Taxpayers who elect to use bonus depreciation must comply with the requirements for listed property under § 280F, utilizing the Modified Accelerated Cost Recovery System (MACRS) method. In order to qualify, taxpayers must be able to show that an aircraft meets the primary business use test during the year they intend to take the 100% bonus depreciation.
The aircraft must be used for more than 50% in the trade or business of the taxpayer. This Qualified Business Use (QBU) is subject to a “Compensation Exception” and a “Related Party Leasing Exception”. Therefore, QBU does not include flights provided as compensation to a Five-Percent or Greater Owner or related person. Additionally, under the Leasing Exception, QBU does not include flights leased to a Five-Percent or Greater Owner.
The § 280F depreciation recapture requirements are complex and making sure that the requirements are met can be challenging. FTS simplifies the tracking of business use flights under the § 280F rules by providing a reporting tool that performs two tests, a 25% test and a 50% test. These tests allow users to track their flight activity throughout the year taking all of the complexities of the regulations into consideration.
The § 280F reporting tool:
- Utilizes a passenger-by-passenger allocation method to apply all applicable exceptions
- Appropriately calculates tests based on individual passenger flight purposes
- Captures Five % or greater owner and related party details as necessary
- Recognizes employee-provided aircraft and company lease to a 5% owner structures