Discussion:Maintenance reserves

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Discussion Forum Index --> Consumer Questions --> Maintenance reserves

Highlandman (talk|edits) said:

20 May 2008

(Disclaimer: I am not an accountant of any sort, just trying to get some general understanding of the financial structure of the organization we are trying to start up.) Operating an aircraft owned by a flying club involves a relatively large, reasonably predictable (but spaced out over a number of years) expense for engine overhauls. Our club (an LLC) wants to assess each member a consistent amount per hour flown for engine reserve. My question is, what is the tax implication of having, say, a third of the cost of an engine overhaul in the bank at the end of the first tax year? Is this supposed to be treated as an expense (in which case of course the engine repair would come from the reserve fund and NOT be opex)? What we want to avoid is having the LLC pass through to the members taxes on what should be a prudent leveling of expenses. Thanks

Natalie (talk|edits) said:

May 20, 2008
I'm curious why one would set up a club like this as an LLC.

GrinnenTL (talk|edits) said:

21 May 2008
My old boss did this. He set it up as a non-profit. Hence no tax implications. If you are an LLC, what are you taxed as?

Marcilio (talk|edits) said:

21 May 2008
Not-for-profit does not equal tax exempt. If there is no business purpose for the club, there wouldn't be taxes anyhow since you would only be assessing dues to finance the operation. I presume that the club is merely for pleasure flying and that some of the members occasionally fly for business. That business activity doesn't affect the club.

If that's right, engine reserve wouldn't have a tax impact.

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