July 7, 2014
Listen to an NBAA Flight Plan podcast about the Aircraft Transactions Guide.
How often do you buy or sell aircraft? If you’re not an aircraft sales professional, chances are you don’t do it very often. That is why NBAA created its first-ever Aircraft Transactions Guide, now available to Members on the NBAA website.
The guide is designed as a one-stop resource for owner-operators and flight departments planning to conduct an aircraft transaction, covering issues that range from taxes to FAA regulatory considerations.
“It goes beyond financial issues and also covers regulatory concerns,” said Scott O’Brien, NBAA’s senior manager for finance and tax policy, who managed the publication’s production in conjunction with several industry volunteers on the Association’s Tax Committee. “It reviews key considerations for selecting an appropriate FAR Part 91 operational structure or considering FAR Part 135 operations if an operator’s situation fits the scenario. With advance planning and knowledge of the questions to ask your advisors, we hope to help Members avoid costly pitfalls during the transaction process.”
The NBAA Aircraft Transactions Guide was developed not to replace transaction advisors, but to augment the advice you might receive and help you make better use of it, O’Brien said.
“For example, tax depreciation is a very important part of the equation when acquiring a business aircraft,” explained O’Brien. “What are the depreciation schedules? What are some of the ways depreciation deductions may be limited during your ownership of the aircraft? The guide enables Members to be prepared for depreciation considerations that will come up during the transaction process.”
O’Brien said the guide is especially useful for smaller flight departments and owner-operators. “You may not have a staff of in-house attorneys or accountants, so the guide will give you an idea of the right questions to ask,” he explained.
O’Brien also pointed out that the guide is a useful resource for in-house attorneys who may know everything about their companies but perhaps are not as familiar with the intricacies of aircraft transactions.
One example of a common mistake made during the transaction process is falling into the “flight department company trap.”
“In this case, under Part 91, you create a single-purpose entity to own and operate the aircraft on behalf of an individual or a company. That might be attractive from a tax or liability standpoint, but to the FAA, it looks like you’re paying for a commercial flight whenever you fund the operation. By using resources such as the Aircraft Transactions Guide, NBAA Members can be armed with the knowledge to avoid falling into these traps,” said O’Brien.