A Win-Win For Companies Purchasing Aircraft

Law360, New York (February 24, 2016, 10:18 AM EST) -- A new IRS chief counsel memo says that an aircraft leasing partnership that trades in an aircraft that is leased to a related entity is eligible for §1031 tax-free exchange treatment, even though the related-entity lease rate was so low that it produced tax losses during the term of the lease. This is good news for a combined state sales tax planning structure frequently used for aircraft acquisitions, to be followed by a trade-in of the aircraft when a new plane is desired.

Under this sales tax planning transaction, a company wanting to acquire an aircraft sets up a separate entity...

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