4 ms·
Very different situation. For Coyote vs Acme, the movie was finished properly and the only issue was WB projected it would make more money as a tax write-off. T
by gkoberger 3y ago
Very different situation. For Coyote vs Acme, the movie was finished properly and the only issue was WB projected it would make more money as a tax write-off. There was no malfeasance from the director/producer/etc.
For this one... well, read the article. The director/producer did some crazy stuff with the money.
- nradov 3y agoIt is not possible to make more money as a tax write-off. That's not how corporate income taxes work. The expense of making a movie can always be written off regardless of whether it is released or. If the studio decided not to release it then that was done for other reasons.
- jedberg 3y agohttps://deadline.com/2023/11/coyote-vs-acme-shelved-warner-bros-discovery-writeoff-david-zaslav-1235598676/ https://deadline.com/2023/11/coyote-vs-acme-shelved-warner-b... tl;dr: If they never release it they can write off the "lost profits" which they can't do if they release or sell it.
- nradov 3y agoBullshit. You can't write off "lost profits". The US corporate income tax code contains no such provision. Don't believe anything you read in the entertainment press, it's mostly fake news or at least not fact checked. Go ask your own income tax accountant if you don't believe me.
- jedberg 3y agoOk, well then why didn't they release the movie? Why did they say it would be more profitable to not release it? You're either smarter than the entirety of Warner Brother's finance department, or wrong.
- nradov 3y agoThis is not a matter of who is smarter. The US tax code is very clear on that point and is not open for debate. If the studio decided not to release the movie it was most likely because the expected marketing and distribution costs exceeded the expected revenue. Or maybe they didn't want a crap movie to damage the long term brand of a valuable character that they plan to leverage in other products.
- jedberg 3y ago> The US tax code is very clear on that point and is not open for debate. Anyone who has ever worked with an accountant knows this isn't true. The law is a series of gray areas at best. You can have three accountants do your taxes and get three results, because each applies different interpretations to the laws. And going in front of a judge won't get extra clarity -- three judges would give you three different opinions. > If the studio decided not to release the movie it was most likely because the expected marketing and distribution costs exceeded the expected revenue. Maybe, but it tested better with test audiences than any other movie they release this year, so that's highly unlikely. Also, they specifically said they were doing it for the write down.
- boeingUH60 3y agoI love how you're being called out for how wrong you are on this thread, but somehow manage to double down and always ask "but what about?..."
- jedberg 3y agoBut that’s what tax accounting is. Asking “what if we interpret the tax code this way?” It’s all gray areas. See my sibling comment about how to write off future profits.
- boeingUH60 3y agoNo it's not. But sure, "They just write it off!"
- jedberg 3y agoUsing the correct accounting method (value based method) the value of an asset (the movie) includes its future profit value. If you then choose not to release the movie, the future profit goes to 0, and you can write off the loss of the asset value.
- deleted 3y ago[deleted]
- mminer237 3y agoWhat basis do you have for that method? Your basis for capital losses is the amount you put into it. If you're writing it off, the value of the asset is by definition zero. The only way you could write off based on the value would be if you already paid capital gains on the value.
- MarkSweep 3y agoWhile I do think it is unlikely that you can deduct “lost profits” by not releasing film, there are some interesting ways expenses of a film can be depreciated. See this form: https://www.irs.gov/forms-pubs/about-form-8866 https://www.irs.gov/forms-pubs/about-form-8866 It is the only thing on the IRS website I could find about this and it does not tell the whole picture of the special depreciation method for films. The fact that this form can have you pay interest to the IRS if you incorrectly predict income reinforces the idea that you can’t deduct “lost profits”.
- gamblor956 3y agoA failed film generates a write-off whether or not it's released. If released, then the losses (and associated write-offs) are taken over the course of several years, since many of the costs of the movie are treated as capitalized costs that get expensed over time. If the movie is not released, then the expenses can get written off all at once. Due to the way financial accounting works (e.g. time value of money) an immediate deduction is more valuable than a deduction over time. In this case, the value would have been from offsetting profits from Barbie. It's a small savings, only about 6m in reduced taxes (on an approximate 30m writedown, taking into account that WB did not fully finance the film itself and so losses would be shared with the other investors), for an effective loss to WB of 24m. Based on the 2x Budget principle (marketing and distribution combined are generally the same as the production budget), with a 70m production budget, Coyote vs Acme was expected to make significantly less than 140m gross if released. Given that they were willing to completely write off the film, this means they were expecting a total box office gross of significantly less than $115 million.
- jedberg 3y agoThe real crime in the whole Coyote vs Acme situation is that the tax code makes it more profitable to write off a completed movie than sell it.