What You Need to Know
- Key takeaway #1Individual and corporate taxpayers that improperly reported personal aircraft use as business use may face increased taxable income and penalties and/or denial of deductions.
- Key takeaway #2Corporate taxpayers that allocated the affiliated individual’s use of the corporate jet as business use may be denied deduction of such use.
- Key takeaway #3Taxpayers may wish to preemptively audit the prior deductions and, if the target of an IRS audit, seek advice from tax professionals with specific expertise in business aviation tax and IRS audits.
Last week, the IRS announced plans to begin a campaign to audit personal use of business aircraft. The audits will focus on whether large corporations, partnerships and high-and ultra-high net worth aircraft owners have properly reported their business and personal aircraft usage for tax purposes, with a particular focus on ensuring that owners are only taking deductions to which they are entitled. Given the value of an aircraft, the amount of a deduction for aircraft related expenditures on a given taxpayer’s return can be in the tens of millions of dollars, and with more than 10,000 corporate jets operating in the U.S., IRS Commissioner Daniel Werfel recognized that much is at stake with this campaign. The audit campaign is expected to focus initially on multinational and domestic corporations and complex partnerships but is expected to expand from there.
We would like to thank Heonjun Park, Associate, for his contribution to this alert.
For further information, please contact:
S. Starling Marshall , Partner, Crowell & Moring
smarshall@crowell.com
