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Deducting an Airplane

August 02, 2018 | Written by: John N.
Airplane Flying
My member had a small startup that required him to travel all over the country doing business. A certified pilot for over 15 years, the member had used expenses related to an airplane to leverage the ability to conduct important business on short notice, typically, at a faraway city of the client’s choosing. The member stated this helped him turn his business into a success. The member rationalized that he would have up to three meetings in a single day across different cities spanning over 200 miles, and this helped him conduct business in all these places with the help of an airplane he flew himself.  He further explained in written testimony that the costs for car expenses, lodging, food and incidentals would far exceed the costs of flying the plane.  In addition, he asserted he may not have been able to aggressively conduct business and turn it into an eventual success without leveraging the use of an airplane to have so many important business meetings.

Typically, business expenses are required to be ordinary and necessary. At first glance, these expenses may be considered not ordinary − or an auditor may decide the airplane expenses are more personal in nature. An auditor may typically scrutinize the airplane expenses as not being deductible.

The member had merit with his cases and many valid documents substantiating his expenses and tax position. At TaxAudit, we provide our analysis and warnings to our members and we explain that we are not auditors, but rather are advocates for our clients. We believe our 30 years of experience gives us a clear understanding of an auditor’s thought process. The member in this case believed he had a strong argument that his expenses regarding the airplane were more economical and more practical than alternatives such as driving a car and paying for lodging and meals. After our thorough analysis, we advised the member that we would defend his case to the best of our ability, but that he should be prepared to have the airplane expenses challenged and possibly even disallowed.

Our annual low-cost memberships cover our members with income tax audit representation whether it is one or more audits − all for the same low price. The taxpayer was audited for one year by the IRS and then the IRS audited him again the next year for the same expenses. He was then audited by the state tax authority for the same year and then another year by the state as well. In total, the member had four audits and we helped him with all of them. The defense we provided regarding the airplane expenses was mostly accepted by the federal and state tax authorities. For one of the audits we reduced the member’s tax bill from over $20,000 to over $2,000, and the remaining three audits resulted in no changes! The taxpayer was unbelievably happy with the results.

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