While aircraft manufacturers and others were cheering the extension of the bonus-depreciation deadline included in the American Jobs Creation Act of 2004 (HR 4520)(see yesterday’s post), some aircraft owners are mourning the loss of the aircraft expense deductions allowed under the 8th Circuit’s Sutherland Lumber case.
Section 102 of the Senate passed bill (S. 1637) amends Code section 274(e)(2) to reverse the result of the Sutherland decision. The amendment limits the deduction for the owner to the amount claimed as compensation or as imputed income (usually at the standard industry fare level “SIFL” rate), rather than the actual cost/expenses of providing the flights. The provision applies to expenses incurred after the date of enactment and before January 1, 2006. You can read the language in Section 102 here.
This legislation follows two previous failed attempts originally cited in my June 29, 2004 post. Unfortunately for aircraft owners, this latest attempt was successful in closing a “loophole” whose aggressive marketing and promotion by others probably led to its demise.