A custom 54' design I had built in 2007-2008. Lots of details at www.newmorning.info
Diamond Share Experience
Moderators: Rick, Lance Murray
- Boatguy
- 5 Diamonds Member
- Posts: 1866
- Joined: Mon Jan 22, 2018 4:48 am
- First Name: Russ
- Aircraft Type: DA62
- Aircraft Registration: N962M
- Airports: KSTS
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Re: Diamond Share Experience
- mbitran
- 2 Diamonds Member
- Posts: 47
- Joined: Fri Nov 29, 2019 2:33 am
- First Name: Marco
- Aircraft Type: DA40NG
- Aircraft Registration: n920LA
- Airports: KOWD
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Re: Diamond Share Experience
I just received a DA40 NG in Norwood, MA and have 2 other pilot members in the DiamondShare program. Happy to share my experience if anyone wants further details. So far, so good.
I would agree with one comment - the rates are low. I will need to increase them over time to ensure that members' incremental costs are completely covered.
I would agree with one comment - the rates are low. I will need to increase them over time to ensure that members' incremental costs are completely covered.
- Boatguy
- 5 Diamonds Member
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- Joined: Mon Jan 22, 2018 4:48 am
- First Name: Russ
- Aircraft Type: DA62
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Re: Diamond Share Experience
I've been dry leasing my DA40NG for two years and just reviewed the 2020 expenses for my tax returns. I adjusted the depreciation from what the IRS allows (6yrs straight line) to $20K which I believe is closer to the real decline in value. Included is interest (even if you don't borrow, you have opportunity cost for your equity, probably higher than my loan rate), hangar, insurance, property tax, maintenance, DB subscription, etc. I come out to about $250/hr dry cost, and that's while the plane is covered by warranty (though I had no major warranty claims).mbitran wrote: ↑Sat Jan 16, 2021 8:02 pm I just received a DA40 NG in Norwood, MA and have 2 other pilot members in the DiamondShare program. Happy to share my experience if anyone wants further details. So far, so good.
I would agree with one comment - the rates are low. I will need to increase them over time to ensure that members' incremental costs are completely covered.
Meanwhile, the tax advantages are not huge. If you end up with 60% of your expenses categorized as business expense, and you are in a 25% marginal tax bracket because of all the other ways you shelter income, then you are saving about 15% of your expenses. Using the tax allowable depreciation sweetens that a bit, but be careful about using accelerated depreciation because if you discontinue leasing or sell the plane you may be subject to depreciation recapture.
The bottom line is that there is some financial compensation for the time and hassle of managing two other pilots using your airplane, less availability due to sharing your plane, less opportunity for spontaneity and more hours in the shop because even with an NG those 100hr services come up more often. The question to be answered is am I sufficiently compensated for my time to manage this business, manage the increased maintenance (schedule with the shop and shuttle to/from the service center), and the subjective loss of access to my plane?
My lessee decided to buy an SR22 and I decided to not continue to dry lease my plane.
- firedwg1
- 3 Diamonds Member
- Posts: 59
- Joined: Fri May 11, 2018 2:56 am
- First Name: josh
- Aircraft Type: DA40
- Aircraft Registration: DA40XLS
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Re: Diamond Share Experience
I was looking at this for a few years. What I have found was
1. the 20% down payment, that cost of that money that could be invested in something is not accounted for.
2. You have to be in a position to take the tax write off. If you’re not you investment will lose value over the first 5 years and you will not be able to take advantaged of it.
3. The Diesel engines are expensive to operate according to the A&P. What was stated was there is additional maintenance which exceeds the cost to operate the IO360.
Basically it’s good to read what everyone’s experience is. It seems like a really good deal for non owners.
V/r
1. the 20% down payment, that cost of that money that could be invested in something is not accounted for.
2. You have to be in a position to take the tax write off. If you’re not you investment will lose value over the first 5 years and you will not be able to take advantaged of it.
3. The Diesel engines are expensive to operate according to the A&P. What was stated was there is additional maintenance which exceeds the cost to operate the IO360.
Basically it’s good to read what everyone’s experience is. It seems like a really good deal for non owners.
