Sport Pilot Talk

drseti · Joined: 28 Nov 2009 Posts: 1387 Location: Lock Haven PA

tu16 wrote: Do you think a leaseback to a school can make a local school interested in investing into their CFI transitional training?

That's a tough one, Alex. Most flight schools expect their instructors to bring themselves up to speed at their own expense. Can't blame them for that attitude, either, given that most young CFIs are only instructing to get someone else to pay for their flight hours. Very few stay with an FBO long enough to justify the employer investing anything in their training or currency.

On a more general note: I don't see leasebacks making a lot of sense for the owner who wants to fly his or her plane. They are strictly a business transaction, and you would be treated just like any other renter. Leaseback makes sense if you are in a high enough marginal tax rate to be able to benefit from accelerated depreciation. Otherwise, it's a break-even proposition at best. Partnerships or flying clubs make a lot more sense for someone who actually wants to fly. My opinion, of course; your mileage may vary.

scottj · Posted: Thu Feb 25, 2010 12:32 pm Post subject: Leasebacks

A leaseback is the "only" way to make an LSA and Sport Pilot tax deductible. Regulations do not allow Sport Pilots to use airplanes in the furtherance of a business, except flight training.

You can discriminate and choose your own customers. Work it out in your lease with the school or instructor the flight requirements.

drseti · Joined: 28 Nov 2009 Posts: 1387 Location: Lock Haven PA

scottj wrote: A leaseback is the "only" way to make an LSA and Sport Pilot tax deductible.

Even then, it only makes sense if you are in one of the higher marginal tax brackets. Otherwise, the deduction is not sufficient to justify the ownership costs. (Not just my opinion; my CPA agrees!)

scottj · Posted: Thu Feb 25, 2010 2:06 pm Post subject:

Any income tax deduction, or credit, is worth it. Never give the government more than they ask for. Your CPA needs to be more aggressive in protecting your money from confiscation.

Besides, only rich people are pilots and own airplanes.

Bottom line... did you pay any income taxes last year? If yes, then it makes sense (to me).

drseti · Joined: 28 Nov 2009 Posts: 1387 Location: Lock Haven PA

Quote:
Bottom line... did you pay any income taxes last year?

Actually, no! Being retired, last year my medical expenses exceeded my investment income. (This year may be different, if my flight school is successful - I hope...)

drseti · Joined: 28 Nov 2009 Posts: 1387 Location: Lock Haven PA

scottj wrote:
Besides, only rich people are pilots and own airplanes.

I hear you, Scott. Back when I had my Beechcraft, folks used to see it and say "it must be nice to be rich." My answer: "it was!"
:wink:

drseti · Joined: 28 Nov 2009 Posts: 1387 Location: Lock Haven PA

scottj wrote: Never give the government more than they ask for.

I think it was Justice Hand who wrote in a Supreme Court decision that it is the patriotic duty of every American to pay every penny of taxes to which the Government is entitled - and not one penny more. He is quoted as having said: "There is nothing sinister in so arranging one's affairs as to keep taxes as low as possible."

tu16 · Joined: 18 Feb 2010 Posts: 85 Location: Bellevue, WA

drseti wrote:
...I don't see leasebacks making a lot of sense for the owner who wants to fly his or her plane. They are strictly a business transaction, and you would be treated just like any other renter. Leaseback makes sense if you are in a high enough marginal tax rate to be able to benefit from accelerated depreciation. Otherwise, it's a break-even proposition at best. Partnerships or flying clubs make a lot more sense for someone who actually wants to fly....

Paul, that would be my exact thoughts too.

The context for leaseback here would be to cover a period of my own training in the plane that a school currently doesn't train in and to facilitate CFIs transition to this plane at school by making it available to instructors on a condition of getting a factory authorized transition training.

The problem here, of course, is that at the end of my own training I will get out of the program with a quite beat up, high-hours, depreciated plane for my own cross-country cruising project :)

Didn't research how tax-deductions exactly work in case of a leaseback yet - the common sense would be that one can deduct depreciation to the extent of leaseback income - if any... Which may end up in a wash in a best case. Again - this is just my uneducated guess. More research would be needed.

In your experience how does the flight school normally gets its planes for training - from a leaseback or are they school-owned?

Thanks!
Alex.

drseti · Joined: 28 Nov 2009 Posts: 1387 Location: Lock Haven PA

tu16 wrote:

In your experience how does the flight school normally gets its planes for training - from a leaseback or are they school-owned?

In my present case, I started and own the flight school, and bought the airplane with cash out of my retirement savings. :shock: The flight school I taught for previously was similarly self-funded by the owner. The old adage still applies: Want to make a million in aviation? Start with two million.