White jet plane flying in the sky above the clouds

Tax consequences of selling an aircraft that has appreciated

Capitals gains or ordinary income?

When selling a business aircraft that has been depreciated for income tax purposes, a taxable gain will result.  The “recapture” of previously taken depreciation results in ordinary income tax treatment.  In recent months, we are seeing rising prices for aircraft and many clients are selling aircraft at a higher value than the original purchase price.  The gains from the appreciation is taxed as capital gains.

If the holding period of the aircraft is less than one year, the gains will be taxed as short term capital gains, which is taxed at ordinary income tax rate.  The more favorable long term capital gains rate is only available if holding period exceeds one year.

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