FREQUENTLY ASKED QUESTIONS
How much does HEXA cost?
LIFT is offering a very limited number of special, Founder Series HEXA aircraft for delivery in 2020 for a total price of $495,000, including two sets of battery packs, one charging cart and all accessories required for safe operations.
How much income can I earn under Option 1?
Income under Option 1 is a monthly guaranteed lease payment regardless of the rental use of the aircraft - so the income and benefits are greatly simplified.
The following is a
Sample Pro Forma for the 5 year term of Option 1, shown with sample financing terms based on a typical HELOC.
Note: Financing your aircraft purchase is optional and based on what financing might be available to you. As you can see below, the Option 1 Owners program can essentially provide you with significant positive cash flow, a net profit after the term, significant owner use benefits, and the residual value of the aircraft at the end of the term.
Where will LIFT's bases be located?
LIFT is accepting refundable deposits for Option 1 Owners Program buyers in several US cities including Austin, Las Vegas, Los Angeles, New York City, Orlando, San Francisco, and Seattle. LIFT will determine the sequence and schedule for opening locations based on several factors including demand from consumers in the form of our waitlists, weather/seasonality, tourism, availability of suitable base sites and demand from owners/investors under this program. LIFT is also evaluating several locations outside the US, for example Dubai, Saudi Arabia, etc. but these are subject to approval being provided by aviation regulatory agencies in these regions.
Option 1 Owners will buy aircraft and put them into operation at specific locations, while Option 2 Owners buy aircraft and LIFT determines the best location, which may be subject to change during the course of the term.
How much will my HEXA be worth at the end of the term?
Hexas are a completely new type of aircraft, so resale values are unknown - however, we are manufacturing Hexa airframes to have a useful life of more than 100,000 flights so they will have significant value after the end of the 5 year term.
What are the tax benefits of operating an aircraft as a business?
DISCLAIMER: LIFT Aircraft is not qualified to give you tax advice. Please consult with a tax specialist to determine what tax benefits may apply to your specific income and tax situation.
Your LLC will file taxes and you, as the owner of the business, will receive flow through income or loss, typically with IRS form K-1. Any asset used in a legitimate, profit business is allowed to be depreciated up to 100% in its first year in service per IRS Section 179. This accellerated depreciation was included in recent tax changes to promote capital expenditures and investment by small businesses in the US. The depreciation will create a tax benefit of up to $185,000, depending on your income tax rate (37% of $500,000 = $185,000). Your ability to take advantage of this tax benefit will depend on having sufficient income to expense this large expense against and the classification of your income in a given year as either ordinary income or passive income.
It's important to note that, after you fully depreciate the aircraft, if you sell the aircraft there will be tax on the full proceeds of the sale as ordinary income. If you keep the aircraft for personal use after the program then this is not be an issue but check with your CPA for your personal situation. The third alternative is that you can sell the aircraft or trade it in as part of the purchase of a new aircraft and the tax gain will be offset by the depreciation of the new aircraft.
Can I fly my aircraft as an owner in this program?
Yes, owners get the benefit of personal use of their aircraft under both Option 1 and Option 2 of the Owners Program. Option 1 owners get to choose the base location for their aircraft, and owners and their guests can fly up to 8 times per month for free. Option 2 owners and their guests get to fly up to 8 times per year (typically this will be during an annual base visit that will be required for Option 2 given that aircraft may not be based near them). Owners also get unlimited use of our virtual reality flight simulators (subject to availability) and will be invited to special Owner and VIP events at their LIFT base.
Limited personal use of your aircraft should not impact the tax treatment of your aircraft as a business asset. According to most CPAs that specialize in this area, personal use of your aircraft is generally allowed by the IRS up to a certain limit - up to 10% of its available use. Please seek the advice of a tax professional about your specific tax situation.
Can I split up ownership of my LLC or buy more than one aircraft?
Yes, you can bring multiple investors together to buy and aircraft and form an LLC. Consult with legal and tax specialists as to how income and tax benefits flow through an LLC with multiple owners. You can also buy and operate more than one aircraft under your LLC.
How is insurance handled?
You are personally protected from liability by operating under your LLC, and LIFT Aircraft has made arrangements with a leading aviation insurance underwriter to provide aircraft hull and liability insurance for your business. Under Option 1, LIFT will pay for liability and hull insurance for your aircraft, and under Option 2 your LLC will pay for its own insurance. Please consult with qualified legal professionals to understand liability and insurance relating to your business.
