Federal Services
Personal Use of Company Aircraft
Personal use of the company aircraft was long viewed as a benefit available to wealthy private business owners and executives of large public companies. With increased security in the wake of September 11th and new lower priced and more efficient aircraft, more businesses have found advantages to operating corporate aircraft. As aircraft ownership has become more popular among businesses, the IRS and Congress have created a set of rules applicable when an employee has personal use of the company aircraft.
It has long been understood that personal use of company assets, such as apartments or automobiles, results in a taxable fringe benefit to the employee. Additionally, if a designee of the employee uses company assets for personal use, the employee is regarded as the recipient of the fringe benefit.
Two methods are available for valuing personal use of the company aircraft. Employers may use the Fair Market Value (FMV) method to determine the value of personal flights. This method requires determining the charter rate for a similar aircraft for a similar flight plan in an arm's-length transaction. The second method available for valuing personal use of the company aircraft is known as the Standard Industry Fair Level (SIFL) formula. This method typically results in a lower imputed income to the employee.
Aviation Tax Group assist its clients in these complex calculations and determining which method is best utilized.
