Three sources of durability.
What each asset class is, what owning it involves, and what to know before you talk to your advisors.
The active and passive tests, basis and at-risk limits for partnership and fund owners, and the business loss cap ($256,000 single or $512,000 joint in 2026). The tables below cover only what differs.
Aviation
Aircraft used in a trade or business: jets, helicopters, and drones. The option to move people and operations quickly and on your own schedule.
Qualifying aircraft acquired after January 19, 2025 and used more than 50% for business in the year placed in service may be depreciated in full in the first year or expensed under Section 179, subject to income and other limits. Leasing or charter arrangements can change eligibility. Aircraft are listed property, so qualified business use has to be more than 50% of total use. Interest on financed aircraft is deductible within the business interest limit.
If business use falls to 50% or below, earlier deductions can be recaptured. Personal and entertainment flights count against the percentage. Costs of entertainment flights are generally not deductible, and personal flights by employees or owners can create taxable income to them. Leasing an aircraft to others is generally a rental activity, which is passive by default.
The IRS increased its review of business aircraft use in 2024. It expects flight logs showing the purpose, passengers, and business reason for each trip.
How aircraft depreciation works →Ways to own an aircraft
Tap a row for detail.
Whole ownership, business use
Yes
Applies
Depends
+
You own the aircraft and fly it for your business. Qualified business use has to be more than 50% of total use, and flight logs are the record of it.
Managed charter
Yes
Generally not
Often passive
+
A management company operates the aircraft and charters it to others when you aren't using it. The 50% test generally doesn't apply when substantially all use is for-hire flights for unrelated people; use by you, family, or a 5%+ owner isn't business use. Charter falls under FAA Part 135 rules and federal excise tax.
Fractional ownership
Your share
Applies
Depends
+
You own a share of an aircraft within a managed program. Program fees and contract terms shape the costs.
Interest in an entity
On a K-1
Reported to owners on a K-1, generally passive
Rarely
+
You hold an interest in an entity that owns aircraft. Limited partners can generally qualify as active through only three of the seven tests, so most fund investors are passive.
When the aircraft is sold
If an aircraft sells for more than its depreciated value, the depreciation taken is generally taxed as ordinary income, known as recapture. Aircraft don't qualify for 1031 exchanges.
Which way of flying fits you?
Three questions that show how common ownership models line up with different flying patterns. General information only.
Real estate
Property, including airport-adjacent and aviation-support assets such as hangars. The option of ground you control.
Buildings are depreciated over 27.5 years (residential) or 39 years (nonresidential), and land isn't depreciable. First-year bonus depreciation applies to shorter-lived components, such as equipment, fixtures, and land improvements. For nonresidential buildings, Section 179 can also cover certain improvements, such as roofs, HVAC, fire protection, and security systems. Residential rental property generally doesn't qualify.
A cost segregation study is how those shorter-lived components are identified. Rentals are passive by default; the exceptions are explained in the Owner's guide.
Property passed at death generally takes a new cost basis at fair market value. State estate taxes can apply well below the federal exemption. Investments in designated opportunity zones carry their own capital gains rules.
Communities
Co-living, shared-ownership, and preparedness-focused developments. The option of people and resources close by.
The same real property rules apply to the buildings and improvements. How ownership is structured decides who takes the depreciation and how it's treated.
Owners who don't work in the project are generally passive. At-risk and basis limits can also cap the losses an owner can deduct in a given year.
Shared ownership comes with its own legal documents, governing who decides, who pays, and how you exit. Review them with your attorney.
Active and passive, explained →Ways to own real property
Tap a row for detail.
Direct, or your own LLC
Yes
Depends
Yes
+
You own the property. Rentals start out passive; real estate professional status or average stays of 7 days or less can change that.
Partnership or syndication
On a K-1
Rarely
No
+
You hold an interest in an entity that owns property. Most investors are passive, and partnership interests can't be exchanged under 1031.
Tenancy in common
Your share
Depends
Depends
+
You own an undivided share alongside other owners. It can qualify for a 1031 exchange when structured as direct co-ownership rather than a partnership.
Delaware statutory trust
Your share
No
Yes
+
A trustee operates the property, so owners are passive. The IRS has allowed these interests in 1031 exchanges (Rev. Rul. 2004-86).
REIT shares
No
No
No
+
You own stock in a company that owns property and receive dividends. The depreciation stays inside the company.
Co-op or condo
Depends
Depends
Depends
+
Common in communities. A co-op is shares in a corporation that owns the building; a condo is your unit plus a share of common areas. A home you live in gets none of these; a unit held for rent or business use can.
When property is sold
Depreciation on the building is generally taxed at up to 25%, and depreciation on shorter-lived parts at ordinary rates. A 1031 exchange lets you sell real property held for business or investment and reinvest in other real property with the tax on the gain deferred: identify the replacement within 45 days, close within 180, and use a qualified intermediary to hold the proceeds. Your original basis carries over to the new property.
IRS Publication 946, How to Depreciate Property
Citrin Cooperman, OBBBA impact on real estate
IRS, Like-kind exchanges
IRS Topic 409, Capital gains and losses
26 U.S.C. 280F, listed property and qualified business use
The Tax Adviser, Limited partners and material participation
IRS Publication 925, Passive Activity and At-Risk Rules
IRS Cost Segregation Audit Techniques Guide
The Tax Adviser, IRS scrutiny of business aircraft use
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