Is this type of ownership program common?
The Hexa ownership program is structured very similarly to other common ownership programs in aviation and other industries. It is very common for owners of general aviation aircraft to lease their aircraft to fixed-base operators (FBOs), who then rent the aircraft out to pilots by the hour.
In the yacht charter industry, it is common practice for yachts to be owned by individuals under business entities and put in charter rental under similar programs.
How do I know people will want to rent and fly Hexas at LIFT locations?
While this is an entirely new kind of aircraft and the first truly consumer flying experience to launch anywhere in the world, we have been testing consumer interest in this new form of flying by opening up waitlists in 25 US cities. As of November 27th 2019, we have a waitlist of over 15,000 flights, with "Super Early Bird" pre-paid deposits for flights during our upcoming US road show sold out for more than half of the tour.
LIFT has been covered extensively in the news including The TODAY Show, CNBC, TechCrunch and Motherboard on VICE. Experiential entertainmnet is one of the fastest growing segments of the economy and estimated to be a $12B market by 2022. Comparable businesses like iFLY (indoor skydiving), K1 Speed (electric cart racing) and Top Golf (gamified golf entertainment) have grown rapidly as consumers and millenials in particular trend toward spending more discretionary income on experiences, particularly those that are easily shareable on social media.
Is financing available for the purchase of the aircraft?
LIFT is not offering financing for purchase of aircraft under the program, but encourages prospective owners to explore financing options that might be available to them. For example, a common source of financing that is widely availabe is a home equity line of credit (HELOC). Depending on the terms of the financing that may be available to you, the income from the Owners Program may be more than enough to cover principle and interest payments, resulting in significant positive cash flow. Please seek the advice of financial advisors.
What is the timeline for buying an aircraft and putting it into service?
LIFT is accepting refundable deposits in the amount of $5,000 to reserve your aircraft for deliveries starting in 2020. We expect only approximately 12 "Founder Series" aircraft will be produced and delivered in CY2020 with production ramping up in 2021 and beyond.
Within a week of placing your deposit, a LIFT representative will contact you and there will be a period of 30-60 days of due diligence. You will be able to review financial projections, consult with your legal and tax advisors, evaluate your financing options and review the purchase and management agreements.
Aircraft deliveries will be allocated rougly in the order deposits are received, however aircraft purchased under Option 1 will not be produced or delivered until the base location at which those aircraft will operate has been secured. When it is time for your aircraft to start production, you will execute the purchase and management agreements and 100% of the purchase price will be due. You will be provided an estimated delivery date at the time of signing your purchase agreement. Production and delivery may take up to several months and your aircraft will be put into service at its base shortly after delivery and pre-operational testing and verification is complete.
Your deposit is fully refundable at any time until you sign the purchase agreement, and LIFT reserves the right to decline participation in the Owners Program to anyone for any reason and will promptly refund the deposit to anyone whose participation is declined.
Production and operation of Hexa aircraft are subject to the satisfactory outcome of extensive safety and flight testing that is in in process and will be ongoing. As a powered Ultralight classified vehicle, no FAA certification is required, but extensive safety testing is being performed by LIFT and subject to third-party, expert oversight and review prior to the commencement of customer flight operations.
Who should choose Option 1 of the Ownership Program?
Option 1 is designed for owners that want to earn guaranteed income from their aircraft while also getting significant use benefits. Option 1 owners choose the base location where their aircraft will operate (typically near where they live) and will be able to fly their aircraft, or or other Hexa aircraft in our fleet at their base, up to 8 times per month for free.
Option 1 Owners will get a tax deduction for the cost of the aircraft that dramatically reduces or eliminates the tax due on income from the program.
If you elect Option 1, you will not have "material participation" in your LLC according to the IRS definition and therefore its gains and losses are considered "passive" by the IRS. IRS rules limit you to deducting passive losses only against passive income, but not against any ordinary income you have from you job or from capital investments like stock and real estate investments.
If you have significant income that is classified as passive by the IRS, e.g. income from the rental of real estate or income from businesses that you do not have material participation in per IRS, then you may be able to deduct the entire cost of your aircraft in the first year against this passive income. If not, then income generated by the Option 1 Owners Program is considered passive itself so you can still deduct the cost of the aircraft over the term of the program.
