Tax Treatment of Private Jet Expenses

Tax Treatment of Private Jet Expenses Facts: Alex Jones is a computer engineer, Aubrey, his wife, is an attorney. Alex is an independent contractor at ABC, Inc. Jones owns a Christmas tree farm as sole proprietorship in Oregon and they report the farm on their joint federal income tax return. Apart from the home in Phoenix, AZ, Jones has the other home in Honolulu, Hawaii, and cost $2 million to rebuilt it. They lease the home to operate the house as B&B. Apart from that, they also own a home in Aspen, Colorado when skiing at there. Jones and his wife has a personal jet, costs $4 million in 2000 to fly to their various properties. Alex and Aubrey used the jet to fly 15 times to Oregon farm, 2 times to the Hawaii home, 8 times to the Colorado home and 2 times to computer conferences. The total annual fee of operating jet and depreciation are $500,000 in 2010. On their 2010 joint federal income tax return, Jones deducted $500,000 to operate their jet as a business expense. Because of Internal Revenue Service agent, it is not allowed to deducted, as the jet operation cost is a personal expense, rather than a necessary or ordinary business expense under IRC, Sec 162.

Issues: Is that reasonable that Alex and Aubrey’s expense $500,000 on their personal jet can deduct on their joint federal income tax return in 2010?

Conclusions: Alex and Aubrey can deduct $500,000 jet cost as a business expense partially. The 15 times trip to the Oregon farm and the 2 times to computer conferences as business expense can deduct, however, the jet expense on 2 times to Hawaii home and 8 times to Colorado home cannot deduct.
Legal Support: Sec. 162(a), Sec. 274(a), Sec. 274(e), Reg. §1.162-1 ¶L-1208. Use of a private plane Palo Alto Town & Country Village Inc, (1977, CA9) 41 AFTR 2d 78-517, 565 F2d 1388, 78-1 USTC ¶9200, remg (1973) TC Memo 1973-223, PH TCM ¶73223, 32 CCH TCM 1048; French, John, (1990) TC Memo 1990-314, PH TCM ¶90314, 59 CCH TCM 966 .