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Panelists Say, When Buying a Business Aircraft, Consult the Experts
October 12, 2011
Perhaps the most important thing to remember when buying a business aircraft is never go through the process on your own. That’s especially true for first-time buyers. Instead, surround yourself with a knowledgeable team of experts who understand the intricacies of insurance, state and federal tax laws, and Federal Aviation Administration (FAA) regulations.
This was one of the many points made by a panel of four experts during a Tuesday discussion and “role-playing” session entitled: “Buying A Business Aircraft: Lessons from the Trenches.” Another important recommendation offered by the panelists is to always conduct a “mission profile”, which helps the buyer determine how the aircraft will be used and select the correct make and model.
The presentation featured Dave Weil, Solairus Aviation LLC; Alan Burnett, CenterPoint Aviation Law PLLC; Stuart Hope, Hope Aviation Insurance, and Frank Polk, McAfee & Taft, using real-life scenarios that underscored the complexities that often surround an aircraft purchase – from a high-performance jet to single-engine plane. The panelists’ scenario focused on a make-believe company called Acme, Inc. that was evaluating the purchase of a midsized aircraft.
Complicating Acme’s scenario, the company’s CEO wanted to complete the purchase quickly through a broker who also was a friend. That sent off alarms among panelists who all advised proceeding cautiously and conducting a complete due diligence process for every facet of the purchase.
They advised that any buyer’s team of experts should include an aviation attorney, FAA or international registry special counsel, flight department manager, mechanic and technical representatives. When it comes to insurance, use an agent or company experienced in insuring aircraft, the panelists counseled.
Once a plane has been chosen, buyers should conduct a thorough market evaluation of comparable selling prices on similar models to determine a market price.
On the topic of state taxes, the complexities can be onerous. So a thorough examination of how the plane will be used, where it will be registered and reside, is critical.
Federal taxes can be just as tricky, especially for Part 91 and Part 135 uses, especially since IRS and FAA exemptions don’t always agree. Again, employ skilled and knowledgeable legal counsel to help guide others through the maze of issues related to the aircraft purchase. Again, consult an attorney seasoned not just in tax law, but FAA regulations, as well.
Additional tips offered by the group include the following:
- Draft a letter of intent.
- Select an insurance agent with an understanding of aviation.
- Conduct thorough searches of all FAA title and lien records, as well as FAA and international registries.
- Draft a thorough purchase agreement.
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