Once a business attains a certain level of success, an aircraft
often becomes a valued asset. Public and closely held private
companies alike find that the use of a private
aircraft—whether possessed via whole or fractional shares,
and whether owned, leased or chartered—fosters secure and
efficient transportation for owners and executives. However,
this benefit does not come without a price, and it is not unusual
for the tax deductions with respect to the typical flight
department to run in the $20 to $30 million range. These
significant amounts, and the fact that the deduction and other tax
rules are so complex and often subjective, have caused company
aircraft to catch the attention of the Internal Revenue Service
(IRS). A new Information Document Request (IDR), IRS Form
4564, has recently been employed on audits of companies with
business aircraft, providing a roadmap for how to prepare for an
IRS audit.
