Federal regulations make most aircraft sellers subject to mandatory reporting requirements when they are involved in transactions of more than $10,000. Since a failure to report may trigger both civil and criminal penalties, aircraft dealers should be aware of the need to comply with these requirements. A dealer is required to file Form 8300, reporting the transaction to the IRS, under any of the following circumstances:
- Cash Transactions: If an aircraft seller receives more than $10,000 in cash from a customer for a single transaction, the seller must complete and file Form 8300 within 15 days of the transaction. Form 8300 must be filed even when a buyer makes several cash payments that are all under $10,000. For example, if a customer buys an aircraft for $12,000, paying $6,000 in cash at the closing, and the remaining $6,000 one week later, the seller is still required to report the transaction to the IRS.
- Transactions with Monetary Instruments: The reporting requirement applies whenever payment is made by a monetary instrument different from a personal check or bank wire, so it may apply even when no cash changes hands. Use of a cashier’s check, bank draft, traveler’s checks, or money order, for a purchase exceeding $10,000, still triggers the reporting requirement. Again, the requirement cannot be defeated by the use of multiple payments. For example, an aircraft dealership sells an aircraft for $11,000. The buyer pays with a cashier’s check of $9,000 at the closing of the sale. A few days later, the purchaser pays the rest with two money orders of $1,000 each. Here, the aircraft seller must submit Form 8300 after receiving the money orders that push the total amount above $10,000.
- Related Transaction: A related transaction occurs when an aircraft seller receives more than $10,000 from a single customer within a 24-hour period, for two or more transactions. For example, a customer makes two purchases from an aircraft seller on the same day: one for $9,000 and one for $8,000. Individually, these transactions do not require Form 8300, but since they occurred within a 24-hour period of time and totaled more than $10,000, and the source of the currency is a single customer, a Form 8300 must be submitted.
- Connected Transactions: An aircraft seller must file Form 8300 when there is reason to know that one transaction will trigger another transaction and that together the transactions will exceed $10,000. The report must be filed even if the other transaction occurs more than 24 hours later. For example, an aircraft dealership sells an aircraft for $8,000 to a buyer. As part of the deal, the buyer agrees to buy accessories for $3,000. The buyer pays with cashier’s checks for both the aircraft and the accessories. The seller must complete and file Form 8300 because the total amount of the two transactions is more than $10,000.
- Transactions Intended to Avoid Reporting Requirements: Finally, an aircraft seller must submit Form 8300 when the seller knows that the buyer is paying in such a way as to prevent the seller from filing Form 8300. For example, a customer purchases an aircraft for $11,000, paying $5,000 in cash and $6,000 in a personal check. The customer states that this form of payment is meant to avoid triggering the need for Form 8300. The dealership must complete and file Form 8300 because the dealership knows the customer is “structuring” the transaction to avoid the Form 8300 filing requirement.
The penalties for failure to comply with these reporting requirements include civil penalties of up to $50,000 for a pattern of negligent violations, and criminal penalties of up to $250,000 for willful violations. Spencer Fane can provide advice and assistance to dealers concerned about complying with these requirements.