The Economic Stimulus Act of 2008 provides both 50%
bonus depreciation on new aircraft purchases, and new improvements to used
aircraft; as well as an expanded $250,000 expensing election for taxpayers
who invest less than $1,050,000 in new or used capital assets. Both
provisions require that the aircraft be placed in service during 2008. The
balance of the assets will be written off in the remaining 5 years under an
accelerated basis for non-commercial operators.
Other highlights include the following:
Q
General tax rules require that the slower method be used for
depreciating aircraft for purposes of determining alternative minimum tax.
Aircraft qualifying for bonus depreciation can use accelerated methods for
both regular tax and alternative minimum tax.
Q
Demonstrator aircraft held only in the name of a dealer will
qualify as new for purposes of bonus depreciation.
Q
If the taxpayer has already contracted to buy an asset prior
to 2008, the asset will not qualify for bonus depreciation to that party, or
any related company. However, if an unrelated party acquires the rights to
the new asset, it may qualify for bonus depreciation under certain
circumstances.
Q
In order for a used aircraft purchaser to qualify for bonus
depreciation on new improvements, he must purchase them separately. For
example, if a taxpayer buys new engines to put on a used airframe the
engines will qualify for bonus depreciation. If on the other than the
taxpayer buys an aircraft with new engines on it, no portion of it will
generally qualify for bonus depreciation.
Q
A taxpayer may create a net operating loss with bonus
depreciation and carry it back to prior years. The expensing election is
limited to taxable income; therefore net operating losses cannot be
generated.
These
new provisions in the law contain limitations and provide opportunities that
are further detailed at
www.advocatetax.com.
Louis
M. Meiners, Jr.
President
Advocate Aircraft Taxation Company
