 01:12:51,967 Yeah, absolutely. 469 01:12:53,402 --> 01:12:55,471 It's certainly not a certainty that this 470 01:12:55,471 --> 01:12:56,872 bill gets through, but 471 01:12:56,872 --> 01:12:57,973 there's a ton of optimism 472 01:12:57,973 --> 01:13:01,043 in our space that 100% bonus in some way, 473 01:13:01,043 --> 01:13:03,512 shape, or form will be back for 2025. 474 01:13:03,912 --> 01:13:05,147 So it's a good climate. 475 01:13:05,647 --> 01:13:08,016 So if I were a shady individual, I'm not 476 01:13:08,016 --> 01:13:09,885 saying I am, but if I 477 01:13:09,885 --> 01:13:11,553 were, and I wanted to avoid 478 01:13:11,620 --> 01:13:14,823 painting taxes altogether, I don't have 479 01:13:14,823 --> 01:13:16,892 to try to do anything shady. 480 01:13:16,892 --> 01:13:17,526 I just have to wait. 481 01:13:18,827 --> 01:13:20,529 Just wait. 482 01:13:20,729 --> 01:13:21,730 Is that kind of what it is? 483 01:13:22,664 --> 01:13:24,800 Yeah, if you want certainty that you can 484 01:13:24,800 --> 01:13:27,002 take 100% bonus in 2025, 485 01:13:27,870 --> 01:13:28,971 if you want 100% certainty, 486 01:13:28,971 --> 01:13:30,272 you would have to wait to acquire until 487 01:13:30,272 --> 01:13:31,206 this bill gets through. 488 01:13:31,206 --> 01:13:33,809 And the latest that I've heard is the 489 01:13:33,809 --> 01:13:34,977 target date to get this 490 01:13:34,977 --> 01:13:36,812 enacted would be July or 491 01:13:36,812 --> 01:13:37,045 August. 492 01:13:37,513 --> 01:13:38,313 But Jason can speak 493 01:13:38,313 --> 01:13:39,248 more to this than I can. 494 01:13:39,548 --> 01:13:41,717 If you wait until September and then you 495 01:13:41,717 --> 01:13:43,118 say, oh, the bill got 496 01:13:43,118 --> 01:13:44,486 through, let's get started 497 01:13:44,486 --> 01:13:45,387 with an aircraft acquisition, 498 01:13:45,988 --> 01:13:46,955 you're very late to the game. 499 01:13:47,189 --> 01:13:48,323 Yeah, probably not going to happen. 500 01:13:48,323 --> 01:13:49,725 It's probably not going to happen in 501 01:13:49,725 --> 01:13:52,494 2025, or at a minimum, it'll be a rush. 502 01:13:53,595 --> 01:13:55,664 So it's important to get started now with 503 01:13:55,664 --> 01:13:56,498 an aircraft 504 01:13:56,498 --> 01:13:57,933 acquisition if you're hoping to 505 01:13:57,933 --> 01:13:59,201 close before the end of 2025. 506 01:14:00,169 --> 01:14:04,306 Is there anything that might go awry with 507 01:14:04,306 --> 01:14:06,775 any of the stuff where, you mentioned all 508 01:14:06,809 --> 01:14:10,312 the potentials here, but what does 509 01:14:10,312 --> 01:14:11,380 somebody's situation have to 510 01:14:11,380 --> 01:14:12,981 be in order to take maximum 511 01:14:13,015 --> 01:14:13,682 advantage of this? 512 01:14:13,682 --> 01:14:14,483 Do they have to have a 513 01:14:14,483 --> 01:14:15,551 bunch of cash on hand? 514 01:14:15,551 --> 01:14:17,286 Do they have to have a 515 01:14:17,286 --> 01:14:18,887 certain asset mix, whatever? 516 01:14:19,488 --> 01:14:20,856 Generally, they need to be a business 517 01:14:20,856 --> 01:14:21,957 owner, and they need to 518 01:14:21,957 --> 01:14:22,991 be able to fly the plane 519 01:14:22,991 --> 01:14:25,427 around for business use in relation to 520 01:14:25,427 --> 01:14:26,528 that business that they own. 521 01:14:27,529 --> 01:14:27,830 Gotcha. 