Buying, Selling and Financing Aircraft
As one of the largest and most respected full-service civil law firms in the Southwest, McAfee & Taft has tremendous depth of talent and extensive experience in representing purchasers, sellers, lenders and entrepreneurs in buying, selling and financing a variety of assets, from aircraft to real estate.
We have assisted many lenders in drafting forms for standard transactions, as well as crafting and negotiating more customized documentation for unique or complicated transactions.
Fractional Ownership and Operational Issues
The fastest-growing area of practice in the aircraft industry deals with the concept of fractional ownership of aircraft. While many companies find that the ownership of a corporate aircraft is a necessity for their operations, they also find it difficult to keep the aircraft busy on a full-time basis and that the cost of shouldering the full burden of owning and maintaining the aircraft can be exorbitant. As such, aircraft owners and attorneys are using a variety of structures to better utilize their aircraft, such as fractional ownership and the “sharing” of aircraft with other companies. Such arrangements can completely change the economics of aircraft ownership. At the same time, the FAA has narrow, and sometimes confusing, regulations in this area that must be addressed when using a creative ownership or operations structure.
McAfee & Taft has worked with a variety of clients – from leaders in the industry to individuals – in crafting solutions to these issues, and has extensive experience in dealing with fractional programs, time-share arrangements, joint ownerships and interchange agreements.
Like-Kind Exchanges (Section 1031 Tax-Deferred)
McAfee & Taft represents clients in various forms of aircraft tax-deferred exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”). In these transactions, the client, as both a seller of an existing aircraft and purchaser of a new aircraft, avoids the current recognition of income and, therefore, federal income tax liability, under the IRS Code for the difference between the basis of the existing aircraft and its sale or trade value.
A like-kind exchange transaction may be accomplished with respect to both whole and fractional aircraft interests. Furthermore, a like-kind exchange transaction can be accomplished irrespective of whether your old aircraft is sold before or after you purchase a new aircraft.
We have assisted clients in a variety of exchange structures, including:
- Customary exchanges using a qualified intermediary
- Simultaneous exchanges
- Reverse exchanges
Tax-deferred exchanges vary in complexity and require strict compliance with Revenue Procedure in order to meet the safe harbor, or strict compliance with the Treasury Regulations in order to structure an exchange outside of the safe harbor. These transactions require advice and guidance of attorneys with experience in both aviation and tax matters.