Are all costs associated with fractional aircraft ownership, deductible as business expenses?

Under prevailing laws and regulations, the associated costs of a fractional interest in an aircraft may be treated as a deductible item for the purposes of corporate income tax where the use of the aircraft can be directly attributed to the purpose of earning income.

For example, the expense may be necessary when your business deals with out-of-the-way locations without ready commercial air service, the timing and duration of business flights are unpredictable, or personal security is a significant concern.

In line with this, associated costs arising from the utilization of this asset - including maintenance, insurance, fuel, and other operational expenses - are considered an eligible annual expense on the corporate tax returns.

Additionally, it's worth noting that the capital asset, in this case the fractional interest in an aircraft, can be amortized over the period of the fractional aircraft use program. This is in line with common practices and accounting principles pertaining to the management of capital assets and the recognition of their depreciation over time.

These deductions and amortization practices can significantly reduce your corporation's taxable income, offering potential for enhanced tax efficiency and bottom-line savings.

Please note that a taxpayer who uses the aircraft for personal purposes is considered to have derived a taxable benefit unless the taxpayer pays or reimburses the corporation or employer an amount equal to the fair market value of that benefit. When the personal use aircraft benefit is received or enjoyed, the benefit is included in income. The valuation of the taxable benefit is determined on the basis of what is reasonable in relation to the facts of the case and the manner in which the aircraft is used, whether business or personal.

The corporation and/or employer, as well as the individual taxpayer, are required to maintain adequate records, logs or other evidence to document that instances of aircraft travel, and travel by the passengers on that aircraft, were for business or personal reasons.

We advise that this is a generalized view, and the specifics can vary depending on the jurisdiction, prevailing tax laws and regulations, and the specific circumstances of your business. Therefore, we strongly recommend consulting with a tax advisor or financial expert to understand the exact benefits you could avail from this practice.