Spring 2013 issue of Horizons

∙ Flight by Flight Method A taxpayer has the option of allocating expenses on a flight-by-flight basis. Under this method, a taxpayer may aggregate all expenses for the taxable year and divide the amount of total expenses by the number of flight hours or miles for the taxable year to determine the cost per hour or mile. The taxpayer then will allocate expenses to each flight by multiplying the number of miles or hours for the flight by the expense per hour or mile and allocate expenses for the flight to the passengers on the flight per capita. When a trip contains flights that include both business and entertainment segments, the costs must be allocated between the two uses. The entertainment cost is the excess of the total expenses of the flights less the expenses of the flights that would have been taken without the entertainment leg(s).

Expenses incurred for non-entertainment personal travel of specified individuals aboard employer-provided aircraft are not subject to the disallowance provisions of the final regulations so long as such use is treated appropriately as compensation or reported as income to the specified individuals. For example, the final regulations provide that entertainment does not include travel to attend a family member’s funeral.

To calculate: Amount of the expenses allocable to the entertainment flight of the specified individual (using either the occupied seat hour or mile method or the flight-by-flight method) – Amount the taxpayer treats as compensation or reports as income to the specified individual (not below zero) + Any amount the specified individual reimburses the taxpayer Amount disallowed under Section 274 for a personal entertainment flight by a specified individual

RubinBrown Tax Services Group The proactive and creative technical expertise of our tax consultants combined with our personal, long-term relationships with our clients distinguishes RubinBrown tax services.

Steve Brown, CPA – Saint Louis Partner-In-Charge & Chairman Tax Services Group 314.290.3326 steve.brown@rubinbrown.com

Tim Sims, CPA – Saint Louis Partner Tax Services Group 314.290.3434 tim.sims@rubinbrown.com

Jim Massaro, CPA – Denver Partner Tax Services Group 303.952.1211 jim.massaro@rubinbrown.com

Jason Uetrecht, CPA, CFP – Saint Louis Partner Wealth Management Service Group 314.290.3283 jason.uetrecht@rubinbrown.com

Mary Ramm, CPA – Kansas City Partner Tax Services Group 913.499.4406 mary.ramm@rubinbrown.com

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