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.

For more information or questions regarding the IRS guidance and NBAA resources, contact the author.