Rev. Rul. 79-29

ISSUE

Does the exemption from federal transportation taxes for affiliated groups apply where an affiliated group's aircraft ceases to be available to outside parties?

FACTS

As in Rev. Rul. 77-405, 1977-2 C.B. 381, an affiliated group's aircraft was available for hire to persons outside the affiliated group and thus the transportation tax exemption under section 4282(a) of the Internal Revenue Code of 1954 was not applicable to any flights of the aircraft. The determination of whether the fuel taxes or the transportation taxes applied to such flights was made on a flight by flight basis. However, in this case, after a period of time the affiliated group's aircraft ceased to be available for hire at all by outside parties and was thereafter available only to members of the group.

LAW

The applicable sections of the Code are 4041(c) relating to the aviation fuel taxes, 4261 and 4271 relating to the taxes on transportation by air of persons and property, respectively, and 4282(a) relating to the exemption from the transportation taxes for affiliated groups. For definition of an "affiliated group" see section 1504(a).

HOLDING

Since the affiliated group's aircraft ceased to be available to persons outside the group, the section 4282(a) exemption applies as of the date on which the availability of the aircraft to outside parties ceased.

Rev. Rul. 77-405 is amplified.