522 01:14:27,830 --> 01:14:30,632 So the slam dunk client fact pattern for 523 01:14:30,632 --> 01:14:31,867 us would be a 524 01:14:31,867 --> 01:14:33,635 construction company or a consulting 525 01:14:33,769 --> 01:14:36,872 company that needs to acquire an aircraft 526 01:14:36,872 --> 01:14:37,973 to fly around and 527 01:14:37,973 --> 01:14:39,308 meet with its clients or 528 01:14:39,308 --> 01:14:41,143 go to its job sites, and it's using the 529 01:14:41,143 --> 01:14:42,010 plane as an internal 530 01:14:42,010 --> 01:14:44,746 business use tool to facilitate 531 01:14:44,913 --> 01:14:45,614 earning its revenues. 532 01:14:46,348 --> 01:14:47,249 So the plane is not a 533 01:14:47,249 --> 01:14:48,250 profit center for them. 534 01:14:48,250 --> 01:14:49,451 They're not leasing it out to their 535 01:14:49,451 --> 01:14:50,919 portfolio of companies. 536 01:14:50,919 --> 01:14:52,087 They're just using the plane as an 537 01:14:52,087 --> 01:14:54,489 internal tool to get around and 538 01:14:54,489 --> 01:14:55,524 facilitate their dealmaking. 539 01:14:55,924 --> 01:14:57,659 So if I own Acme Construction Company, 540 01:14:58,093 --> 01:14:59,194 does Acme Construction 541 01:14:59,194 --> 01:15:00,529 Company own the plane, or 542 01:15:01,196 --> 01:15:05,834 is it plane co owns the plane, and then 543 01:15:05,834 --> 01:15:06,635 the construction company 544 01:15:06,635 --> 01:15:07,903 leases it off of plane? 545 01:15:08,237 --> 01:15:09,104 What does that look like? 546 01:15:09,538 --> 01:15:10,606 I know there's a lot of 547 01:15:10,606 --> 01:15:11,874 shell games that you can play. 548 01:15:11,874 --> 01:15:13,609 Excellent question, and the answer 549 01:15:13,609 --> 01:15:14,943 depends on the sales and 550 01:15:14,943 --> 01:15:16,545 use tax planning involved, 551 01:15:16,812 --> 01:15:16,979 typically. 552 01:15:17,679 --> 01:15:19,548 So from an income tax perspective, if 553 01:15:19,548 --> 01:15:21,149 Acme is using the plane for 554 01:15:21,149 --> 01:15:23,151 its business use, generally, 555 01:15:23,952 --> 01:15:25,153 Acme owning the plane could actually work 556 01:15:25,153 --> 01:15:26,455 from an income tax perspective. 557 01:15:26,455 --> 01:15:27,523 It can be as simple as that. 558 01:15:27,756 --> 01:15:30,325 However, you'll very seldom see that 559 01:15:30,325 --> 01:15:31,793 structure be used in practice. 560 01:15:32,261 --> 01:15:33,695 For a number of reasons, some are not tax 561 01:15:33,695 --> 01:15:34,630 related, but the main 562 01:15:34,630 --> 01:15:37,432 tax one is many times 563 01:15:37,432 --> 01:15:38,967 for sales and use tax planning purposes, 564 01:15:38,967 --> 01:15:39,935 we need a separate 565 01:15:39,935 --> 01:15:42,371 entity to own the aircraft 566 01:15:43,171 --> 01:15:45,307 so that it can serve as the lessor of the 567 01:15:45,307 --> 01:15:46,108 aircraft and lease 568 01:15:46,108 --> 01:15:47,509 the plane from plane co 569 01:15:48,277 --> 01:15:49,411 to the construction company. 570 01:15:50,145 --> 01:15:53,315 The reason why that matters is sales tax 571 01:15:53,315 --> 01:15:54,416 can in some states be 572 01:15:54,416 --> 01:15:56,618 paid on lease revenue rather 573 01:15:56,685 --> 01:15:57,286 than up front on the 574 01:15:57,286 --> 01:15:58,253 purchase price of the plane. 