V/r
- shorton
- 2 Diamonds Member
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- Joined: Thu Jan 17, 2013 7:42 pm
- First Name: Scott
- Aircraft Type: DA42NG
- Aircraft Registration: N68MJ
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Re: Diamond Share Experience
Just looking at the tax issues, anytime an owner leases an aircraft a few big red flags pop up in the eyes of the IRS: 1) passive activity loss, 2) hobby loss. You need a good plan to deal with both or the idea of leasing might cost more than leaving the plane sitting on the ramp. Lots of people play the audit lottery, either knowingly or unknowingly.
Regarding depreciation, the depreciation deduction taken each year is dictated by allowable methods contained in tax regulations. Generally, an aircraft owner is not able to pick an amount based on the actual economic depreciation of the aircraft. The downside of making an error here is that the recaptured income on sale is based on the greater of the amount that is allowed or is allowable. So if you don't take what was allowable, you may end up paying tax on ordinary income for which you did not realize a corresponding depreciation deduction.
Regarding depreciation, the depreciation deduction taken each year is dictated by allowable methods contained in tax regulations. Generally, an aircraft owner is not able to pick an amount based on the actual economic depreciation of the aircraft. The downside of making an error here is that the recaptured income on sale is based on the greater of the amount that is allowed or is allowable. So if you don't take what was allowable, you may end up paying tax on ordinary income for which you did not realize a corresponding depreciation deduction.
Scott Horton, JD CPA
ATP, FAA Gold Seal CFI, CFII, MEI
https://orangecountyflightinstruction.com
KSNA, Orange County, CA
ATP, FAA Gold Seal CFI, CFII, MEI
https://orangecountyflightinstruction.com
KSNA, Orange County, CA
- Boatguy
- 5 Diamonds Member
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Re: Diamond Share Experience
To be clear, I only adjusted the depreciation for the purpose of computing my true opex and communicating that to other owners. Using the IRS regs would overstate the actual expense that I think should be recovered by anyone leasing their plane with Diamond Share or just a block hours dry lease as I did.shorton wrote: ↑Sun Jan 17, 2021 11:41 pm Regarding depreciation, the depreciation deduction taken each year is dictated by allowable methods contained in tax regulations. Generally, an aircraft owner is not able to pick an amount based on the actual economic depreciation of the aircraft. The downside of making an error here is that the recaptured income on sale is based on the greater of the amount that is allowed or is allowable. So if you don't take what was allowable, you may end up paying tax on ordinary income for which you did not realize a corresponding depreciation deduction.
- mbitran
- 2 Diamonds Member
- Posts: 47
- Joined: Fri Nov 29, 2019 2:33 am
- First Name: Marco
- Aircraft Type: DA40NG
- Aircraft Registration: n920LA
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Re: Diamond Share Experience
I agree with Boatguy on the $250/hr cost. With interest/capital cost included --- I believe you are close to that number.
That said, bringing on members increases your total hours, and spreads the fixed cost, hence lowering the hourly cost of the plane. At 400 hours/yr I believe the cost of operating the plane would drop closer to $215/hr.
I think one of the keys of the program is to sign on experienced pilots. In my short efforts thus far, this has been one of the biggest challenges.
That said, bringing on members increases your total hours, and spreads the fixed cost, hence lowering the hourly cost of the plane. At 400 hours/yr I believe the cost of operating the plane would drop closer to $215/hr.
I think one of the keys of the program is to sign on experienced pilots. In my short efforts thus far, this has been one of the biggest challenges.
- CFIDave
- 5 Diamonds Member
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Re: Diamond Share Experience
The "rules of thumb" for DiamondShare Owners:
- If you have 3 Members, the monthly payments from the Members is usually sufficient to cover just about every expense (insurance, hangar, interest on an 80% note, maintenance, database updates, etc.) except for the cost of the fuel that you personally use. Owners need to charge more in locations with high hangar rents.
- If you have 2 Members, the monthly payments from the Members is generally sufficient to cover the cost of the note on the aircraft.
