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What ways are you thinking of? They could have incorporated and posted losses for 2? straight years before the IRS started auditing; those losses could have been deducted against this revenue. What other angles are there?
Set up an offshore that owns the IP and pay a licensing fee to the offshore? Licensing costs would then reduce net profits and likely also taxes, right?
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can't they book expenses? income taxes are to be paid on "net profit" and not gross receipts, right? how can you pay half of revenue as taxes? this assumes tax rate is 50% and there are no expenses?
If we assume their previous income was covering their expenses (a reasonable assumption for a 18 year old company), the $7M from Steam would be pure profit. Now I'm not sure about Washington (?) tax rates, but just for comparison: in Germany you would have paid about 35% taxes on company profits, and another 20% income/capital gains taxes if you just pay it all out to the owners. Not that this is the smartest choice,…
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People are just used to wealthy people gaming the tax system to a point it's shocking when someone actually pays them.
With this kind of money, you can absolutely get someone to do all the work you need to make your tax mostly disappear. Heck, they probably find your number and call you directly, you would only have to say "Yes, I want to save a couple million dollars". I'm not saying it's good, but at the moment it's just so easy, risk-free and completely legal.
Taxes can be deferred or distributed across a number of years with various structures if you’re willing to put that money into a business structure and pay it out to yourself over time (which they absolutely should)
But there is no magic wand someone can wave to get the money into your bank account and make the tax bill disappear without other consequences and/or breaking the law.
Note that in these situations, people absolutely will come out of the woodwork and try to talk you into various schemes to dodge taxes, but that doesn’t mean they’re legal. Plenty of stories about people using dubious structures to avoid taxes and then getting crushed by the IRS when they get around to auditing the situation.
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plus Steam's cut I'd imagine.
Plus kitfox games, the "steam version" publisher, who AFAIK also brought on artists etc, non-nil contributions.
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Yes. There are ways they could have minimized that payment but it doesn’t seem that the team is primarily money motivated in the first place, so may as well just make the process simple and pay up.
What ways are you thinking of? They could have incorporated and posted losses for 2? straight years before the IRS started auditing; those losses could have been deducted against this revenue. What other angles are there?
IANAA.
Well, yes. Charging 30$ will generate those numbers for such an anticipated game.
It could also have completely flopped though, since the classic version is free and for die hard DF fans who know all hotkeys inside out there's little actual reason to switch to the Steam version. But they did a really good job making the game approachable to newcomers.
They made the game so much more playable it's hard to understate. We're not even talking mouse vs keyboard here. They made one of the core mechanics (labor assignment) go from something that essentially required a third party tool to manage to something that is trivial to manage in its vanilla state. Sure it took some adjustment for long-time players and some prefer the algorithms used by those custom tools, but those tools are being made available.