Partner buyout (re: Sales Tax / Taxes)

rupertjl · Post by **rupertjl** » Tue Mar 07, 2006 1:48 am

Has anyone ever bought out a partner in co-ownership? My partner is getting married and moving away and wants to sell his half. I talked to AOPA and got the low down on the paperwork required. My worry is that the great communist state of Maryland will try to collect taxes again. Am I allowed to put on the bill of sale that he sold his half to me for $1?
Any other gotchas I need to know about?

Thanks!

davevramp · Post by **davevramp** » Tue Mar 07, 2006 5:18 pm

Usually they tax on the money that changes hands so many people use other value consider. (OVC) if they need paper work you could just by the spare part what should be a casual sale. In New Jersey another tax happy state aircraft are not taxed, because of the casual sale provision. But you have to know how to answer the questions they ask.

Harold Holiman · Post by **Harold Holiman** » Tue Mar 07, 2006 9:56 pm

Better talk to your accountant. Most every state is different. "$1.00 plus other considerations" used to work in a lot of states where in is not accepted now.

Harold

Post by **GAHorn** » Wed Mar 08, 2006 7:27 am

As a former employee of the Comptroller of Public Accounts, State of Texas, (and my brother is actually still an enforcement officer for them) I can tell you that such commentary as OVC (other valuable considerations) no longer passes muster.
If the taxing authority suspects that less-than fair market value has been declared, they will assign a value of their own...usually higher than "blue book", to which they all subscribe. They've gotten smarter.
(In fact, many states also are hip to the practice of out-of-state registrations, and they may tax you anyway based upon a "Use" tax.)
BUT....there may be some relief for you if your partner simply "abandons"

his interest to you.

The tax authority likely subscribes to the FAA's new registrations list, and that is how they'll pick up on the transaction. But Texas (and many other states) also allow an "occasional sale", normally intended to allow an owner to occasionally replace an aircraft and avoid sales tax for a replacement of similar value. If you can show that you only assumed a small additional value, then it might fall under that rule. Texas took no interest when I sold my Baron and purchased a 170, under the "occasional sale" rule. (The rule requires that only one such transaction occur within a 12 mo. period.)

Disclaimer: I am not a lawyer and I am not offering legal advice. Seek your own legal counsel.

swfraley · Post by **swfraley** » Mon Mar 27, 2006 12:20 am

Who actually owns the airplane? If you own it in a partnership or corporation, he isn't selling you an airplane; he's selling you his part of the organization which owns the airplane. There shouldn't be any tax on that.

rupertjl · Post by **rupertjl** » Mon Mar 27, 2006 11:53 am

we're both on the registration, so we both own the plane.

N170CT · Post by **N170CT** » Mon Mar 27, 2006 8:09 pm

Yeah, you gotta be careful in everything you do. Bought my airplane about four years ago and recently relocated to Virginia from So.Cal.
Being a law abiding citizen(not always a good idea), I changed my address with the FAA FUZZ in Ok City, and promptly got a Greetings letter from Virginia wanting the sales tax owed and some kind of Aviation Permit which is applicable to a/c based or operated in the great Commonwealth of Virginia. Neither of my a/c are in or ever have been in Virginia so you can imagine how I plan to respond.

Make no mistake, these tax happy jerks, er politicians, deliberately target aircraft and boat owners as easy prey. My goal is to make it difficult.

chuck

Post by **GAHorn** » Tue Mar 28, 2006 5:38 pm

Charlie, it's not different than your automobile. If you move to another state, most of them require that the auto be re-licensed in that state after 30 days. The fees for that license must be paid. It's how the system gets revenue for all the services it provides, like roads, cleanup, signage, runway repaving, etc.

lowNslow · Post by **lowNslow** » Tue Mar 28, 2006 6:17 pm

N170CT wrote:Being a law abiding citizen(not always a good idea), I changed my address with the FAA FUZZ in Ok City, and promptly got a Greetings letter from Virginia wanting the sales tax owed and some kind of Aviation Permit which is applicable to a/c based or operated in the great Commonwealth of Virginia. Neither of my a/c are in or ever have been in Virginia so you can imagine how I plan to respond.

Did you mean to say property tax? I can't see how they can expect to collect sales tax if you have owned the airplane for 4 years. Most states that have sales tax only collect it if you bring it in state within a short time of purchase (30-60 days).

Post by **GAHorn** » Tue Mar 28, 2006 7:23 pm

Well, Charlie said he didn't actully bring his airplane to his new state, so I presume he'll tell them that and they'll drop it.
Some localities inspect the local airports from time to time and send the registered owners a tax-bill based upon a "use tax". Sales taxes can be waived and replaced by "use tax" when ownership has not actually changed.
Some counties also have "ad valorem" taxes. Travis county (Austin, TX) has such a tax, and they attempted to tax my boat when I lived there, although it was based in a different county. I wrote them that it was actually located in Matagorda County, and the little snerd of a country clerk shot back at me "Well, then I guess we'll just have to notify Matagorda County about that then won't we?"
I told her to go ahead....that's why it's registered in another county. They don't have an ad valorem tax.

The county I presently live in has no such taxes. Don't like the taxes where you live? Move! (But if you live in Rome, render unto Ceasar that which is Ceasar's. IMHO)

Harold Holiman · Post by **Harold Holiman** » Tue Mar 28, 2006 10:40 pm

Here in Georgia I get a tax bill each year from both the city and the county.

Harold
N92CP