2.04 Trade-Ins

Special tax benefits may be available where an aircraft is traded-in for another. For state income tax purposes, the gain on the disposition of the old aircraft can often be deferred. For state sales tax purposes, many states allow a deduction for property taken in trade.

Special attention must be paid to the types of transactions which qualify. An exchange which qualifies as a like-kind exchange for federal income tax purposes will generally qualify for state income tax purposes, but may not qualify for state sales tax purposes. For example, the state sales tax rules may not allow the kind of multi-party exchanges which are allowed under the federal income tax rules.1 Nevertheless, a trade-in which qualifies for state sales tax purposes will probably qualify as a like-kind exchange for income tax purposes.

  1. See, e.g., Ind. Law 6-2.5-1-6(c)(1).