depreciate a helicopter?

Hello,

Client bought a helicopter for $220k for a business he has started to do "external load work, air conditioners, fans, electrical equipment to roof tops". He also hopes to use it in firefighting.

Is this simply treated as 5 year property for purposes of depreciation? Can bonus depreciation be taken to take it all in 2019?

thanks,
deb

Hello,

Client bought a helicopter for $220k for a business he has started to do "external load work, air conditioners, fans, electrical equipment to roof tops". He also hopes to use it in firefighting.

Is this simply treated as 5 year property for purposes of depreciation? Can bonus depreciation be taken to take it all in 2019?

thanks,
deb

Does it pass the smell test of "ordinary and necessary"? I would think 99% of electricians who repair air conditioners or equipment on roof tops go up there by taking elevators. As for firefighting? I do not know how a private business can get involved in firefighting. But if somehow he can obtain a contract with the local fire department to assist if needed, he may have an argument there.

TaxIt.... thanks for your reply... I'm sure the repair men take the elevator but the equipment is originally delivered by helicopter.

I think I know what TaxItRight is getting at, but it's not whether it's ordinary and necessary. It's whether it's

... property used in the trade or business, or
... property held for the production of income.

Hello.... I have more information now on this...

Client says he was open for business in November, 2019, which is when he bought the vehicle, although there was no revenue in 2019.
,
Client wants to depreciate $220k helicopter entirely in 2019. This sure doesn't feel right to me but I can't tell him not to do it just cuz it doesn't feel right. If he's hung out his shingle to start doing this work it seems to qualify for either Sec. 179 or SDA treatment.

Please help me understand if/why this is not a good idea.

Thanks,
Deb

It would make sense for the business to not have any firefighting revenue in Nov/Dec. Not too many forests burn in the wintertime. That's generally how helicopters are used to fight fire and private companies often times do that work. Does he have other income that would be offset by using bonus depr? Bonus wouldn't be of much use if he has very little other income.

I've dealt with clients that owned jets. Personal use is an item to pay very close attention to and document it. Have him keep logs of all business and personal use. We would track flight hours for each flight, the state, etc. What's his personal use already for 2019? We all know there is some. Maintenance can be crazy on a helicopter.

If his intention is profit motive and it seems reasonable, then I would take 100% bonus depreciation in the current year. I don't see the problem.

FAA requires a flight log of each and every trip the helicopter is in the air. You can easily determine personal vs. business use. I believe the destination is also required. If you are in doubt as to personal vs business, ask him for the log.

As to the amount if depreciation to take in 2019, since there is no revenue, you need to look to other sources of income for accelerating depreciation expense beyond the MACRS tables.

Doug M... thanks for your reply... besides this helicopter activity client only has mid six figure w2 and gains on sale of company stock, so how else to claim/justify the depreciation?

Debbie

Client says he was open for business in November, 2019, which is when he bought the vehicle, although there was no revenue in 2019. . So he'd assert that the helicopter was placed in service in2019 and thus eligible for depreciation. I assume he had tax basis and at risk basis. And that the "business" is a Sch C, maybe a SMLLC.

So did he materially participate in it? How?

Did he have a helicopter pilot's license in 2019? Did he have the business permits / certifications to conduct the two different businesses? Did he have the copter fitted with tanks.. to do fire fighting. Did he have the copter outfitted with infrastucture needed to deliver a 12ton ac unit? Did he have advertising in place? Inquiring auditors would like to know.

If the business is a Schedule C, he may not want to take bonus. Even if it created an NOL, l(and it sounds like it won't) loss carryover won't reduce SE tax. Section 179 carryover would, but it sounds like his W-2 income will trigger the whole deduction for year one so that's no good either. Deducting it slower and saving on SE might be a better bet.

All good questions from EAsternPA in post #11.

Don't want to bonus it out only to recharacterize as a start-up expense. Yikes.