NOTE: LIFT Aircraft is not qualified to give you tax advice.Please consult with a tax speicalist to understand the tax benefits available to you based on your specific situation.
Note: While you will only be able to write off the allowed 100% depreciation losses against passive income under Option 1, you will be able to expense depreciation against the income you receive from this program as it is also considered passive - so effectively you will get the full tax benefit of depreciation but only over time as your income from the program produces passive income.
Who should choose Option 2 of the Ownership Program?
Option 2 is designed for investors that are willing to take more risk (income from Option 2 is not guaranteed) and put more of their time into managing their LLC in exchange for the potential of higher returns through revenue sharing and potentially more tax advantages. While there is some owner use benefit in Option 2, it is 8 flights per year (vs. 8 flights per month in Option 1) and you do not get to choose where your aircraft is based so it may not be in your home area.
Under Option 2, if you are actively involved in your LLC and spend the time required by the IRS to indicate "material participation" (typicall 100 hours per year), then you can deduct 100% of the cost of the aircraft (as a depreciation loss) against your ordinary income, even potentially 100% in year 1. Ordinary income is defined as income generated from activites in which you actively participate - your job, stock and real estate investments, business income in business in which you materially participate, etc.
Option 2 is better for people in high income tax brackets that have high ordinary income from their jobs, stock and real estate investments, but that don't have significant "passive income" from real eastate rental activity or other passive business income.
NOTE: LIFT Aircraft is not qualified to give you tax advice. Please seek advice from qualified tax professionals regarding your specific situation.
What is "material participation" and how do I qualify for the expanded tax benefits assiciated with Option 2?
The most common test for active participation is that the owner does a minimum of 100 hours and more than any other one person. As the owner, you need to monitor the activity, track and document all income and expenses, communicate with LIFT Aircraft and periodically visit the aircraft and the base. Each year, you will inspect the aircraft, review maintenance with base staff, check expenses of the aircraft and participate in co-managing your aircraft rental business.
In addition to the worldwide marketing conducted by LIFT, you will be expected to participate in the promotion of the aircraft. For example, by generating social media content for LIFT and contributing to the LIFT Ownership blog to help promote rental demand and maximize revenue. As an active owner, your time spent attending aviation conventions, trade shows and exhibitions will count toward your particpation, as will time spent reviwing LIFT communications keeping you informed of new developments that may impact your business. By making certain you perform the aforementioned, and meticulously documenting all the time spent by you (including time spent by your spouse) to include a minimum of 100 hours per year, you should qualify under standard IRS rules for active participation in your aviation rental business.
If you meet the IRS tests for material participation, then you can legitimately benefit from deducting depreciation losses agaist your ordinary income. Please consult with a tax specialist for advice on your specific tax situation.
How much income can I earn under Option 2?
LIFT plans to offer flights on Hexas to the public at its base locations for approximately $249 USD, subject to change by location, seasonality, demand and other factors. Option 2 owners receive 30% of rental revenue, or approximately $75 per flight, and pay for all operating expenses.
LIFT plans to operate bases 7 days a week, during daylight hours, and during seasons suitable for this type of recreational flying - which we expect to average approximately 12 hours per day over the course of a year. Each flight lasts up to 15 minutes, with battery swapping and pilot change to allow for up to 2 flights per aircraft per hour. Per FAA Part 103 Regulations, LIFT will allow flights in VFR (Visual Flight Rules) conditions only and will not allow flights in adverse or unsafe weather conditions - including excessive winds, precipitation, low visibility, etc. Total available flight slots will vary greatly by location and additional downtime should be considered for maintainance.
The following is a
Sample Pro Forma for the 5 year term of Option 2, shown with sample financing terms based on a typical HELOC.
Note: Financing your aircraft purchase is optional and based on what financing might be available to you. As you can see below, the Option 2 Owners program provides you with significant positive cash flow (if financed), a larger net profit after the term, some owner use benefits, and the residual value of the aircraft at the end of the term.
Assuming you meet the IRS qualifications for "material participation", you have the option of deducting the full cost of the aircraft from your ordinary income in Year 1. *NOTE: Please consult with your tax professional to understand your particular situation.