Posted by Michael Raben at 63.204.234.5 on September 05, 2000 at 17:06:54:
In Reply to: The Taxman Yeahhhh The Taxman,,,,, posted by PorKDog on September 05, 2000 at 10:33:54:
: does a investor in a small film ie: break out film like Clerks get to write off their investment? Any Limits? Any side effects? thx
For the above example ('Clerks'), I can't speak for the business transactions that Kevin & Scott (through View Askew Productions) made
and subsequently followed through on when the film was sold. For the sake
of argument though, I'd guess that if the cash investors were paid back in full(perhaps with interest?) they would not be able to write off the investment. Now, there are ways to be crafty with the numbers (and by crafty, I mean law-breaking), in terms of WHEN you report the earnings/repayment/etc. or HOW MUCH you report or even if you REPORT IT AT ALL.
Now, in terms of more recent and realistic situations ('Clerks' pretty much stands at the top of every indie filmmaker's "wish list", but the
success of 'Clerks' is not all that common) here's some things to consider...
Most indie films will NEVER be sold. Those investors that backed the project will be out of luck, but they CAN use the tax system to their advantage. As a pure business venture, a filmmaking investment can be
treated like any other tax write-off, provided the documentation is there.
Also, there are tax codes that govern individual investment (from, say YOU) into your own project and still other codes that can be applied to family members (Mom and Dad, etc.) who put money into your work.
Rest assured, there's a legal way to accomplish a tax write-off when it
comes to filmmaking investments (and a few illegal ones, but you didn't hear it from me). It's important to note that these kind of large write-offs send up a red flag to the IRS, so you better be able to document everything to the nth degree.
Always,
Michael Raben