EFTA02472839

From: jeffrey E. <[email protected]> Sent: Friday, January 29, 2016 5:09 PM To: Melanie Spinella Subject: Fwd: GOOFY< Forwarded messa e From: Yvonne Berger Date: Thu, Jan 28, 2016 at 4:=5 PM Subject: To: "Melanie Spinella Cc: John Castrucci Joe Avantario Richard Joslin "Jeffrey Eps=ein ([email protected] <mailto:[email protected]> )84q=ot; <[email protected] <mailto:[email protected]> =gt; MEMORANDUM TO: =AO Melanie Spinella =C2 =AO =C2 CC: =AO John Castrucci =C2 =AO =C2 =AO =C2 =AO =C2 =AO Joe Avantario =C2 =AO =C2 =AO =C2 =AO =C2 =AO Rich Joslin =C2 =AO =C2 =AO =C2 =AO =C2 =AO Jeffrey Epstein FROM: =AO Brad Wechsler DATE: =AO January 28, 2016 Summary EFTA_R1_01584960 EFTA02472839 1. In 2015, based on 180 hour= of usage, the plane costs you approximately $3.4MM/yr (operating costs) w=th approximately $400K of interest costs. Debt amortization in 2015 was $1.5MM. Amount of debt outstanding on the pl=ne today is $19.6MM and the loan is due in September of this year. Last qu=rter, the fmv (actual sales) of a G-V was approximately $14MM. Today, the =verage asking price market is $13MM. 2. Currently the plane is reg=stered under Part 135 as part of chartering business which means all fligh=s "technically" can be business related, thereby maximizing deductions. Last year because of various non-complying =ctivities, 62% of the flights or 111 hours of the 180 hours flown were 135=flights. The balance of the hours were flown under Part 91. Ap=llo hours were 42 of the 180. 3. The alternative to Part 13= is to abandon the chartering business and fly solely Part 91. A numerical=after-tax analysis comparing 135 to 91 for 2015 shows net after tax costs of roughly $2.6MM under Part 135 and $3MM u=der Part 91. (This assumes all non-Apollo hours are non-business which may=be too conservative). If 20% more of Part 91 flights were considered =80 business" there would be additional after tax savings under Part 91 of approximately $370K and the net after-t=x costs of Part 135 and Part 91 would be a push. 4. The key "life-styl= difference" between 91 and 135 is that there are less rigorous pi=ot rest rules under Part 91. 5. Generally speaking the tax=position is stronger under 135. 6. As a point of information =he charter rate for a G-V today is around $7,500/hr excluding flight incid=ntals of $300K. Your 180 hours would have meant an all-in "chartering" cost without incidentals of a=ound $1.35MM. 7. There is a lot of underlyi=g detail and complexity which can be walked through (Jeffrey has received =etailed numbers). The family office's bottom-line recommendation: is to continue under Part 135 as that is (i) is like=y to have a moderately lower net out of pocket cost to you; (ii) provides =he strongest tax position, (iii) can reduce net costs further, if, and as,=the percentage of Part 135 flights goes up and (iv) makes your plane marginally more attractive to a potentia= purchaser. 8. Structurally, we would hav= plane ownership be held directly by Avioneta which would enter into a man=gement services agreement with Jet Aviation. Avioneta would be owned by you and Debra. Wells Fargo (initial trustee for=purposes of a failed 1031 and Rance (current owner of plane) would disappe=r. 2 EFTA_R1_01584961 EFTA02472840 9. To us (and the experts) th=s is a close call but with 135 being the favorable route. Please note, how=ver, everyone is comfortable with reverting to Part 91. (Jeffrey's recommendation I believe). Let's discuss. please note =he information contained in this communication is confidential, may be =ttorney-client privileged, may constitute inside information, and is in=ended only for the use of the addressee. It is the property of JEEUnauthorized use, disclosure or copying of this communication or any p=rt thereof is strictly prohibited and may be unlawful. If you have rece=ved this communication in error, please notify us immediately by ret=rn e-mail or by e-mail to [email protected] <mailto:[email protected]> , and destroy this communication an= all copies thereof, including all attachments. copyright -all rights r=served 3 EFTA_R1_01584962 EFTA02472841