Sharing Aircraft Among Multiple Users

The planning process would be a lot easier if everyone needed a whole aircraft. However, in many cases, the aircraft is bought with the expectation that the aircraft will be shared by several users. In other cases, the owner would like to defray the fixed costs of ownership by leasing the aircraft to an air charter operator. Regardless of how this is done, the overriding objectives are generally to minimize tax cost, to comply with the FAA Part 91 rules and to insure adequate insurance coverage.

The simplest alternative is for the same company to lease both aircraft and crew to the other users (a "wet lease") and may generate sales tax benefits. However, this alternative also involves the FAA risk of being considered a Part 135 "air charter" operation and is potentially subject to the federal transportation tax. Where the user is a related party, such as the "affiliated group" exemption. Where the user is an unrelated party, a "time-share" or "interchange" agreement may be used to avoid the FAA problems, but not the transportation tax. However, care must be taken to avoid The Sole Purpose Company Trap.

The aircraft can be purchased by a company and leased to other users without crew (a "dry lease"). A dry lease is allowed under Part 91, as long as certain disclosure requirements are followed. The tax advantages and disadvantages of using an aircraft leasing company are discussed in Aircraft Leasing Companies.

Another alternative is for the different users to become co-owners of the aircraft. This kind of operation is generally permitted under Part 91, is not subject to income tax limitations or to the transportation tax. The greatest challenge is to draft an agreement which is fair to everyone.