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It's defrauding the taxpayer
by dymk 3y ago
It's defrauding the taxpayer
- gruez 3y ago"fraud" doesn't mean "losing money in a manner I don't like", so I ask again: where's the deception here?
- dymk 3y agoThat they actually incurred the losses they claim to have incurred, so they get a tax break. The taxpayer is defrauded. They would rather delete the movie to claim the tax break than sell it to another studio offering more than the tax break. If you think they actually lost that amount of money: https://en.wikipedia.org/wiki/Hollywood_accounting https://en.wikipedia.org/wiki/Hollywood_accounting
- gruez 3y ago> That they actually incurred the losses they claim to have incurred, so they get a tax break. The taxpayer is defrauded. Did they not incur such losses? Did they claim to delete the movie but actually kept a backup? Granted, the loss is self-inflicted, but that's not a relevant factor in the tax code.
- ok_dad 3y agoIf I burn down my house and claim insurance or tax losses, they’ll laugh and send me to jail. Explain how a corporation doing the effectively the same thing should get a write off. It’s a sham.
- gruez 3y agoIn your scenario the illegal parts would be: 1. claiming insurance on it. AFAIK this isn't applicable in the case of the movie 2. endangering other houses by doing it in a non-approved way Other than that setting houses that you own on fire isn't illegal.
- ok_dad 3y agoAnd why should a studio be allowed to claim a movie they destroyed on taxes again? I’m not interested in the answer, “it’s legal,” because a lot of things are legal that should be illegal and vice versa, I’m looking for your moral reasoning here as to why this shouldn’t be made illegal.
- gruez 3y ago>I’m looking for your moral reasoning here as to why this shouldn’t be made illegal. If you read the thread more carefully, you'll see I never made such a claim. The only claim I made is that it's not fraud. I thought this was pretty clear with my earlier comment: > "fraud" doesn't mean "losing money in a manner I don't like", so I ask again: where's the deception here?
- ok_dad 3y agoThe deception is that normal people won’t expect you can destroy your own property and claim insurance without being put in the clink.
- shadowgovt 3y agoIt's not the same because the tax code is, even more than the rest of the law, really just made up. It just tells you when you have to pay and when you don't have to pay. If they didn't explicitly write in that you're not allowed to burn a movie, then burning a movie gets you a tax break. End of.
- travisjungroth 3y agoA company buys a balloon making machine for $100k. They use the machine and depreciate it over the years to $20k, getting $80k of deductions over the years. They decide to stop making these balloons. Someone offers them $1k but they decline. They destroy the machine, and have a $20k loss on their taxes. This is all above board, totally normal behavior. There are reasons to be against destroying these movies, but tax fraud really isn’t one of them. They actually did take the loss of whatever was the remaining value of that asset.
- Dylan16807 3y agoBut why wouldn't they sell it for $1k and then have a $19k loss to deduct? And how do we encourage them as much as possible to take that option?
- travisjungroth 3y agoMaybe the reason they stopped making them is the balloon got a negative connotation and was hurting their brand. I dunno, a disgraced celebrity. Selling the machine for others to make it hurts them (even under another brand). Maybe the offer was only $100 and it’s not worth the time.
- ok_dad 3y agoThey used the machine here, and depreciation rules mean you can do that, but most companies will still try and keep using a machine until it’s no longer working for that process, whether or not it was depreciated fully. Also, I expect there are different time windows for dormant equipment depreciation and while laptops might depreciate in five years I doubt industrial equipment does at the same rate.
- travisjungroth 3y agoThe motivation to stop using the machine wouldn’t be deprecation but just some external business reason. You can also change the deprecation schedule and the numbers, the idea is the same. The overall point is I don’t think it’s rare to destroy an asset that you could sell, and to take a deduction for that. Comments were calling that fraud.
- 2OEH8eoCRo0 3y agoWe aren't arguing that it's tax fraud by definition, but that it should be considered fraud. If the tax code incentivizes destroying something then that seems like a defect of the tax code.
- gruez 3y agoIf you re-read my prior comment, you'd see my complaint is that it's not "fraud" by any reasonable definition because deception is not involved, not that it should or should not be allowed. > "fraud" doesn't mean "losing money in a manner I don't like", so I ask again: where's the deception here?
- deleted 3y ago[deleted]
- dymk 3y agohttps://en.wikipedia.org/wiki/Hollywood_accounting https://en.wikipedia.org/wiki/Hollywood_accounting
- deleted 3y ago[deleted]
- lisper 3y agoDestroying a movie to claim the tax break is analogous to burning your house down for the insurance money or to claim a casualty loss. Yes, you really did lose your house. No, you are not entitled to claim it as a write-off.
- gruez 3y ago>insurance money That's fraud because the insurance policy specifically says it won't pay out if you intentionally set it on fire. If you actually did set it on fire, then claimed that you didn't then that's the deception. >No, you are not entitled to claim it as a write-off. Can you point to the relevant tax law that prevents this?
- bhpm 3y ago“ Nondeductible losses. A casualty loss isn’t deductible, even to the extent the loss doesn’t exceed your personal casualty gains, if the damage or destruction is caused by the following. Accidentally breaking articles such as glassware or china under normal conditions. A family pet (explained below). A fire if you willfully set it, or pay someone else to set it. A car accident if your willful negligence or willful act caused it. The same is true if the willful act or willful negligence of someone acting for you caused the accident. Progressive deterioration (explained below). However, see Special Procedure for Damage From Corrosive Drywall, later.” https://www.irs.gov/publications/p547#en_US_2023_publink100014703 https://www.irs.gov/publications/p547#en_US_2023_publink1000...
- gruez 3y agoThe linked document looks like it's for personal taxes, not corporate taxes. Business taxes is different from personal taxes in many ways, including how deductions are handled. For instance if you buy office 365 personally that can't be deducted, but if you bought it as a business it can.
- lisper 3y agoSure. Qualified business expenses are deductible. Personal expenses are not deductible, and neither are losses suffered because you willfully destroyed your own property. That is true for businesses as well as individuals.
- jrflowers 3y agoYou make a good point. When somebody says something should be illegal, the clever route of discussion is to repeatedly point out that it is not currently illegal — a fact that both of you agree about, since that is the premise for making the statement that it should be illegal.
- nirvdrum 3y agoThe 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.
- gruez 3y ago>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 https://news.ycombinator.com/item?id=39339493 There's no way that you can save taxes by doing this.
- nirvdrum 3y ago> 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.
- AlbertCory 3y agothe deception is assigning a zero value to the movie, when it's not zero.
- gruez 3y agoIt is zero when the hard drive holding the only copy is degaussed.
- AlbertCory 3y agono, if you had an offer for $30M, then that was the value.
- gruez 3y agoAnd the value went to $0 after destroying it. I don't see what's the issue is here.
- AlbertCory 3y agoIf you can't understand accounting, maybe an introductory course would help.
- gruez 3y agoWhatever "introductory course" you took must be pretty bad, because even the elective I took in college taught that valuations on the same asset can go up and down.
- AlbertCory 3y agoapparently they didn't teach about "fair market value" then.
- smileybarry 3y agoThe buyer is not buying the hard drive, they're buying the asset it holds. If you destroy the only copy, you make it unobtainable but the value of that intellectual property is arguably still $30m. (If said offer was $30m, in this case) For that reason: if the studio destroyed all known copies of the movie, write it off, and then an unknown copy gets leaked by someone who worked on it -- the studio will still sue for damages >$0 and claim in court that any piracy downloads are potential viewings, ergo stolen profit.
- glitchc 3y agoHow so if funded by private capital?