Editor Welcome Jan18.qxp_JMesingerNov06 19/12/2017 15:37 Page 1
EDITORIAL Editorial Director J.W. (Jack) Olcott 1- 201 572 9284 Jack@avbuyer.com
Editor’s Welcome
They’re All Business Aircraft ctivity at year’s end is intense for most businesses, especially so for buyers and sellers of business aircraft. Transactions involving equipment that are ordinary and necessary for the furtherance of business typically have significant ramification for a firm’s taxes, thus buyers and sellers want to complete their transactions by December 31. The run up to January 1, 2018 was particularly tense this past year for the US Business Aviation community. With both houses of the US Congress, each with a Republican majority, highly motivated to pass a joint resolution reforming the nation’s tax code, thereby providing President Trump with the first legislative win of his year-old administration, activity in the US Capital was indeed frenetic since tax reform Bills passed by the House of Representatives and by the Senate differed in several ways. For the Business Aviation community, one of the most significant differences involved 100% depreciation for new and used equipment, including business aircraft. Provisions in the House bill treated new and used aircraft similarly, allowing 100% depreciation, but the Senate bill proposed 100% depreciation only for new aircraft. By the time you receive this month’s issue of AvBuyer, tax legislation may be finalized and ready for President Trump’s signature. Only then will we know whether Congress agreed to maintain 100% depreciation for both used and new aircraft, as was the tax code for many years. We feel that there are many unintended consequences in eliminating 100% depreciation for used aircraft. The vast majority of business jets and turboprops are sold to companies and entrepreneurs who have business aircraft. Unequal tax treatment discourages market activity. Without a healthy market for used aircraft, current owners desiring to upgrade will find the market for their
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AVBUYER MAGAZINE – January 2018
existing aircraft negatively impacted. A robust market for new aircraft requires a robust market for used aircraft. Equal Treatment The die may be cast as we enter 2018, however. If so, we have no choice but to make a better case for why our nation needs all business aircraft—used as well as new. Regardless of whether it was just delivered from the OEM or had done yeoman’s duty for several owners, a business aircraft is business equipment and should be equally treated for tax purposes. The Business Aviation community must do more to communicate the fact that there is one market for business aircraft, not one for new equipment and another for used. Both new and used aircraft serve the same purpose—they are highly capable business tools. Following best practices for servicing and maintaining business aircraft as well as adding new equipment when available, used aircraft maintain their capabilities and provide great value at attractive prices. Furthermore, both new and used aircraft represent substantial investments of capital. To the extent that the tax code should encourage productive investments, both new and used aircraft deserve equal treatment. Today, many well-established Flight Departments appreciate the benefits of purchasing late model used aircraft. Whereas a decade ago the focus was mostly on aircraft delivered from the factory, today Fortune 100 companies look for value in used as well as new aircraft. Indeed, new or used, a business aircraft is a valuable business tool. The entire Business Aviation community would be wise to promote the advantages of all business aircraft— used as well as new.
Jack Olcott Editorial Director, AvBuyer
www.AVBUYER.com
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