Taking Flight

Following 9/11 companies of all sizes increased their purchases of business aircraft to make travel easier and more convenient for employees and executives. CPAs should be aware of the tax, financial, operational and regulatory issues involved in acquiring and operating a business aircraft

Tax aspects of aircraft ownership

STANDARD RATES FOR THE JET SET

Most of us are familiar with the use of mileage rates to value personal use of company cars. Not so many of us have to worry about valuing personal trips on company aircraft. For those who do, the IRS publishes "SIFL" (Standard Industry Fare Level) rates for valuing personal use of company aircraft.

The IRS just released the SIFL rates for the first half of 2007 (Rev. Rul. 2007-17). The rates have two parts: a "Terminal Charge" that applies to each trip, no matter the length, and a mileage charge. Of course, it has to be more complicated: the mileage charge is multiplied by an "aircraft multiple" before it is added to the "terminal charge." If you are a "control employee," you use a different aircraft multiple.

For flights taken January 1, 2007 through June 30, 2007 the terminal charge will be $37.92. For the first 500 miles of a trip, the SIFL rate per mile is $..2075. For the next 1000 miles, the rate is $..1582; for miles after that, the rate is $..1521 per mile.

The aircraft multiples are: (2007)

Maximum Certified Take-Off Weight of the Aircraft	Aircraft Multiple for a Control Employee (Percent)	Aircraft Multiple for a Non-control Employee (Percent)
6,000 lbs. or less	62.5%	15.6%
6,001-10,000 lbs.	125.0%	23.4%
10,001-25,000 lbs.	300.0%	31.3%
25,001 lbs. or more	400.0%	31.3%

Standard Industry Fare Level (SIFL)

If your company provides a free flight on a company aircraft to an employee that's not for business purposes, you must impute the value of the flight as income on the employee's W-2. The table below is how the IRS values such a flight. It's a combination of a terminal charge and a mileage charge.

Period Flight Taken	Terminal Charge	Up to 500 Miles	501-1500 Miles	Over 1500 Miles
Jan.1, 07--Jun.30, 07	$37.92	0.2075	0.1582	0.1521
Jul.1, 06--Dec.31, 06	37.85	0.2071	0.1579	0.1518
Jan.1, 06--Jun.30, 06	37.00	0.2024	0.1543	0.1484
Jul.1, 05--Dec.31, 05	35.21	0.1926	0.1468	0.1412
Jan.1, 05--Jun.30, 05	35.49	0.1942	0.148	0.1423
Jul.1, 04--Dec.31, 04	35.21	0.1926	0.1469	0.1412
Jan.1, 04--Jun.30, 04	34.45	0.1884	0.1437	0.1381
Jul.1, 03--Dec.31, 03	34.66	0.1896	0.1445	0.139
Jan.1, 03--Jun.30, 03	37.76	0.2065	0.1575	0.1514
Jul.1, 02--Dec.31, 02	38.02	0.208	0.1586	0.1524
Jan.1, 02--Jun.30, 02	37.12	0.2031	0.1548	0.1489
Jul.1, 01--Dec.31, 01	36.88	0.2017	0.1538	0.1479
Jan.1, 01--Jun.30, 01	35.84	0.1961	0.1495	0.1437
Jul.1, 00--Dec.31, 00	34.57	0.1891	0.1442	0.1386
Jan.1, 00--Jun.30, 00	32.98	0.1804	0.1376	0.1323
Jul.1, 99--Dec.31, 99	32.41	0.1773	0.1352	0.13
Jan.1, 99--Jun.30, 99	32.69	0.1788	0.1364	0.1311
Jul.1, 98--Dec.31, 98	31.81	0.174	0.1327	0.1276
Jan.1, 98--Jun.30, 98	31.6	0.1729	0.1318	0.1267
Jul.1, 97--Dec.31, 97	31.72	0.1735	0.1323	0.1272
Jan.1, 97--Jun.30, 97	31.73	0.1735	0.1323	0.1272
Jul.1, 96--Dec.31, 96	31.61	0.1729	0.1318	0.1267
Jan.1, 96--Jun.30, 96	32.20	0.1761	0.1343	0.1291
Jul.1, 95--Dec.31, 95	30.86	0.1688	0.1287	0.1237
Jan.1. 95--Jun.30, 95	31.52	0.1724	0.1315	0.1264

So Joe Executive, CFO, has a 2000 mile flight in the company Boeing to go golfing. As a control employee, his aircraft multiple is 400%. The amount added to the W-2 is as follows:

First 500 miles: 400% x $.2075 x 500 = $415.00
Next 1000 miles: 400% x $.1582 x 1000 = $632.80
Last 500 miles: 400% x $.1521 x 500 = $304.20
_______

$1,352.00

+ Terminal Charge: 37.92
________

Total amount added to Joe's W-2: $1,389.92

If his wife accompanies him, another $1,389.92 is added.

If he takes the Saratoga next time (maximum takeoff weight 3,600 lbs) his aircraft multiple will only be 62.5%, and his W-2 add-back will be only $211.25.

Yucaipa Office

35460 Beech Avenue

Yucaipa, CA 92399

Telephone (909) 790-1583

Fax (909) 790-3862

E-mail Please Call For Address

Please contact our Web master with questions or comments.

Web designed and authored by Jerry E. Bartram, CPA Last Updated 02/08/08

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, I inform you that any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any matters addressed herein."