This is just cash flow -- not counting taxes. However many DiamondShare Owners (following their tax advisors) have determined that DiamondShare qualifies as business use, with many Owners claiming accelerated depreciation to write off as much as 1/3 the cost of their new plane in the first year. Your particular tax situation may differ.
- If you have 3 Members, the monthly payments from the Members is usually sufficient to cover just about every expense (insurance, hangar, interest on an 80% note, maintenance, database updates, etc.) except for the cost of the fuel that you personally use. Owners need to charge more in locations with high hangar rents.
- If you have 2 Members, the monthly payments from the Members is generally sufficient to cover the cost of the note on the aircraft.
This is just cash flow -- not counting taxes. However many DiamondShare Owners (following their tax advisors) have determined that DiamondShare qualifies as business use, with many Owners claiming accelerated depreciation to write off as much as 1/3 the cost of their new plane in the first year. Your particular tax situation may differ.
Epic Aircraft E1000 GX
Former DA40XLS, DA42-VI, and DA62 owner
ATP, CFI, CFI-I, MEI
Former DA40XLS, DA42-VI, and DA62 owner
ATP, CFI, CFI-I, MEI
- Rich
- 5 Diamonds Member
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- Joined: Mon Aug 30, 2010 12:40 pm
- First Name: Rich
- Aircraft Type: DA40
- Aircraft Registration: N40XE
- Airports: S39 Prineville OR
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Re: Diamond Share Experience
This isn't Diamond Share directly, but when the two of us bought the plane in '02 we formed a Subchapter-S corporation. I'm told an LLC is functionally identical but Sub-S is what we were advised at the time. We each paid $120 K cash for the plane (price was $225K) and to seed an operating expense account.
Over the years we depreciated the airplane value but you can only go so far with that. Many years, outside of depreciation we actually made a small profit (positive EBITDA), which keeps you out of trouble with respect to taxes. I came to be the sole owner in 2010 and the sole user of the plane in 2016. (Prior to this we/I had several non-owner renters of the plane.) This sole-customer status is risky and could be troublesome in an audit. So in 2018 the corporation sold it to me and was dissolved. This is when you pay the depreciation piper. A one-time hit in "ordinary" capital gains, which is taxed at normal marginal rate. Because I live in a state with no sales tax (Oregon), there wasn't that hit, as there would have been in Washington. Fortunately I had no problem handling this tax hit. So now life is simpler and I don't have to juggle getting funds into the business account to manage expenses.
An interesting wrinkle is that Washington has no Income tax, though there is a small similar tax on businesses if you make enough net profit, which we never did. But there is a sales tax. The reverse is true of Oregon.
Over the years we depreciated the airplane value but you can only go so far with that. Many years, outside of depreciation we actually made a small profit (positive EBITDA), which keeps you out of trouble with respect to taxes. I came to be the sole owner in 2010 and the sole user of the plane in 2016. (Prior to this we/I had several non-owner renters of the plane.) This sole-customer status is risky and could be troublesome in an audit. So in 2018 the corporation sold it to me and was dissolved. This is when you pay the depreciation piper. A one-time hit in "ordinary" capital gains, which is taxed at normal marginal rate. Because I live in a state with no sales tax (Oregon), there wasn't that hit, as there would have been in Washington. Fortunately I had no problem handling this tax hit. So now life is simpler and I don't have to juggle getting funds into the business account to manage expenses.
An interesting wrinkle is that Washington has no Income tax, though there is a small similar tax on businesses if you make enough net profit, which we never did. But there is a sales tax. The reverse is true of Oregon.
2002 DA40-180: MT, PowerFlow, 530W/430W, KAP140, ext. baggage, 1090 ES out, 2646 MTOW, 40gal., Surefly, Flightstream 210, Orion 600 LED, XeVision, Aspen E5
- Stephan
- 2 Diamonds Member
- Posts: 14
- Joined: Sat Jan 23, 2021 1:24 pm
- First Name: Stephan
- Aircraft Type: DA40NG
- Aircraft Registration: N275SB
- Airports: KNEW
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Re: Diamond Share Experience
Dumb Question: how do you lease blocks of time to non equity pilots and not fall into a commercial category?