With wet pen in hand, there is a temptation to race to the bottom line of the agreement in order to stake out a position in a production queue that may span several years into the future. Austin did not hesitate to rattle off more than a dozen provisions in sales con- tracts that can save buyers time and money, as well as ensure that manufacturers and completion centers deliver on their promises. The basic Boeing Business Jet purchase agreement, for example, is a relatively short 19 pages. In addition, there are numerous appendices, plus a letter of confidentiality, leaving little margin for misinterpretation of the rights of and remedies for each of the parties. As a result, it's essential for buyers to scrutinize the remedies and penalty clauses associated with late delivery.
Delays can have considerable tax consequences.
Delay the acquisition of your replacement aircraft more than six months and the sale of your old aircraft and purchase of the new one could be treated as two separate transactions. Separate sale and purchase transactions would trigger depreciation recapture on the old aircraft, thereby requiring the owner to pay tax on the difference between the old aircraft's book value and its actual resale price. Ensuring the intended tax benefits may be the least-important outcome of a successful purchase contract. As described be-low, price, performance and product configuration could be far more important. Contract Specifics Aircraft price is a primary consideration.