575 01:15:58,687 --> 01:15:59,154 Oh, nice. 576 01:15:59,154 --> 01:15:59,888 So take Indiana, for 577 01:15:59,888 --> 01:16:00,956 example, perfect example. 578 01:16:01,823 --> 01:16:02,791 If you went out and bought a $10 million 579 01:16:02,791 --> 01:16:03,792 aircraft in Indiana, 580 01:16:04,026 --> 01:16:04,793 let's say you didn't work with 581 01:16:04,793 --> 01:16:06,295 the tax advisor at all, you 582 01:16:06,295 --> 01:16:07,095 just went out and bought it. 583 01:16:07,496 --> 01:16:08,196 Indiana would impose 584 01:16:08,196 --> 01:16:09,665 7% use tax on the plane. 585 01:16:10,732 --> 01:16:12,768 So that would be $700,000 tax liability 586 01:16:12,768 --> 01:16:13,969 on a $10 million aircraft. 587 01:16:15,103 --> 01:16:17,673 With proper planning, the aircraft can be 588 01:16:17,673 --> 01:16:19,608 leased from plane co 589 01:16:19,608 --> 01:16:20,475 to construction co in 590 01:16:20,475 --> 01:16:23,178 this example, that 7% can be paid over 591 01:16:23,178 --> 01:16:24,046 time on lease revenue. 592 01:16:24,446 --> 01:16:26,315 Is plane co like in Montana or Delaware? 593 01:16:26,615 --> 01:16:27,983 No, plane co can be in Indiana LLC. 594 01:16:28,283 --> 01:16:29,084 It could be a Montana 595 01:16:29,084 --> 01:16:30,285 LLC or Delaware LLC. 596 01:16:30,285 --> 01:16:30,852 It actually doesn't 597 01:16:30,852 --> 01:16:31,887 really impact what we're doing. 598 01:16:32,387 --> 01:16:34,656 So sometimes our clients will have out of 599 01:16:34,656 --> 01:16:36,091 state LLCs for some 600 01:16:36,091 --> 01:16:37,492 non-tax reason, but for 601 01:16:37,492 --> 01:16:39,061 tax purposes, it can be an Indiana LLC. 602 01:16:39,294 --> 01:16:40,362 That entity will have an 603 01:16:40,362 --> 01:16:41,430 Indiana sales tax account. 604 01:16:41,763 --> 01:16:42,931 So it'll be registered here anyway. 605 01:16:43,465 --> 01:16:43,665 Right. 606 01:16:43,699 --> 01:16:45,667 And how much just napkin math, how much 607 01:16:45,667 --> 01:16:48,804 savings could you expect just by doing 608 01:16:48,804 --> 01:16:49,538 the right paperwork, 609 01:16:49,805 --> 01:16:51,373 having the right timing, consulting with 610 01:16:51,373 --> 01:16:52,574 someone such as yourself, 611 01:16:52,908 --> 01:16:54,209 that would be able to help 612 01:16:54,676 --> 01:16:55,644 understand all of that. 613 01:16:55,877 --> 01:16:56,778 Yeah, generally in Indiana, 614 01:16:56,778 --> 01:16:58,347 it's about a 13 year break even. 615 01:16:58,847 --> 01:16:59,047 Yeah. 616 01:16:59,314 --> 01:17:00,549 So the amount of sales tax you would have 617 01:17:00,549 --> 01:17:01,516 paid on lease revenue 618 01:17:01,516 --> 01:17:02,250 compared to what you 619 01:17:02,250 --> 01:17:03,185 would have paid upfront will 620 01:17:03,185 --> 01:17:04,453 be the same after 13 years. 621 01:17:05,287 --> 01:17:07,155 So about you pay about one 13th of 622 01:17:07,155 --> 01:17:09,124 700,000 per year in 623 01:17:09,124 --> 01:17:10,325 sales tax on lease revenue. 624 01:17:10,325 --> 01:17:12,327 And the real beauty of that in Indiana 625 01:17:12,327 --> 01:17:13,195 and states like Indiana 626 01:17:13,195 --> 01:17:15,030 is if you sell the plane 627 01:17:15,030 --> 01:17:17,766 after four years, for example, then 628 01:17:17,766 --> 01:17:19,067 you've paid for 13th of 629 01:17:19,067 --> 01:17:19,601 what you would have paid 630 01:17:19,601 --> 01:17:20,002 upfront. 