Ordinary and
Necessary Expenses in Business Use of Aircraft
By John
Alan Cohan,
Attorney at Law
One of the
biggest areas of tax litigation for aircraft owners involves Section 162
of the IRS Code concerning the deductibility of
ordinary and necessary
business expenses. An ordinary expense is one that is normally to be
expected, in view of the circumstances
facing the business. Necessary
has been interpreted to mean appropriate and helpful in the development
of the taxpayers business.
And for expenses to be deductible they must
be associated with the taxpayers trade or business activities rather
than with hobbies.
For example, if you have a hobby interest in stamp
or coin collecting, using your aircraft to attend auctions would not be
considered
a business use of the plane...
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How
to Handle an IRS Audit
By John
Alan Cohan,
Attorney at Law
Excessive business deductions by owners and breeders of horses,
livestock or general farmers--or in other businesses activities--
can be
a red flag that triggers IRS audits....
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Summary of Interesting Tax Cases
By John
Alan Cohan,
Attorney at Law
Some
accountant friends asked if I could write about cases I am familiar with
that involve pilots who have either been granted or
denied tax deductions in connection with various aircraft activities.
Most of these involve charter and rental activities, and so I
will share them with you. Mind you, these cases are all from the Tax
Court or federal courts after the IRS issued a deficiency
notice....
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