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Deleting and destroying finished movies

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Re: Deleting and destroying finished movies

#161

Post by nirvdrum »

gruez wrote: post #88
nirvdrum wrote: post #73

Earlier quoted context omitted.

The deductible losses are supposed to be incurred in pursuit of profit. Not every expense a business incurs is tax deductible. Not even trying to sell it calls into question whether it was in pursuit of profit. They’re expecting the American tax payer to make up the shortfall and that’s likely based on Hollywood’s unique accounting practices, which has a tendency to inflate the claimed expense amount.

>Not every expense a business incurs is tax deductible. True, there are multiple reasons why some expenses aren't deductible, but AFAIK no such exception exists for "intentionally destroying it". >and that’s likely based on Hollywood’s unique accounting practices, which has a tendency to inflate the claimed expense amount. See my other comment here: https://news.ycombinator.com/item?id=39339493 There's no way that yo…

> True, there are multiple reasons why some expenses aren't deductible, but AFAIK no such exception exists for "intentionally destroying it".

No, of course not. There isn't an enumerated list of weird cases and if your weird case doesn't match you can get a tax advantage. There are rules about what is and isn't deductible and if you're unclear, you can ask the IRS for a clarification. If you don't get that clarification you better be prepared to adequately defend your tax theory when you get audited. What I suggested is what they're doing may not be in line with the rules about what is deductible. It seems like something should be evaluated.

> There's no way that you can save taxes by doing this.

You absolutely can save taxes by doing this. They're not only not paying any tax, they're offsetting tax they would otherwise pay on a profitable film. I think what you're saying is that they couldn't get enough tax deductions to offset the money they put into the film development. That's a claim I didn't make. I do think it's possible they could get back more money than they otherwise should. It's not like tax fraud is a rare occurrence. And that situation could make this maneuver more attractive. I think it's worth an audit.

Re: Deleting and destroying finished movies

#162

Post by willcipriano »

prepend wrote: post #106
Schnitz wrote: post #45

Earlier quoted context omitted.

Where do you draw the line? If someone buys the Mona Lisa and burns it for the tax credit, is the owner to be prohibited from doing so based on the public interest?

> If someone buys the Mona Lisa and burns it for the tax credit This is not how taxes work. If I buy the Mona Lisa for $100 and burn it for the tax credit. That would only yield me a $100 deduction so a savings of $46 in taxes (and I live in the most tax heavy portion of the US for purposes of my example). So I would lose $54 in your example. Why would anyone do this?

How does that work when the film rights live in Ireland and the intellectual property lives in the Cayman Islands and your business has a well known catch phrase on for your creative accounting practices?[0]

[0]https://en.m.wikipedia.org/wiki/Hollywood_accounting

Re: Deleting and destroying finished movies

#163

Post by crooked-v »

mdasen wrote: post #80

To me, the weird thing is that the tax write-off doesn't even seem to make sense. Let's say you spend $80M making a film and you write it off for a $30M benefit. You're still in the hole $50M. Let's say that you sell the film for $20M and write off the remaining $60M loss for a $23M benefit. In the latter case, you're only in the hole $37M instead of $50M. That's a lot better. Is there some weird accounting rule wher…

It doesn't work in their favor. It does, however, work in the favor of Zaslav's specific desires about slashing content that has to pay residuals in favor of residual-free reality shows and documentaries.

Re: Deleting and destroying finished movies

#164

Post by graeme »

s1artibartfast wrote: post #123
nerdponx wrote: post #76

Earlier quoted context omitted.

If $15m of taxpayer money is being paid out as a write-off for a finished movie, I feel like I as a taxpayer should have the right to see the movie. Nobody is forcing anyone to sell anything.

Taxpayers arent paying anything, Taxes are on profit after costs. The company spent 90M of its own money, and hasn't made any income? Why souldnt they be able the claim the 90m they spent as an expense?

My guess is this is actually an accelerated capital loss. From a profit-loss perspective the net loss is the same whether they release or not.

But the accounting net loss is smaller initially because the movie is on the books as having capital value. It might take decades to reduce that to zero.

Destroying the film does so instantly so you get to book the full loss immediately.

