They’ve just cancelled their upcoming film “Coyote vs. Acme,” and everyone is calling it a tax write-off, just like they did with the cancelled Batgirl film.
Having spent so much on the production of these films, how is it beneficial to them to cancel the film outright? What is a tax write-off in that sense?
In: Economics
As a CPA, a tax write-off is literally just a term people use for “deduction” to make it sound bad. Your standard deduction on your 1040 is a “write off.” Generally a company developing a movie cannot expense the costs immediately. Rather, if they spend $10 million on it, they are forced to recognize that expense over a period of 5 years, the idea being to recognize the expenses over the useful life of the film (so 2 million deduction per year). If cancelled though, you can just deduct the whole amount at once, because the useful life is now over. End of day though, you’re still losing money. You still spent 10 million dollars and wasted it. There is no crazy “tax avoidance” here.
With that stated, even though I’m not a film CPA, I believe in many cases you can immediately expense film costs now; so it is also highly likely that the cancellation of this film had zero tax impact whatsoever.
Random additional commentary, ever since TCJA, a lot of the crazy international loopholes companies used to have set up for tax avoidance were closed. Tax burdens have been lowered somewhat on corps, but there really aren’t many “tricks” that can be played nowadays that aren’t skimming the line of illegal. The companies most likely to do shady things are small
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