18 Apr 2024, 16:02 [ UTC - 5; DST ]
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Post subject: Re: MUSTANGS Posted: 23 Nov 2018, 13:56 |
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Joined: 09/07/13 Posts: 519 Post Likes: +357 Location: Louisiana
Aircraft: K35 Bonanza
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[quote="Clint Newell"]It’s true that you would have less capital recapture when selling a non-program jet. However, there are offsetting costs and risks. First, since you’re depreciating the airplane, it’s a given you’re flying it for business use. Therefore, your operating costs, including program reserves, are deductible. No program, no deduction. So, while you benefit from less recapture when you sell it, you will have paid more ordinary income tax while you owned it. At the end, there’s no savings.
Then, there’s the risk management piece. If you have an unscheduled event with an engine, the program will pay for it. Otherwise, you’re out of pocket. When I had an unscheduled engine repair, the engine program paid the $450K bill, plus it covered the engine rental during the repair.
Last edited on 23 Nov 2018, 16:34, edited 2 times in total.
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Post subject: Re: MUSTANGS Posted: 23 Nov 2018, 15:26 |
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Joined: 09/07/13 Posts: 519 Post Likes: +357 Location: Louisiana
Aircraft: K35 Bonanza
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Username Protected wrote: We all understand why some folks like engine programs and others don’t. It’s all about choices, and one pays their money and makes their choices. But, look at what Williams has done to TBO by putting it in required maintenance instead of manufacturer’s recommendations. Now, part 91 has no choice even if the engine runs fine. Also, Williams must do the work. Very monopolistic move on there part that severely limits competition. TBO should not be “required maintenance”. Dave, I agree, there are no options. At least with a PT6, there are options
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Post subject: Re: MUSTANGS Posted: 23 Nov 2018, 15:48 |
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Joined: 10/03/16 Posts: 273 Post Likes: +181 Location: Chicagoland
Aircraft: Mooney Acclaim
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Username Protected wrote: One thing people tend to forget is that you have to pay per engine hour no matter if you are on the engine program or not. The value of a non-program airplane goes down every hour you fly it. From a financial consideration standpoint you would need to calculate that number and subtract it from the engine program cost per hour. Once it becomes clear that you are not “saving” the $300 per hour, the engine program starts to look a whole lot better.
My general rule of thumb is that if the majority of operators are on the program, you should be as well. I don’t recall discussions of tax implications here. Let’s say $1,000,000 is spent on acquisition and depreciated over five years. If you you are on the engine program, you have paid all that money in, and let’s assume the plane is still worth $1,000,000. When you sell the airplane the tax depreciation is recaptured. So you have deferred taxes. Now if you aren’t on the engine programs and the plane is worth $500,000, the depreciation recapture is half. You have reduced taxes. If the contention is true that the cost is the same on or off engine programs, it appears not being on the program, realizing depreciation and letting the buyer “catch up” on engine expenses is the loweroverall cost?
If the dollars are the same (FV of program$ = depreciation), then wouldn't you prefer current deductible expense (program premiums) and deferred tax bill (recapture) to lower expensible spending (premiums) and a deferred tax saving (less recapture)?
IANACPA
Last edited on 23 Nov 2018, 22:25, edited 1 time in total.
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Post subject: Re: MUSTANGS Posted: 24 Nov 2018, 08:50 |
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Joined: 10/05/11 Posts: 9575 Post Likes: +6447 Company: Power/mation Location: Milwaukee, WI (KMKE)
Aircraft: 1963 Debonair B33
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Username Protected wrote: We’re all observing how GA is declining and a major contributor is cost. Folks that purchased new planes, later sold them at lower prices that the more general GA community could afford. Now, one manufacturer has created a situation that will dramatically cut future affordability. If others see this work, you can bet they’ll follow. I wonder how the new GE TP (Catalyst?) will be set up?
_________________ Be Nice
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Post subject: Re: MUSTANGS Posted: 24 Nov 2018, 09:52 |
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Joined: 11/07/11 Posts: 723 Post Likes: +412 Location: KBED, KCRE
Aircraft: Phenom 100
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Clint, do you know where you are in terms of the ProParts bank?
Chip-
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Post subject: Re: MUSTANGS Posted: 25 Nov 2018, 10:20 |
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Joined: 11/07/11 Posts: 723 Post Likes: +412 Location: KBED, KCRE
Aircraft: Phenom 100
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Username Protected wrote: Yes, I currently have a positive balance since I just renewed my contract eight months ago. I had a negative balance prior to renewal, but they zero out thr balance at renewal and start over. I haven’t had much parts usage so far this year. Other than a battery replacement, it’s been small stuff. They zero out the balance meaning you made out? Or you had to cover the difference to renew? TIA, Chip-
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Post subject: Re: MUSTANGS Posted: 25 Nov 2018, 12:37 |
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Joined: 12/26/17 Posts: 141 Post Likes: +74
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Username Protected wrote: They zero out the balance meaning you made out? Or you had to cover the difference to renew?
TIA,
Chip- They absorb anything in the Red if you stay the 3 year commitment, wipe the slate clean whether you resign or not. If you re-up for another 3 years it starts over, so yes you make out if you stay the course (3 years at a time).
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Post subject: Re: MUSTANGS Posted: 26 Nov 2018, 09:43 |
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Joined: 11/07/11 Posts: 723 Post Likes: +412 Location: KBED, KCRE
Aircraft: Phenom 100
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And then what if you were in the black? Paid more into it than you used?
Chip-
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