After an aircraft accident happened: Global Aerospace Inc Insurance company, asked us to sign over the FAA aircraft title to them and told us we "MUST leave the buyer and dollar amount blank. We questioned them if it was legal as they told us they would later sell the plane to a salvage company by filling the salvage companies information in as the Buyer and the salvage amount.

It appears to us Global Aerospace is trying to avoid tax laws both State and Federal by passing the title off as if we sold it to the salvage company. Is this tax fraud under IRS rules?

If this is against IRS rules, how do I protect myself from liability?

We told this insurance company that we preferred to fill out that they were the Buyer and the dollar amount was the amount we received from the insurance company. Their response was we "MUST leave the buyer information BLANK and the dollar amount blank and that this was non negotiable".

  • Can you explain why you believe they are doing this for tax avoidance reasons, and not, say, just to save the extra paperwork of a double sale (you to them; them to salvage company)? I'm not saying they're right doing what they're trying to do – I really don't know one way or the other – just curious as to why you think it's tax fraud. – TripeHound Aug 8 '18 at 6:58
  • Do you own the title to the plane? Does the insurance cover replacement cost or just current value? Does the insurance contract say that the company will buy the plane from you, or just make a payment to you? Your question is unanswerable until you provide more details. Right now it is just an unsupported accusation and rant. – Dilip Sarwate Aug 8 '18 at 8:58
  • I have made some edits that I hope steer this question back on topic. If you frame this as your own risks or liability you protect yourself. If the insurer is skirting the rules in a way that gets them in trouble, thats not your problem. If they are skirting the rules in a way that would make you liable for more tax or a penalty, that is your problem. – Freiheit Aug 8 '18 at 19:43
  • Why do you think this isa good place to ask? How many people with AIRPLANE insurance claims do you think are in a personal finance q&a site like that, in your tax jurisdiction. – TomTom Aug 8 '18 at 19:47
  • @TomTom questions about insurance and taxation are on topic per money.stackexchange.com/help/on-topic . OP is probably new. If this is off topic it would be more helpful to point to law.stackexchange.com or aviation.stackexchange.com rather than asking OP about the demographics of Money.SE – Freiheit Aug 8 '18 at 20:45

I know nothing about selling planes, but I have had people ask me to do this with used cars. It happens when the buyer wants to buy the car from you and then resell it quickly.

From their point of view if they buy the car from you, the paperwork for the transfer has to go through the appropriate bureaucracy and the buyer doesn't get papers proving they are the owner for a while, and so can't sell it quickly. What they want to do is set it up as a single transfer from you to their buyers. Doing this is (in the case of a car) probably breaking the rules, but only in a very minor way.

So this isn't necessarily a scam in the sense that they are trying to cheat you. But they are trying to skirt the law, and there are some significant downsides for you, and there are bad things they can do to you in this scenario.

I've done this with a car worth $1000, but I wouldn't do it with a plane worth presumably much more.

It's also worth saying that if this company is handling your insurance claim this is absolutely NOT 'non-negotiable'. The company is obliged to deal with your claim, and not artificially impose a borderline illegal condition on you. What you might do is say you want to take your request to the authorities who handle transfers of plane ownership and 'check that it is OK with them'. I bet they will back off pretty quickly.

  • The other way is to give limited power of attorney to the insurance company to aid transfer of title from owner to the scrap buyer – Dheer Aug 8 '18 at 16:46

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