Wiley Rein LLP


Aviation | AVIATION TAX PLANNING

Tax planning for the purchase, lease, and operation of an aircraft can save the owner/operator millions of dollars and is an essential part of any transaction.  We provide the full range of legal services to our clients for complete tax planning, compliance, and audit and litigation defense.



Federal Income Tax Planning

We provide federal income tax planning that is specific to each client's needs based upon individual aircraft ownership and use.

When purchasing an aircraft, we assist our clients with maximizing federal income tax deductions for aircraft expenses, depreciation, bonus depreciation, and compliance with federal income tax rules for "trade or business requirements," hobby loss, at-risk rules, passive loss, and recordkeeping and substantiation requirements.

Business aircraft are frequently used by our clients' executives, board members, employees, and their spouses, children, and guests for personal and entertainment purposes.  We provide our clients with federal income tax planning for such aircraft use and assist with federal income tax compliance, including the Standard Industry Fair Level (SIFL) rules and deduction disallowance rules that apply to companies on the personal, "entertainment" use of their aircraft.

State Sales and Use Tax Planning

The delivery of an aircraft may subject a client to sales tax in the state where the aircraft is delivered.  The use of an aircraft may subject a client to "use" tax in the state where the aircraft is operated, regardless of whether sales tax was paid to another state.  We work with our clients to develop and implement a plan of aircraft use that will minimize the impact of both state sales and use tax through a variety of tax exemptions, such as "fly away" laws, leasing exemptions, and interstate use.

1031 Tax Free Exchanges

When an aircraft owner sells an aircraft after taking federal income tax depreciation deductions, the owner can be required to "recapture" those deductions when the aircraft is sold, which can create a federal income tax liability.  One of the most effective ways to avoid depreciation recapture on the sale of an aircraft is to structure the transaction as a 1031 tax-free exchange.  We plan, organize, and prepare for our clients all of the documents necessary to obtain 1031 tax-free exchange treatment on the sale of our clients' aircraft in both forward and reverse 1031 exchanges.

Federal Excise Taxes

Aircraft operated under Federal Aviation Regulations (FAR) Part 91 (private), FAR Part 135 (charter), and FAR Part 121 (commercial) can all be subject to special federal excise taxes (FET) on air transportation services.  Frequently, business aircraft operations are improperly structured and are, unintentionally, subject to FET.  We review our clients' aircraft operations to determine their FET obligations, structure their aircraft activity to minimize FET obligations, and provide assistance with FET compliance and Internal Revenue Service (IRS) filings.  We also work with charter and commercial carriers to structure transactions to minimize the incidence of FET.

Tax Audits and Litigation

We represent our clients in all stages of tax audits, appeals, and litigation to protect them against increases in federal income taxes, aircraft deduction disallowances, federal excise taxes, state sales and use taxes, penalties, and interest.

Representative Experience

  • Provided aircraft management, charter, and tax (income, excise, and sales) planning advisory services to a major public accounting firm for a Bombardier Global Express.
  • Represented private equity firm in the purchase of a Falcon 900B and provided related tax planning services.
  • Advised alternative energy producer in the acquisition of a Hawker 400XP and provided related tax planning services.
  • Represented investment bank in the acquisition, sale, and tax planning of multiple aircraft.
  • Advised international electronic product solutions company on business and personal aircraft use and provided tax planning services.
  • Represented alternative fuel trader in the purchase of a Hawker 900XP, including ownership planning, financing, management, charter, hangar, and tax planning.
  • Represented large clothing chain with aircraft and tax planning services in connection with a Cessna CJ3 aircraft.
  • Provided tax planning services to large U.S. frozen vegetables supplier relating to a CitationJet 650.
  • Represented charter operator in successful federal excise tax audit.
  • Counseled large public accounting firm in state sales tax audit.
  • Represented private company in successful federal excise tax appeal.
  • Prepared and represented Japanese businessman in state sales/use tax private ruling.
  • Counseled car dealership company in a successful federal excise tax audit.



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