The purchase and sale of private aircraft is complex, and often can seem overwhelming. There are a variety of contractual issues, regulatory issues, and tax implications. That’s why it's imperative to have an experienced team of professionals to help you manage the process. In most cases, your team should include, at a minimum, a broker and an attorney.

Aircraft Purchase
The first step when contemplating the purchase of an aircraft is understanding your requirements. How do you plan to use your aircraft? Will it be for recreational or business use? How many passengers will it need to transport? What is your proposed range? Will you lease your aircraft for charters? What will your budget be? The price of private aircraft can range from under $50,000 to over $100 million, and insurance, maintenance, fuel, crew and storage are ongoing expenses. The answers to these and other pertinent questions will help you identify what size and type of aircraft will suit your needs.
When exploring the market, it’s important to conduct a thorough background check on the aircraft you are potentially interested in buying. This should include a review of every flight and all maintenance records. Generally, you are buying an expensive asset on an “as-is, where-is” basis, unless you have negotiated other rights in the Purchase Agreement.
Once you’ve located the aircraft you want to buy, your attorney will draft a Letter of Intent, which sets forth the purchase price, deposit amount, and an expiration date for the offer. The Letter of Intent allows both parties additional time to negotiate and agree on the terms and expectations of the purchase.
Once the seller accepts the Letter of Intent, you will typically pay the deposit, usually between 5% and 10% of the total purchase price. In most cases, the deposit is paid to an aircraft escrow company or to the broker.
If the parties agree to move forward, the next step is for your attorney to prepare a Purchase Agreement which specifies in detail the terms and conditions of the purchase. An important term of the Purchase Agreement is the pre-purchase inspection and where it will occur. Another important aspect of the Purchase Agreement is what type of warranties come with the aircraft. The Purchase Agreement will also include the terms for any possible refunds. A properly drafted Purchase Agreement will protect you in the event that the seller has misrepresented the aircraft.
Sale of Your Aircraft
When you sell your aircraft, your attorney will draft and/or review the Letter of Intent and the Purchase Agreement. He or she will also prepare your Bill of Sale. There are a number of federal regulations that apply to the sale of aircraft, including those of the Federal Aviation Administration and the Internal Revenue Service.
Tax Issues
For businesses and individuals who purchase aircraft and want to optimize their tax benefits, it’s extremely important to engage in advance tax planning before the purchase. A number of tax considerations come into play, including state sales and use taxes and federal excise taxes. Note that the Internal Revenue Service’s rules regarding reimbursement of and deducting the cost of the business use of an aircraft are complex. Additionally, while there are benefits from depreciating an aircraft, this is only possible if the proper ownership structure has been created.
If you buy an aircraft internationally, there are additional sales, use and transfer tax considerations such as the European Union’s value added taxes (VAT). The tax exposure in international jurisdictions can be extremely burdensome, again underscoring the need for advance tax planning.
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Lento Law Group has many years of experience helping businesses and individuals with the purchase, sale, financing and leasing of aircraft. Contact Lento Law Group today, trusted advisors in this complex legal specialty.