Deducting corporate aircraft entertainment travel.

• Author: Laffie, Lesli S.
• Position: FROM THE IRS

Notice 2005-45 clarifies the post-American Jobs Creation Act of 2004 (AJCA) tax treatment of the personal use of corporate aircraft for entertainment travel. For such use after Oct. 22, 2004, the employer's deduction cannot exceed the amount the traveling employee includes in income.

Background: Prior to the AJCA, if an employee used a business aircraft for entertainment travel, the employer could deduct the cost of providing the flight if the employee properly reported the flight's value as additional income. While the employer generally deducted many thousands of dollars for providing the flight, the employee would include in income only a relatively small amount, calculated under the Department of Transportation's standard industry fare levels formula.

New law: Under the AJCA, the business's deduction cannot exceed the amount the executive takes into income for...