We previously wrote about how a recently passed Texas bill (S.B. 1396) will allow certain in-state aircraft purchases to qualify for a resale exemption from sales tax, with the tax instead applied to later leasing contract payments.
Now, a new IRS Chief Counsel memo says that an aircraft leasing partnership that trades in an aircraft that is leased to a related entity is eligible for §1031 tax free exchange treatment, even though the related entity lease rate was so low that it produced tax losses during the term of the lease. This is good news for a combined state sales tax planning structure frequently used for aircraft acquisitions, to be followed by a trade-in of the aircraft when a new plane is desired. To read the full GT Alert click here.