When buying a private jet, your initial structure for owning and operating the aircraft must meet your current business and tax goals as well as comply with the FAA regulations.
Life Changes and Business Changes
In addition, knowing that life and business can change, you may want to consider how to optimize your ownership and operating structure to be ready for potential future changes.
Planning for Changes
in the Aircraft Loan Documents
Planning ahead for future changes in your aircraft use is particularly important if you are financing the purchase of the aircraft. If you may want to later lease the aircraft to a third party or add the aircraft to a Part 135 charter certificate to help cover costs or timeshare the aircraft to a couple of key executives, try to include these options in your loan documents. The lender may agree to consider these additional uses at a later time.
Hold An Annual Review
to Identify Pending Changes
An annual review of your aircraft ownership and operational structure will help you identify in advance whether any pending changes may affect the aircraft and whether any changes that happened last year are affecting the aircraft. Early identification of aircraft ownership and operation changes and knowledge of the requirements to satisfy the FAA regulations allows you to address issues before they become significant problems.
How to Approach a Change
If any life or business change may affect the ownership or operation of the aircraft, you will want to make a list of all of the changes, all of the entities and individuals affected by the changes and each entity and individual’s relationship to the plane. Next, work with your tax advisor and your aviation attorney to determine how the changes will affect the taxes to be paid and whether the anticipated changes will still allow the ownership and the operation of the aircraft to comply with the FAA regulations or whether additional changes are required.
Taxes and Aviation Regulations
You already know that tax rules can have demanding requirements. Business aviation is a highly regulated industry and in addition to civil penalties and bad publicity, there is a possible denial of insurance coverage if a claim is made on an aircraft that has ownership or operations that do not meet the FAA’s regulatory requirements.
Michelle M. Wade is with the law firm of Jetstream Aviation Law and counsels clients on the acquisition, financing and operation of corporate jets operated under Part 91 and Part 135 of the Federal Aviation Regulations. Jetstream Aviation Law can be found at www.JetstreamLaw.com.
The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.