Financing and Company Ownership

[Tick]

So I've been researching the "right" airplane for me for about three years now and have the make and model finally picked out. Now I need to get the financing side figured out and I was thinking this would be the place to start asking questions. The one I'm looking at is sitting around the range of 65K.

Two Questions:
1. What kind of terms have you seen available for A/C financing? I've bounced around on the financing websites a bit but without having them run my credit (not that close yet), I can't find out what's actually realistic for a small single. What have you all seen in practice for yours?

2. We're opening a business in the next couple months and eventually I'd like to move the A/C into the LLC's name. Anyone have experience doing that? We'll be opening a satellite location about 8.5 hrs (drive) away from here and it will be easy to justify the expense at that point.

I know these questions are a bit personal, so no hard feelings if you guys don't want answer in the open. You're welcome to PM me if that's OK. Thanks again!!!

[steve]

I don't know about Alaska taxes, but you might want to check to see if you changed ownership in the plane, it might be subject to being taxed again. It would in most states and that would include your own LLC.

Steve

[Littlecub]

Agree. Set up 'shell' corp first, when you buy, transfer ownership inside-but you need a lawyer that specializes in business in your state to guide you through it-buy advice first.

You now have my uninformed, unfounded opinion-fortunately for free!
lc

[qmdv]

Consider buying the plane yourself and leasing it to the business. Get better coucil than in this site.

Will get some good ideas though.

Tim

[lesuther]

I'm pretty uninformed at this sort of thing, but my LLC saved me several thousand dollars when I got the plane (I simply became a member of the existing LLC structure, and then dropped the old member, et voila...). The savings was a "use tax" for being based at the airport, and the plane was owned by three members that bowed out over time. You might not have the same issues in your case.

[Glidergeek]

One thing to consider is if you've got real property (house) if you can get an equity line of credit easily, Finance the plane through that. Your interest will be deductible (mortgage interest). Second thing to consider unless your business is aviation related avoid making it known or running your plane, boat or other hobby through your biz directly as this is a flag for the IRS. If anything document your Biz usage and have your biz buy your fuel. You should avoid co-mingling expenses as this could get you in trouble.

This advise cost you nothing and as such is worth that much.

Read my post carefully, seems below post seems to disagree, I said unless you biz is aviation related " avoid making it known or running your plane, boat or other hobby through your biz directly". Means if you buy a plane through your biz and depreciate it and try and write it off you will most likely trough up a red flag. If you document well and can prove you use it primarily for biz you'll be in good shape.

But talk to your CPA or tax adviser.

[88H]

Tick:

Recent posts indicating you have tax issues to worry about when transferring plane from personal to business are incorrect. You can contribute plane to the LLC without triggering tax.

However, hangup could be if you are financing. Once you finance in your name personally, will have to get the bank to agree to transfer of ownership.

Side benefit of putting aircraft into LLC would also be that you would have additional liability protection.

As to being a red flag to use plane for business, I disagree. Sounds like you would be legitimately using plane for travel to new location. Especially if you are using plane more than 50% for business purposes, there are significant tax advantages in setting up and depreciating aircraft. Would agree with previous posts that it would pay you to get direction from tax accountant on tax advantages, support and requirements to prove business use, etc.

Good Luck!! Larry

[denalipilot]

I wonder if AOPA Legal Services would give you a straight-up answer. I'm guessing your answer is going to be pretty Alaska-specific though.

[steve]

88H: state sales tax when you register it in the new name after transferring title what I was referring too, maybe Alaska doesn't have a sales tax or tax planes, I don't know. If not, than that would not be an issue.

Steve

[88H]

Good point, Steve.

I'm in NM and property tax here on aircraft is negligible. Perhaps AK is different, I don't know.

[dirtstrip]

Keep in mind if you use your plane 50% for business and own it long enough to depreciate that portion out, when you sell it you will have to likewise report 50% of the price received as income. You will owe capital gains tax on the 50% you declared as a deduction, giving back some of the advantage you got by avoiding income tax now. So don't mistake a dollar of tax deducted now on the aircraft itself as one you get to keep, especially if we go back to appreciating aircraft values. Then your IRS free lunch just gets smaller as the resale value climbs.

The plane ownership itself ends up saving only the difference in your tax bracket rate that you would have paid by keeping it 100% personal use vs. the capital gains rate you will have to pay at the time of sale. Over enough time that means the biggest gains you get by deducting for business might be the operating costs like fuel, insurance and repairs and hangar rent. Those tax savings you get to keep. I can see this working much better for new aircraft than older used planes because a new one is likely to drop in price after purchase but an older plane may hold its value or even increase.

[OregonMaule]

AOPA has good info on this. Go read there.

Good day

[tsnplanes]

Borrow on your home equity and avoid the higher interest. The intrest is then deductable. I would keep the plane personaly and rent to LLC. Will not trigger an IRS audit nearly as fast. Good Luck!

[Glidergeek]

or win $640 million tonight and smile yourself to death

[msara]

or win $640 million tonight and smile yourself to death

Its horrible

[29singlespeed]

Two Questions:
1. What kind of terms have you seen available for A/C financing? I've bounced around on the financing websites a bit but without having them run my credit (not that close yet), I can't find out what's actually realistic for a small single. What have you all seen in practice for yours?
!

8-12% is what I have been seeing with a bunch of hoops to jump through. I have found it's actually harder to finance a place under 50k as less places to do so. I am looking at planes in the 30-35k range.