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  • Why Buying a Private Plane in 2018 Could Be Financially Prudent for a Business Owner

    Sep 18, 2018

    IBA, the Pacific Northwest’s oldest business brokerage firm serving the middle market, periodically facilitates transactions with sell side clients and business buyers who own private planes.  The planes can be used to facilitate timely meetings between parties, as a recent meeting at the airport deli at Boeing Field did between an IBA represented seller and a potential business buyer or to better serve customers as an Alaskan client did who had projects in remote locations around the state.  At its core, an airplane is a vehicle that allows for timely transportation of people & products, that can be a valuable business asset in a geographic region like the Pacific Northwest where access by road, especially in the winter, can be problematic or at minimum a non-productive use of valuable time.

    One of the interesting components of the 2017 Tax Cuts and Jobs Act was an element that allowed taxpayers the immediate deduction of the cost of aircraft acquired and placed in service after September 27, 2017 and before January 1, 2027.  The new law permits 100 percent depreciation for both factory new and pre-owned aircraft provided the following requirements are met:

    1. The depreciable property must have a recovery period of twenty years or less, such as is common for commercial and non-commercial aircraft.
    2. The acquisition is the taxpayer’s first use of the property.

    Additional elements of the tax change related to aircraft acquisition include the following:

    1. Longer Production Period Property (LPPP) and Certain Aircraft are eligible for a one-year extension of the “placed in-service” date provided a binding written purchase agreement exists and a non-refundable deposit of at least the lesser of 10% of the cost of the aircraft or $100,000 is made when executing the agreement. This means that an aircraft can be purchased in 2018 and written off in the current calendar year, but not put into operation until 2019.
    2. “Like-Kind” exchanges of aircraft, like the 1031 exchanges that continue to be allowed for real property, were eliminated in the tax act.

    Opportunities like this one to have time value of money tax saving benefits for entrepreneurs have a history of being washed away in the ebb & flow of the political tide in Washington DC.  I share the information because if you are having a good year financially in Jet City, Seattle, or elsewhere in the Pacific Northwest given our robust regional economy and believe a private aircraft would be a beneficial tool to enhance operational productivity and efficiency, 2018 could be the year for your company to take flight in that direction.  Detailed discussion of the new tax law related to aircraft acquisition with your company CFO or CPA in relation to your specific tax situation is encouraged prior to taking purchase action.

    I also share this information because IBA is a trusted professional resource to entrepreneurs wishing to sell or buy privately held companies in the aerospace industry.  Aircraft sales, whether new or used, are good for the manufacturers, distributors, service providers, and retail vendors affiliated with that industry.  Increased revenues & profits are good for these business owners and in an ancillary manner, when the timing is right, good for IBA because the greater the revenue & profitability and stronger the growth trends of a business the higher the value IBA will be able to achieve for our clients when professionally facilitating an asset or stock sale involving an aerospace business in an environment of confidentiality employing “best practices”.  IBA is a large proponent of “win-win” scenarios.  It is not difficult to envision a multiple tier “win-win” scenario where a business owner enhances their operations by adding a corporate aircraft; where that purchase positively impacts businesses in the aerospace industry creating employment and enhancing tax revenue for federal, state, and local government; and ultimately results in a business owner being able to sell their company for a fair market value achieving an appropriate return on their vision, time, energy, and investment as an entrepreneur.

    IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.

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