December 11, 2007

Highlights of the Proposed Regulations on Deductions for Entertainment Use of Business Aircraft

On June 14, 2007, the IRS issued proposed regulations under section 274(e)(2), which was amended by the American Jobs Creation Act of 2004 for the purpose of limiting deductions for the entertainment use of company aircraft by executives who are “specified individuals.” Essentially, the proposed regulations require taxpayers to evaluate the status of each passenger and his or her reason for flying and to disallow the taxpayer’s deduction for costs attributable to entertainment flights by executives and their guests who are deemed to be specified individuals. By the end of this program, listeners are in a better position to assess the guidance in both Notice 2005-45 and the proposed regulations for the purpose of determining how to handle particular issues until final regulations are issued.