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I think you can monkey around with “Hollywood accounting” for profit sharing purposes as those are all civil offenses with private citizens suing, etc. But I s

I think you can monkey around with “Hollywood accounting” for profit sharing purposes as those are all civil offenses with private citizens suing, etc. But I suspect that studios play it straight with taxes as the IRS doesn’t mess around, it’s criminal investigations, officers are liable, and there’s whistleblower laws where the snitch gets 15-30% of what the IRS recoups [0]. So I bet the only way we find the true cost of these things is when they write them off and even then we know the true cost of the bundle, not each item. What they probably do is include everything legally allowed. This is still bad for studios as getting a $210M tax (corporate tax rate is 21%) reduction from a $1B write off is still way worse than breaking even since the write off is basically a $790M loss and break even is a $0 loss. So the studio doesn’t want to do this, it’s just less bad. I think it’s an example of optimizing after a mistake and doing this too much is a sign of bad management. [0] https://www.irs.gov/compliance/whistleblower-office https://www.irs.gov/compliance/whistleblower-office

ToucanLoucan 3y ago
> So the studio doesn’t want to do this, it’s just less bad. Less bad than what? Apologies if it was outlined in the article, I can't get it to load over my crap connection.
- prepend 3y ago
  It’s less bad than losing everything. For example. Let’s say the movie costs $100 to make. And they value the movie at $100 based on future sales. And they have $1000 in profit from other stuff they do. So the cost of$100 and value of $100 offset each other so they pay taxes on the full $1000. Tax rate is 21% so they pay $210 and keep $790. But if they write off the value to zero that means they have a $100 loss. So you subtract that from the $1000 of profits and pay taxes on $900. Thats $189 in taxes. You subtract that from $1000 and keep $811. So if they don’t write it off in scenario1 they keep $790, but if they write it off they keep 811. They still spent $100 and made nothing so that’s bad. But they are able to keep an extra $21 so really only lose $79. Losing $79 is less bad than losing $100.
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ToucanLoucan 3y ago

> So the studio doesn’t want to do this, it’s just less bad. Less bad than what? Apologies if it was outlined in the article, I can't get it to load over my crap connection.

prepend 3y ago
It’s less bad than losing everything. For example. Let’s say the movie costs $100 to make. And they value the movie at $100 based on future sales. And they have $1000 in profit from other stuff they do. So the cost of$100 and value of $100 offset each other so they pay taxes on the full $1000. Tax rate is 21% so they pay $210 and keep $790. But if they write off the value to zero that means they have a $100 loss. So you subtract that from the $1000 of profits and pay taxes on $900. Thats $189 in taxes. You subtract that from $1000 and keep $811. So if they don’t write it off in scenario1 they keep $790, but if they write it off they keep 811. They still spent $100 and made nothing so that’s bad. But they are able to keep an extra $21 so really only lose $79. Losing $79 is less bad than losing $100.

deleted 3y ago

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