Page 30 - Twin & Turbine May 2017

Tax Talk
by Phil Crowther
Partners in Flight
Aircraft joint ownership can take many forms. Which one is right for you?
Joint ownership qualifies as the oldest form of aircraft ownership, having originated with the Wright brothers. The primary advantage of joint ownership is one of economics. When an aircraft owner does not need access to an aircraft on a full-time basis, joint ownership arrangements
allow the owners to reduce hourly costs by sharing fixed costs (including crew costs) with other owners. The greatest challenge is to make sure that everyone has equal access to the aircraft.
Most joint ownership arrangements are conducted under Part 91. Fortunately, there are many different ways to structure a Part 91 joint ownership arrangement, including:
1. A traditional joint ownership arrangement – sometimes called co-ownership – where the users purchase the aircraft jointly.
2. A Part 91.501 joint ownership arrangement where one joint owner can provide the pilot and can transport the other joint owner(s).
3. A leasing company arrangement where a jointly-owned company (usually an LLC) purchases the aircraft and leases the aircraft to the members.
Because of the amounts involved, all joint ownership arrangements should have a written “joint owners agreement” or, in the case of a leasing company, a “joint operators agreement.” Ideally, the document will ensure that each owner has access to the aircraft in proportion to ownership and will provide for sharing of aircraft costs in proportion to both ownership and usage. The document will also contain provisions relating to the transfer or termination (voluntary or involuntary) of the joint ownership arrangement.
Types of Arrangements
1. Traditional Joint Ownership
A traditional joint ownership is an arrangement whereby two or more participants invest in an aircraft and share access to that aircraft. Some people describe this arrangement as “co-ownership” since the FAA allows joint owners to register as “co-owners.”
The joint owners of an aircraft can operate the aircraft under Part 91. The joint owners must exercise operational control over the aircraft on their respective flights and must provide their own flight crew. This does not mean that the joint owners must all find different flight crews. Just as joint owners can share the same aircraft, they can also share the same flight crew. The joint owners can enter into an arrangement where they share access to a single flight crew and share flight crew costs.
28 • TWIN & TURBINE
May 2017