Day: June 20, 2016

Summary of New FAA Commercial Drone Leaked

Those wishing to use commercial drones have been waiting for many months for the FAA to issue regulations for their.  According to www.dronelawjournal.com the rules are supposed to be officially issued June 21, 2016; however, a leaked copy of a summary of the new Part 107 drone rules has been made available and published on various websites (FAA’s summary).

The significant changes from the notice of proposed rulemaking that was issued in February 2015 are:

  • The minimum age for a Remote Pilot in Command is now 16-years-old;
  • The maximum altitude has been changed to 400 feet AGL;
  • There is a read, speak, write and understand English requirement; and
  • Current Part 61 manned aircraft certificate holders will only have to take and pass an online test.

The new Part 107  – according to the leaked summary – will eliminate many of the most cumbersome and expensive requirements currently imposed on commercial drone operators, including the requirement for a so-called 333 exemption, a manned aircraft pilot’s license, a visual observer, the requirement to hold a certificate of authorization and the requirement to issue a notice to airmen before each flight.

§168(k): Bonus Depreciation is Another Important Cost Recovery Tool

Bonus depreciation under §168(k) provides that the taxpayer may deduct 50% of the cost of qualifying new assets put into service in taxable years from 2015 to 2017, phasing down to 40% in 2018 and 30% in 2019.

This means that an unraced, untrained Thoroughbred yearling is eligible for bonus depreciation because a buyer will be placing the horse in service for the first time. It’s a “new” horse for bonus depreciation purposes. However, a Thoroughbred sold as a 2-year-old in training probably is not, nor is a mare in foal.

Note that changing how the horse is used, buying a show hunter as a broodmare for example, does not constitute a new “original use” for bonus depreciation purposes.

To summarize, the tax rules provide that a horse business with “used” qualifying property may:

  1. First take a 179 expense, if any
  2. Then take MACRS expense

However, a horse business with “new” qualifying property may:

  1. First take 179 expense, if any
  2. Then take 168(k) bonus depreciation
  3. And then take MACRS expense

Importantly, if §179 does not apply because of certain limit triggers then bonus depreciation and MACRS still apply.

So you can see that by taking §179, and bonus depreciation, and MACRS, those taxpayers with qualifying property have significant cost recovery tools.