Page 449 - Small Business IRS Training Guides

Sometimes an aircraft owner will permit the management company to charter the aircraft owner’s aircraft when not in use

by the aircraft owner. When the aircraft is engaged in such a charter flight, amounts paid by the person chartering the

aircraft are subject to the IRC § 4261 and IRC § 4271 taxes (as appropriate to the nature of the flight), unless another
exemption applies.

Examples of Arrangements that Do Not Qualify as Aircraft Ownership under IRC § 4261(e)(5)

• Ownership of stock in a commercial airline cannot qualify the stock owner as an “aircraft owner” of a commercial
airline’s aircraft, and amounts paid for aircraft management services as well as amounts paid for transportation on

such flights remain subject to the tax under IRC § 4261.

• Participation in a fractional aircraft ownership program does not constitute aircraft ownership for purposes of the IRC
§ 4261(e)(5) exemption. However, amounts paid to a fractional aircraft ownership program for transportation under

such a program are exempt from air transportation excise tax under IRC § 4261(j) if the aircraft is operating under
subpart K of part 91 of title 14 of the Code of Federal Regulations (“subpart K”). Such flights are subject to both the

IRC § 4081 tax on kerosene used in aviation (the noncommercial aviation rate applies) and the additional fuel surtax
under IRC § 4043.

• A business arrangement seeking to circumvent the IRC § 4043 surtax on fuel used on fractionally-owned aircraft
(by operating outside of subpart K, allowing an aircraft owner the right to use any of a fleet of aircraft, be it through
an aircraft interchange agreement, through holding nominal shares in a fleet of aircraft, or any other arrangement that

does not reflect true tax ownership of the aircraft being flown upon) is not considered aircraft ownership for purposes
of the exemption provision.

• A lessee that leases an aircraft for a period of 31 days or less is not an “aircraft owner”.

73233-102 13822-6 Tax Cuts and Jobs Act