631 01:17:20,369 --> 01:17:20,569 Right. 632 01:17:20,802 --> 01:17:22,838 So remaining 9th or 13th stays with you 633 01:17:22,838 --> 01:17:24,072 when you sell the aircraft. 634 01:17:24,272 --> 01:17:25,707 The bottom line from my perspective, what 635 01:17:25,707 --> 01:17:28,043 I'm hearing is if you are 636 01:17:28,043 --> 01:17:30,512 even remotely interested 637 01:17:30,812 --> 01:17:32,447 in owning a jet, you need to have this 638 01:17:32,447 --> 01:17:33,649 stuff figured out prior 639 01:17:33,649 --> 01:17:35,717 to even talking to anybody 640 01:17:36,318 --> 01:17:38,654 about a transaction. 641 01:17:39,287 --> 01:17:41,390 Is that how far in advance do we need to? 642 01:17:41,623 --> 01:17:42,691 Really the earlier the better. 643 01:17:42,691 --> 01:17:42,991 Yeah. 644 01:17:42,991 --> 01:17:44,626 To get started with tax planning and at 645 01:17:44,626 --> 01:17:46,128 least kind of table that. 646 01:17:46,128 --> 01:17:49,164 If all the tax answers are good, then 647 01:17:49,164 --> 01:17:50,232 they can set that aside 648 01:17:50,232 --> 01:17:51,900 and we can revisit three 649 01:17:51,900 --> 01:17:52,934 months out of closing. 650 01:17:54,169 --> 01:17:55,504 But it's good to get those questions 651 01:17:55,504 --> 01:17:57,806 addressed well ahead of closing. 652 01:17:58,040 --> 01:17:59,374 One so we have a game plan in place when 653 01:17:59,374 --> 01:18:00,208 we do find the plane we 654 01:18:00,208 --> 01:18:00,909 want to buy and we can 655 01:18:00,909 --> 01:18:01,443 move quickly. 656 01:18:02,711 --> 01:18:05,547 But also if there's something that would 657 01:18:05,547 --> 01:18:06,448 prohibit them from taking 658 01:18:06,448 --> 01:18:07,516 income tax deductions on 659 01:18:07,516 --> 01:18:09,117 the plane, they probably want to know 660 01:18:09,117 --> 01:18:10,585 that sooner rather than later. 661 01:18:10,819 --> 01:18:12,254 So best to get those 662 01:18:12,254 --> 01:18:14,089 answers as early as possible. 663 01:18:14,456 --> 01:18:16,491 And we're always happy to have 664 01:18:16,491 --> 01:18:18,393 consultations with the 665 01:18:18,393 --> 01:18:19,261 way that our firm works. 666 01:18:19,294 --> 01:18:23,031 We do calls early on in that process. 667 01:18:23,031 --> 01:18:24,666 We don't need to be engaged two years 668 01:18:24,666 --> 01:18:26,101 before we buy a plane or 669 01:18:26,101 --> 01:18:26,868 if we're just exploring 670 01:18:26,868 --> 01:18:28,270 the opportunity to buy a plane. 671 01:18:28,703 --> 01:18:30,105 We have those called all the time. 672 01:18:30,105 --> 01:18:31,273 We wrote kind of an open book with 673 01:18:31,273 --> 01:18:32,140 answering questions so 674 01:18:32,140 --> 01:18:35,343 that buyers know if they can 675 01:18:35,343 --> 01:18:36,344 take deductions on the plane. 676 01:18:36,912 --> 01:18:37,112 Nice. 677 01:18:37,512 --> 01:18:37,712 Nice. 678 01:18:37,846 --> 01:18:40,182 And Jason as a broker, that's something 679 01:18:40,182 --> 01:18:41,149 that's top of mind for you 680 01:18:41,149 --> 01:18:42,284 at all times is like, how 681 01:18:42,284 --> 01:18:45,420 do I make sure that my client is getting 682 01:18:45,420 --> 01:18:46,455 the best transaction? 683 01:18:46,788 --> 01:18:46,988 Right? 