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aircraft, for purposes of computing the amount of income taxable
to the employee. See sec. 1.61-21(g), Income Tax Regs. Such
rates do not bear a correlation to the actual costs incurred by
the aircraft’s owner/operator. Instead, the rates are derived
from use of a percentage of commercial flight fares. “[T]he
multiples used are intended to approximate coach and first-class
fares on commercial airlines (e.g., 125 percent of the SIFL
[Standard Industry Fare Level] rates approximates coach fare and
200 percent of the SIFL rates approximates first-class fare).”
50 Fed. Reg. 52281, 52283 (Dec. 23, 1985) (prefatory language to
sec. 1.61-2T, Temporary Income Tax Regs.). The use of this
bright-line approach can result in uneven or differing
treatment.4 As a result, in some cases, such as the one under
consideration, it is possible that an employee would be required
to report a lower value as income while the employer would be
allowed to deduct a higher cost amount. The opposite result
could also occur; i.e., the value of an employee’s use or benefit
is greater than the cost to the employer. In that setting, the
employer would be limited to deducting cost, even though the
employee would be required to report income in excess of the
allowable deduction.
4 See 131 Cong. Rec. 7305-7310 (1985), wherein Senator
Metzenbaum discussed the differences in the cost of travel in a
small plane, which could be less than the SIFL value imputed as
income, and in a luxury plane, which could be greater than the
SIFL value imputed as income.
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