Proposed Regulations on Deductions for Entertainment Use of Business Aircraft
By Carlisle F. Toppin
On June 14, 2007 the Internal Revenue Service issued proposed regulations (REG-147171-05) relating to the use of business aircraft for entertainment. These proposed regulations, which follow the initial guidance of Notice 2005-45, affect taxpayers that deduct entertainment expenses under Section 274(e)(2) of the Internal Revenue Code, as amended by the American Jobs Creation Act of 2004.
Although the principles of I.R.C. Section 274(e)(2) are broadly applicable to various entertainment activities, they and the corresponding IRS guidance are primarily targeted at the entertainment usage of business aircraft by certain executives. This article provides an overview of the current tax rules regarding corporate aircraft.