Private Aircraft Audits May Be At Cruising Altitude

Earlier this year, the IRS announced that it would be increasing the audit rate on private aircraft. The IRS previewed that there would be dozens of private aircraft audits starting in the near future. Given what we have seen, the “dozens” figure appears low.

The stated purpose of the IRS private aircraft audit initiative is to determine whether travel is occurring for business or personal purposes—and if the allocation between business and personal purposes is done correctly. From what we have seen, the IRS is following its stated purpose, at least with respect to its initial information document requests (IDRs).

As further corroboration, IRS audit training materials, which were obtained through a Freedom of Information Act (FOIA) request and republished by the tax press (Bloomberg Law), also show the intense focus on whether flights were conducted for business purposes or otherwise.

Some of the requested information includes:

• Copies of flight and maintenance logs
• Passenger manifests
• Identification of significant owners and key individuals (e.g., officers and directors)
• Information about other passengers and their relationships to those listed above
• Basic information about the aircraft
• Aircraft purchase/sales documents
• Aircraft lease/charter/operating agreements
• Aircraft management contracts
• Minutes/documents indicating the business purpose of the aircraft
• Company policy on aircraft usage
• Qualified business use calculation
• Expense limitation or disallowance calculations
• Fringe benefit computations
• Reimbursement information for personal flights.

As is the case with other IRS training materials, the IRS cites legal authority that can be used to deny claimed aircraft deductions.

Ultimately, the IRS seems to be streamlining its approach with aircraft audits. How the various audit teams analyze the underlying issues though, remains to be seen.

If you have questions about IRS aircraft audits, or any other civil or criminal tax matter, you can reach me at jglassman@meadowscollier.com or 214-749-2417.