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Depreciation:
- Depreciation is fully utilized in business analyses, none if personal.
- MACRS of five years on future capital items and for acquired aircraft, unless any revenue exists, then seven years.
- Bonus depreciation of 30% after September 10, 2001, and 50% after May 5, 2003, but prior to January 1, 2005, for qualified aircraft.
- For bonus depreciation purposes, the aircraft is assumed to be 'placed in service' prior to January 1, 2005.
- The taxpayer does not use section 179 for small businesses.
- Future capital improvements are assumed to qualify for bonus depreciation if made during the legal period.
- Half year convention assumed for the year of purchase, and year of resale if applicable.
Trades:
- If the trade value is below book value, the first plane is assumed to be sold, the second plane purchased, and the loss taken.
- If the trade value is above book value, the first plane is assumed to be exchanged for the second plane in a 'like-kind exchange', and the gain is deferred.
- If the trade value is above both book value and the acquisition price, the amount over the the acquisition price is "boot" and taxed as ordinary income.
- Any equity in the first plane is applied to decrease the principal borrowed.
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Capital Gains:
- All capital gains are assumed to be taxed as ordinary income, with no ceiling on the gain.
Inflation/Deflation:
- Inflation effects are assumed to be continuous over the projected period.
Miscellaneous:
- The graph shows straight-line variation between the data points entered, for the scale chosen, in the table under "Aircraft".
- It is assumed the aircraft is used enough for business to be 100% deductible when values other than zero are entered in the marginal tax bracket field.
- When a 'personal' analysis is indicated, no deductions are made for expenses or depreciation, and the cost basis is increased by the amount of each capital improvement.
- Cash flows occur at the end of the month in which the expense occurs, except in the case of lease payments, which are assumed to be advance payments, and are posted at the end of the preceding month.
- For a cleaner presentation in the reports, expenses are shown as positive numbers and revenues as negative numbers, except where the reverse is more intuitive.
- The 'Effective down payment' for an existing aircraft is generally equal to the investment value which would remain after debt and taxes if the aircraft were liquidated.
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