684 01:18:47,355 --> 01:18:47,722 Absolutely. 685 01:18:48,724 --> 01:18:51,493 So you would reach out early on in the 686 01:18:51,493 --> 01:18:52,194 conversation with your 687 01:18:52,194 --> 01:18:54,730 client about the next stuff. 688 01:18:54,730 --> 01:18:56,164 Yeah, that and financing. 689 01:18:56,832 --> 01:19:00,435 But steering it back towards the part 690 01:19:00,435 --> 01:19:04,306 135, part 91 world as 691 01:19:04,306 --> 01:19:05,474 far as setup and structure. 692 01:19:06,007 --> 01:19:06,975 What are your thoughts on that 693 01:19:06,975 --> 01:19:08,610 as far as how to go about it? 694 01:19:09,010 --> 01:19:09,377 Yeah. 695 01:19:09,377 --> 01:19:11,413 So from a tax perspective, if it's just 696 01:19:11,413 --> 01:19:12,447 the taxpayer flying 697 01:19:12,447 --> 01:19:13,915 around in their own aircraft, 698 01:19:15,016 --> 01:19:16,685 that flight being operated under part 91 699 01:19:16,685 --> 01:19:18,420 or part 135 won't 700 01:19:18,420 --> 01:19:20,055 change anything from a tax 701 01:19:20,055 --> 01:19:22,057 perspective on the income tax side. 702 01:19:22,757 --> 01:19:23,992 In a few states, there may be some 703 01:19:23,992 --> 01:19:26,161 personal property tax benefits of 704 01:19:26,161 --> 01:19:26,795 operating under part 705 01:19:26,928 --> 01:19:27,295 135. 706 01:19:28,096 --> 01:19:29,765 But generally speaking, it's the same if 707 01:19:29,765 --> 01:19:30,432 it's the taxpayer 708 01:19:30,432 --> 01:19:32,467 flying on their own aircraft. 709 01:19:32,768 --> 01:19:35,504 Now if the aircraft is being leased to a 710 01:19:35,504 --> 01:19:36,204 charter company, for 711 01:19:36,204 --> 01:19:37,472 example, for charter to the public, 712 01:19:38,073 --> 01:19:39,374 that's business use, of course, but 713 01:19:39,374 --> 01:19:40,175 that's treated a little 714 01:19:40,175 --> 01:19:42,210 bit differently than internal 715 01:19:42,310 --> 01:19:43,145 business use by the 716 01:19:43,145 --> 01:19:45,647 taxpayer for their own business. 717 01:19:45,914 --> 01:19:47,249 So certainly if that's a part of the game 718 01:19:47,249 --> 01:19:48,416 plan for the aircraft 719 01:19:48,416 --> 01:19:49,818 purchaser, we need to 720 01:19:49,818 --> 01:19:52,354 discuss that ahead of purchase as well. 721 01:19:52,554 --> 01:19:54,689 And that can open the door to some sales 722 01:19:54,689 --> 01:19:57,025 and use tax exemptions as well. 723 01:19:58,293 --> 01:20:01,329 So companies like QuarterShare, so you 724 01:20:01,329 --> 01:20:01,963 own a quarter of the 725 01:20:01,963 --> 01:20:03,698 airplane, they're paying 726 01:20:03,698 --> 01:20:04,366 tax on that? 727 01:20:05,433 --> 01:20:06,668 Well it kind of 728 01:20:06,668 --> 01:20:07,636 depends on the fact pattern. 729 01:20:07,736 --> 01:20:09,371 But generally speaking, if we go out and 730 01:20:09,371 --> 01:20:10,705 we buy a fractional 731 01:20:10,705 --> 01:20:12,140 interest in an aircraft, 732 01:20:12,707 --> 01:20:14,743 we can derive a similar income tax 733 01:20:14,743 --> 01:20:16,511 benefit to if we bought an 734 01:20:16,511 --> 01:20:17,512 aircraft for the same purchase 735 01:20:17,512 --> 01:20:17,746 price. 