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I’m with you. People see this as some kind of scam, but this is a basic business loss as far as I read it. Just like making a dumb IoT juice squeezer and losing

I’m with you. People see this as some kind of scam, but this is a basic business loss as far as I read it. Just like making a dumb IoT juice squeezer and losing money on it. Every single company on the planet does this.

JeremyNT 3y ago
But I don't understand why destruction is required for the write off. An IoT juice squeezer is a physical item that costs something to make every additional unit. Every unit you make can actively lose you more money. Compare to a film.The marginal cost of each digital copy of a finished film is basically zero. The money is already spent. The only thing I can come up with here are royalties, but they should be based on some percentages of revenue right? If you release a turd movie that cost 100M to make and only nets you 5m in revenue after royalties, can't you still write off the 95m and have almost 5m more than you would otherwise? How would writing the entire 100m off ever be preferable? Something is clearly weird where this is advantageous. It's not clear from the article why this trick actually works for movies.
- whartung 3y ago
  I’m not a tax attorney but companies have been destroying product for loss purposes for ages. Motorcycle companies crush inventory to take the losses. I’m sure any company with excess product does similar things. I’m guessing they do it because it gives them the best return. The IRS likely requires it to prevent the company from double dipping. With movies, I don’t even want to think what obligations trigger on “release”.
- Sebb767 3y ago
  > If you release a turd movie that cost 100M to make and only nets you 5m in revenue after royalties, can't you still write off the 95m and have almost 5m more than you would otherwise? How would writing the entire 100m off ever be preferable? Releasing the movie is not free. You still need to finish the product, market it, find a distributor and manage sales channels, just to name a few. Also, a bad movie will reflect badly on your studio and everyone in it; if the movie is in a series, it might even impact the lore of your universe negatively. Movie studios are not stupid, 5M of revenue plus 95M of write-off would be more money than 100M of write-off. But you can easily end up with 5M of revenue and 110M of losses and some non-monetary damages extra, so writing off 100M is the best option.

JeremyNT 3y ago

But I don't understand why destruction is required for the write off. An IoT juice squeezer is a physical item that costs something to make every additional unit. Every unit you make can actively lose you more money. Compare to a film.The marginal cost of each digital copy of a finished film is basically zero. The money is already spent. The only thing I can come up with here are royalties, but they should be based on some percentages of revenue right? If you release a turd movie that cost 100M to make and only nets you 5m in revenue after royalties, can't you still write off the 95m and have almost 5m more than you would otherwise? How would writing the entire 100m off ever be preferable? Something is clearly weird where this is advantageous. It's not clear from the article why this trick actually works for movies.

whartung 3y ago
I’m not a tax attorney but companies have been destroying product for loss purposes for ages. Motorcycle companies crush inventory to take the losses. I’m sure any company with excess product does similar things. I’m guessing they do it because it gives them the best return. The IRS likely requires it to prevent the company from double dipping. With movies, I don’t even want to think what obligations trigger on “release”.
Sebb767 3y ago
> If you release a turd movie that cost 100M to make and only nets you 5m in revenue after royalties, can't you still write off the 95m and have almost 5m more than you would otherwise? How would writing the entire 100m off ever be preferable? Releasing the movie is not free. You still need to finish the product, market it, find a distributor and manage sales channels, just to name a few. Also, a bad movie will reflect badly on your studio and everyone in it; if the movie is in a series, it might even impact the lore of your universe negatively. Movie studios are not stupid, 5M of revenue plus 95M of write-off would be more money than 100M of write-off. But you can easily end up with 5M of revenue and 110M of losses and some non-monetary damages extra, so writing off 100M is the best option.