December, 2003 issue:

- Jet aircraft market update

- Avaition Tax News

- Citation Mania!

Though not a requirement until January 2005, RVSM is having an impact on all but the newest jets right now. Buyers in most cases are deducting for no RVSM. Therefore, most jets in Vref are depicted with RVSM. The deduction for no RVSM ranges from a $25k service bulletin for some very late model airplanes, to more than $300k for older ones. We have included price ranges on many jets, but certification will vary depending on type of autopilot and other factors. It may be necessary to get a quote on each serial number. For many early generation (non-fan, non-digital) airplanes, this is another step closer to the grave.

Prices appear to be 'off the bottom' as the upper end of the market continues to stabilize. Many, if not most, of the sales continue to be price driven, because of the ongoing oversupply of airplanes. Activity is improving, and a few areas are actually tightening up. Late model CJs and CJ1s are drying up, and prices are up. Late model Falcon 50s have brought some very strong prices. Less than 5% of the Gulfstream IVSPs are for sale, and asking prices for the later serial numbers reflect the scarcity. The availability numbers listed below are from early November 2003. In most of these markets, the number for sale is down about one percentage point from the previous month - a very welcome trend. This has not yet reversed the downward price trend, but it has definitely put the brakes on it.

The above information was provided by Vref Market Update. To read the entire 2003 Volume 4, Click Here.

CORPORATE AIRCRAFT USED 95% FOR PERSONAL USE HELD FULLY DEDUCTIBLE

The IRS has announced in Chief Counsel's Advice 200344008 that a company that operated an aircraft for the business purpose of compensating employees was allowed full deductions for all aircraft costs, including depreciation, as ordinary and necessary business expenses; even though 95 percent of the use of the aircraft was for employees' personal use.

PLANNING OPPORTUNITIES EMINATING FROM THIS RULING

Although this Chief Counsel's advice should not be cited as precedent, it does provide an opportunity to review how the Service perceives both the taxation of the fringe benefit and the corresponding deduction to the employer. We believe the following items of note are important in analyzing an aircraft-structuring transaction:

1. The Chief Counsel's opinion did not concern itself with the fact that substantially all of the use was for personal use of employees and shareholders. In fact, the opinion states that the facts were identical to Sutherland even though in that case personal use was not 95 percent.

2. The opinion assumes that the expenses are ordinary and necessary business expenses and reasonable in amount, based on the premise that the wages paid to the employee constituted deductible expenses. To the extent that wages would have constituted excess compensation for the value of the services rendered, a different result would have likely been reached.

3. An aircraft is listed property and as such must be used more than 25 % of the time for business use other than compensatory use, or be subject to a slower method of depreciation. This slower method would also disallow the aircraft's eligibility for bonus depreciation.

4. Although the deductibility limitations are exempted from the disallowance under Section 274(a), they are nonetheless subject to contemporaneous record keeping requirements. Taxpayers should be very cautious in maintaining the records at a level sufficient to qualify for deductibility under this Section.

5. There are various other limitations such as passive activity, at risk rules, basis limitations, or trade or business requirement, which may also affect the deductibility of the expenses by the Corporation or its shareholders.

The above information was provided by:

Advocate Aircraft Taxation Company

This memorandum was designed to provide information of general interest to the public and is not intended to offer specific legal advice. The offering of this information does not create an attorney-client relationship. You should consult Advocate Aircraft Taxation Company, or your tax advisor, if you have a matter requiring attention. For further important tax information regarding aircraft ownership and operation, please visit our website, www.advocatetax.com .

CITATION MANIA!

Aircraft Investment Group is constantly adding new aircraft for sale. If you are interested in this Citation private jet or any other aircraft, please contact us at www.aircraftinvestmentgroup.com/inquiries.htm.

For full specifications, please visit us www.aircraftinvestmentgroup.com/citation_v_aircraft.htm.

For more information about how we can satisfy your aircraft needs, please contact:
Stanley Greenbaum - Principal
Ron Motta - Principal
at:

1601 Belvedere Rd., Suite 217S
West Palm Beach, FL 33408
Palm Beach International Airport
Phone: 561-697-4889
Fax: 561-640-5368
sales@aircraftinvestmentgroup.com

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