IRS releases important guidance on personal use of business aircraft

Washington National Tax Services

The IRS on July 31 issued final regulations on the tax treatment of an employer with respect to certain personal use of employer-provided aircraft. The guidance explains in some detail how to apply the amendments enacted as part of the American Jobs Creation Act of 2004 (AJCA) and the Gulf Opportunity Zone Act of 2005 (GOZA) that limit the costs that a taxpayer may deduct when a "specified individual" uses employer-provided aircraft for personal entertainment travel, including such use for "bona fide security purposes."

The final regulations adopt the 2007 proposed regulations with some notable additions and clarifications. The final regulations appear to provide flexibility to taxpayers in some instances, but could create added administrative burdens for some taxpayers in others. In the preamble to the final regulations, the IRS discusses comments received that were not reflected in the final regulations.

The final regulations apply to tax years beginning after August 1, 2012.

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