1031 Rules: Aircraft; Equipment; Livestock

1031 rules apply to an exchanges of tangible personal property aircraft, livestock, equipment, rolling stock and art. These are all part of current Section 1031 tax law. We are dedicated to providing you with exceptional planning and assistance during your exchange.

Things You Need to Know About 1031 Exchanges of Aircraft:
If you have used an aircraft for trade or business purposes, chances are you have depreciated the aircraft, perhaps even completely. The aircraft may be worth more today than when you purchased it. If you sell it without doing a 1031 Exchange, you may be taxed not only on any gain from the sale, but also on the depreciation recapture. This can cost you many thousands of dollars. Section 1031 of the Internal Revenue Code provides for the deferral of gain, provided certain requirements are met.

  1. Both the old and new aircraft must be used for trade, business or investment, and must be like-kind to one another. In general, all aircraft and helicopters (except those used in commercial or contract carrying of passengers or freight) are treated as like-kind under IRS General Asset Class 00.21. Commercial or charter aircraft and helicopters used for transporting passengers and cargo in scheduled air transportation, are similarly treated as like-kind to one another under Standard Industrial Classification (SIC) classification 3872.
  2. You have 45 days from the date of closing on the old aircraft to identify a list of aircraft from which you will purchase the new aircraft.
  3. From the date of closing, you have 180 days to close on one or more of the aircraft from your 45-day list.
  4. You cannot have actual or constructive control of any of the proceeds received from the sale of the old aircraft. By law, all money is held by a Qualified Intermediary (also referred to as an Accommodator or Facilitator). You cannot have an associate or employee, your attorney, broker or CPA hold the proceeds, nor can you leave the proceeds in escrow until the new aircraft is purchased.
  5. The titleholder on the old aircraft must be the same titleholder on the new aircraft.
  6. You must reinvest all cash proceeds from the sale, and purchase a new aircraft or aircraft’s of equal or greater value, in order to avoid taxation on the gains.

Aircraft owners can realize the benefits available through the 1031 Exchange process. 1031x.com will prepare the documents necessary to complete your exchange and properly comply with current Section 1031 tax law.