736 01:20:17,946 --> 01:20:20,215 So let's say we buy a share for $2 737 01:20:20,215 --> 01:20:21,817 million instead of buying 738 01:20:21,817 --> 01:20:23,585 a $2 million whole aircraft 739 01:20:23,585 --> 01:20:26,087 and we fly at 100% for business, both of 740 01:20:26,087 --> 01:20:27,289 them, then we get the 741 01:20:27,289 --> 01:20:28,723 same depreciation benefit 742 01:20:29,291 --> 01:20:29,724 either way. 743 01:20:30,158 --> 01:20:31,626 The sales and use tax planning involved 744 01:20:31,626 --> 01:20:34,329 typically is, there's less 745 01:20:34,329 --> 01:20:36,264 for a fractional interest 746 01:20:36,364 --> 01:20:37,566 than a whole aircraft ownership. 747 01:20:37,933 --> 01:20:38,300 Makes sense. 748 01:20:39,000 --> 01:20:39,201 Awesome. 749 01:20:39,467 --> 01:20:41,236 So how can people reach out to you if 750 01:20:41,236 --> 01:20:43,238 they are in the process 751 01:20:43,238 --> 01:20:44,406 of like, hey, I really 752 01:20:44,406 --> 01:20:46,741 think I'm ready to start the conversation 753 01:20:46,741 --> 01:20:48,510 of owning a jet and 754 01:20:48,510 --> 01:20:49,411 this is something that 755 01:20:49,411 --> 01:20:51,246 I need to be thinking about potentially 756 01:20:51,246 --> 01:20:53,615 setting up my own plane co or whatever. 757 01:20:54,216 --> 01:20:54,449 Yeah. 758 01:20:54,883 --> 01:20:56,351 Our website is aviation tax consultants. 759 01:20:56,952 --> 01:20:57,853 My email is kj at 760 01:20:57,853 --> 01:20:59,287 aviationtaxconsultants.com. 761 01:21:00,055 --> 01:21:00,789 Reach out any time. 762 01:21:01,289 --> 01:21:01,957 Like I said, we're 763 01:21:01,957 --> 01:21:03,024 happy to hop on a call. 764 01:21:03,925 --> 01:21:05,026 We don't have an hourly 765 01:21:05,026 --> 01:21:06,261 fee or anything like that. 766 01:21:06,294 --> 01:21:06,995 We'll get on the phone. 767 01:21:06,995 --> 01:21:07,729 We'll answer your questions. 768 01:21:07,963 --> 01:21:09,030 If it makes sense to engage 769 01:21:09,030 --> 01:21:11,132 us, we can talk about that. 770 01:21:11,867 --> 01:21:13,101 But we're happy to be a resource. 771 01:21:13,368 --> 01:21:14,169 We'll definitely have you back. 772 01:21:14,169 --> 01:21:15,370 There's like a ton of other questions. 773 01:21:15,704 --> 01:21:16,071 I don't know. 774 01:21:16,404 --> 01:21:18,607 But it's like, I feel like we're abusing 775 01:21:18,607 --> 01:21:20,108 your knowledge at this point. 776 01:21:20,909 --> 01:21:21,843 I'd love to come back anytime. 777 01:21:22,310 --> 01:21:22,611 Awesome. 778 01:21:22,911 --> 01:21:23,144 Awesome. 779 01:21:23,144 --> 01:21:23,612 Well, thank you. 780 01:21:24,145 --> 01:21:25,380 Thank you for watching Own the Jet. 781 01:21:25,780 --> 01:21:27,315 If you want to see more Own the Jet, make 782 01:21:27,315 --> 01:21:28,149 sure to subscribe to 783 01:21:28,149 --> 01:21:29,017 our channel on YouTube 784 01:21:29,184 --> 01:21:30,485 and leave a comment telling us what 785 01:21:30,485 --> 01:21:31,653 aspect of jet ownership 786 01:21:31,653 --> 01:21:32,921 you'd like to know more about. 787 01:21:33,588 --> 01:21:34,389 Own the Jet is brought to 788 01:21:34,389 --> 01:21:35,423 you by Aspen Aero Group. 789 01:21:35,957 --> 01:21:37,392 Your trusted partner in private and 790 01:21:37,392 --> 01:21:38,393 corporate jet ownership. 791 01:21:39,027 --> 01:21:40,996 Learn more at AspenAeroGroup.com. 792 01:21:41,529 --> 01:21:43,064 This has been a Savage Media Production.