The Internal Revenue Service (IRS) recently released Chief Counsel Advice
(CCA) 2021-17-012 to explain that sole proprietor flights
are generally not subject to the employer-provided aircraft rules
in Internal Revenue Code Section 274. This CCA explains that the
entertainment disallowance allocation rules applicable to flights
on employer-provided aircraft do not apply to flights on aircraft
operated by a sole proprietorship.

The National Business Aviation
Association (NBAA) proactively sought clarification on
this issue in a meeting with the IRS. Holland & Knight Partner
and NBAA Tax Committee Chair John Hoover wrote an
article for NBAA members to explain the impact of the CCA
for sole proprietor structures.

The article explains that existing law supports the use of the
primary purpose method to calculate the entertainment disallowance
for sole proprietor flights. However, taxpayers should be aware
that there is a potential risk that IRS agents will assert in tax
audits that the costs of a flight must be allocated among each
passenger to calculate the entertainment disallowance.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.