1967 Piper Cherokee Arrow 180 Questions
Ok, I am about to become the owner of a 1967 Piper Cherokee Arrow 180 !!! I always liked the Arrows and the Cherokee family of airplanes are great flyers. This particular airplane is sitting in Billings, Montana and we are going to take delivery of the aircraft somewhere in between West Tennessee and Montana, if plans work out. I have several questions. Any CPA owners out there ?
1. For TAX purposes , between Montana and Tennessee, what State is best to make an airplane transaction ?
2. What is the benefit of keeping the aircraft registered in my LLC ?
3. Is there any particular issue that I should be careful of with this year Piper Arrow ? High time engine and prop, both original.
4. Wing spar inspections not done
5. Best operating altitudes and power settings for endurance ? Best climb speed ?
Comments
I can help with Q’s 1 and 2. Disclaimer: I’m not a lawyer or CPA.
1) Where is the airplane going to be based? You’re going to pay state sales tax one way or the other where you keep the plane...even if you do the transaction in a cheaper place tax-wise, your home state is going to want their cut and will give you a credit only for what you paid somewhere else, and charge you the difference.
2) Liability-wise, if you own the airplane by yourself, the LLC doesn’t really do anything extra to protect you as an LLC will only make you liable for your share of the LLC. If you are the only member of the LLC, you will have all of the liability,
Jim M.
PA-28R-200
Based at BUU
ATC Chicago TRACON
Keep in mind that the Arrow 180 is slightly underpowered and isn't a fast cruiser, high flier or heavy load carrier. But it is gentle and lots of fun.
Scott Sherer
Wright Brothers Master Pilot, FAA Commercial Pilot
Thank you guys !!! Ok, if we are doing a TRADE for each other's aircraft and NO monies exchanged, then how do we arrive at a value of the aircraft ? Use Vref or NAAA evaluator ? BTW, there used to be a NAAA link on Trade A Plane and it seems to have disappeared ?
I used Vref in 2018 when I traded my Seneca for an Arrow. It worked very nicely!
Scott Sherer
Wright Brothers Master Pilot, FAA Commercial Pilot
What you are describing above about trading is called a 1031 exchange by the IRS, at this point your questions need to be directed to a lawyer and CPA, that is the free advice coming from a lawyer.
One more free bit, the fact that no money changes hands is irrelevant to the IRS, they consider this bartering and there are tax consequences under section 61. These matters get tricky quickly and this is not my area of practice, I did all of my own legals when I bought my Archer, including designating the point of sale and the purchase contract. Without that expertise (and a good friend lawyer who did aircraft title work for me) I would not encourage guessing at what to do. Or SGOTI. Lawyers/CPAs are like the old auto mechanic commercials, cheaper to pay now than to fix a big problem later.
I did a trade a year and a half ago letting my beloved Cessna 150 go for a Cherokee 180. I only had to pay the tax on the price to boot which was part of the reason I made the trade. It was easy to do, but if you have questions, just call you state DOT dept of aeronautics and ask them what to do.
Jim
On a different note, if we sell each other our airplanes for an equal price then there is no 1031 exchange ?
The values have to be equal not the prices on a 1031, which is a federal statute. Don't go down the prices were the same so no problem road. The government looks at that as a fraudulent transaction. Those result in federal criminal Indictments and now we are in my area of practice.
Ok, both aircraft are projects ............. they both need work !!! The value of each aircraft is very similar due to this condition. I don't understand how the IRS gets involved in this anyway ? Airplanes, Cars, Boats, whatever ........ this is none of the government business between two individuals, I could maybe see this if we were Businesses conducting this kind of transaction but I don't understand how between two private citizens, and airplane deal becomes the business of the government other than having to PAY TAXES on each aircraft
I’m certainly not a tax expert, but I would think the state sales & use tax would be the primary factor in this transaction. In Wisconsin (where I live), I was on the hook for 5% sales tax on my plane...it didn’t really matter how I paid for it (cash, trade, whatever), but the value on the plane was $77,000, and Wisconsin wanted their cut on the transaction, same as buying a car or anything else.
The value of each airplane relative to each other doesn’t matter to the state’s department of revenue, just the value of the plane you’re buying/swapping. The other guy is going to have the same thing to deal with.
Now, if you pay sales tax and register the plane in Montana, then fly it to Tennessee, you should get a credit for the tax you paid in Montana (or wherever else you decided to do the transaction). They’ll want evidence that you did, in fact, pay sales tax to another state, and then they’ll want the difference of what their rate is, if there is any more. It usually easier to just register it right away in your home state, pay the tax bill, and be done with it.
Jim M.
PA-28R-200
Based at BUU
ATC Chicago TRACON
Yes, I agree with you ........... The question therein is WHO values the aircraft , Vref or NAAA or State ?
The IRS doesn't get involved normally until you start talking about exchanges (1031) then they get interested because the deal has been consummated under their statutes. A straight up buyer seller is not something they are interested in, except to the extent there is profit above the basis of the original acquisition. For example, you buy a plane for $10K you keep it two years and sell it for $15K you have a $5K profit because it is above your basis. For valuation I would think an amount within reason of an NAAA estimate would be sufficient. Of course, the profit would be reported as a capital gain rather than ordinary income.