On June 13, 2005, the IRS will publish a Notice providing guidance for taking deductions for entertainment use of business aircraft. This Notice is intended to clarify the changes imposed by the Jobs Creation Act of 2004 relating to these types of deductions. The Jobs Act effectively reversed the earlier Sutherland Lumber tax case which provided greater deductibility for aircraft expenses even if the aircraft were used for entertainment purposes more than for strictly business purposes. The deductions were not limited by the amount of income imputed to the individuals using the aircraft. As a result, a deduction greater than the amount included in the recipient’s income was allowable.
The Notice explains what types of activities are considered entertainment and provides the procedure for applying the JOBS act in this situation. It also provides specific examples applying the JOBS act. You can review an unpublished version of the Notice here. The official notice will be published in the Federal Register on June 13. The Notice will be effective June 30, 2005. Comments to the Notice must be received on or before August 1, 2005.