Never really understood why we use depreciation in the first place to be honest, rather than just making all expenses immediately deductible. Presumably there’s some explanation

Re: Deleting and destroying finished movies

#165

Post by pradn »

AlbertCory wrote: post #22

Where do you draw the line? If an artist pays a model and paints her, is the artist to be prohibited from destroying the painting because it sucks, and because the model wants credit? What about a music producer who pays a studio band to record a song that turns out to be terrible -- is the producer prohibited from deleting it? It's the tax write off for destruction that's fucked up, as @cnees says. Failures are part…

Why does someone have to demarcate exactly where "the line" is to make a judgement on this situation?

You can simply ask yourself "do I want to live in a world where this happens" - and any decent person would say "no".

The presence of a "slippery slope" is not enough to prevent going down a path, even somewhat.

A film takes hundreds of people to create - how does it feel for them to just have years of their lives fall into the void?

Re: Deleting and destroying finished movies

#166

Post by hyperhello »

pradn wrote: post #165
AlbertCory wrote: post #22

Where do you draw the line? If an artist pays a model and paints her, is the artist to be prohibited from destroying the painting because it sucks, and because the model wants credit? What about a music producer who pays a studio band to record a song that turns out to be terrible -- is the producer prohibited from deleting it? It's the tax write off for destruction that's fucked up, as @cnees says. Failures are part…

Why does someone have to demarcate exactly where "the line" is to make a judgement on this situation? You can simply ask yourself "do I want to live in a world where this happens" - and any decent person would say "no". The presence of a "slippery slope" is not enough to prevent going down a path, even somewhat. A film takes hundreds of people to create - how does it feel for them to just have years of their lives fa…

Many people believe that banning disliked things is not what laws are for. If it was you’d see the powerful banning everything they didn’t like, making the law tyranny, and the powerless banning everything they didn’t like, and you get the French Revolution.

Re: Deleting and destroying finished movies

#167

Post by joe_guy »

advael wrote: post #150
loughnane wrote: post #139

Earlier quoted context omitted.

Don’t think it’s self-evident. My point was only that if I were to accept OPs argument I’d have to accept them larger argument to abolish the existing subsidies, and the article didn’t persuade me that to do so is the best way to go. I’d like to read an argument against subsidizing development.

One argument is that that particular kind of subsidy is incredibly easy to game, and so you tend to create more reward-hacking than actual benefit

They're turning $10 into $3 except at the scale of millions of dollars.

What hack or gaming did they perform?

Re: Deleting and destroying finished movies

#168

Post by tgsovlerkhgsel »

So how do these tax write offs actually work?

I'm assuming that when the film is produced, they spend money to receive an asset, no different than e.g. buying a machine.

With a machine, they could write it off over time, or (I assume) they can delete the movie/scrap the machine to immediately book the remaining value as a loss?

If they don't do that, I think a machine is valued according to the purchase price and written off over X years. How does a movie get valued and written off?

There's a good argument for banning write-offs for salvageable assets that are scrapped (regardless of whether it's machines, inventory or movies) - I've heard the tax impact argument made for the destruction of still-usable assets too.

Re: Deleting and destroying finished movies

#169

Post by pradn »

hyperhello wrote: post #166
pradn wrote: post #165

Earlier quoted context omitted.

Why does someone have to demarcate exactly where "the line" is to make a judgement on this situation? You can simply ask yourself "do I want to live in a world where this happens" - and any decent person would say "no". The presence of a "slippery slope" is not enough to prevent going down a path, even somewhat. A film takes hundreds of people to create - how does it feel for them to just have years of their lives fa…

Many people believe that banning disliked things is not what laws are for. If it was you’d see the powerful banning everything they didn’t like, making the law tyranny, and the powerless banning everything they didn’t like, and you get the French Revolution.

This is again "slippery slope" thinking. Just because it's possible to go to an extreme - and this is possible in everything humans do - that doesn't mean we don't go somewhere along the line.

We have laws to ban poisons from food, but we don't ban junk food altogether. We have laws to cap the speed limit, but not at 30mph on a highway - etc etc. We pick a spot on the spectrum.

Re: Deleting and destroying finished movies

#170

Post by ThinkBeat »

Could we not just skip the 30 years of copy right protection or whatever it is now and just release it to the public domain?

No money will be made, but if people should want to they can view it.

I am sure Internet Archive or some organization would be willing to host such movies, and not make any attempt at making a profit from it.

Even better would be to turn all the assets that went into the creating it into the public domain as well.

They should be able to say "Well this movie is total sh*t and we want a tax write off, once it is all done and we have recovered that money we will make it available to the public (at no cost to us))

Is the problem that if anyone was allowed to watch it, they may conclude that the movie had potential and thus the tax write off is not made in good faith?

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