Thanks to a recent ruling in a tax case heard in Ventura County, business aircraft listed with an aircraft broker—meaning “held for sale”—could qualify for California’s business inventory exemption, which provides relief from annual property taxes. NBAA Tax Committee member George Rice successfully argued the case on behalf of a client who owned a Gulfstream GV and signed a listing agreement with a local aircraft broker.
The jet was listed with the broker in the third quarter of 2010, but was not sold until the fourth quarter of 2011. After a long legal battle, the Ventura County Appeals Board recently ruled that the aircraft did qualify as business inventory and ordered the assessed value for 2011 to be reduced to zero.
Rice said there are specific requirements to meet the exemption, including entering into a listing agreement that transfers care, custody and control of the aircraft to a broker and, once listed, treating the aircraft as "inventory held for sale." In addition, the aircraft should be flown only for demonstration and maintenance flights, not for business trips or charter. Treating the aircraft as “inventory held for sale” also affects the owner’s federal and state tax filings for the aircraft, including suspension of depreciation.