eli5 How will DC get a tax write off for not releasing bat girl? How do tax write offs work anyways?
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You pay taxes on profits rather then income or expenses. Normally the studio would spend money making a film, then earn money from showing that film and pay taxes on the difference. Since the expenses on a film is usually made in a different year then when the income is the studio will tell the IRS how much money they think the movie is worth at the end of each year and pay the taxes on how much money they think they have earned. The remaining taxes will then be paid the year the movie is released.
With “Bat Girl” they are saying to the IRS that they think the movie is worthless. They spent all this money and have nothing to show for it. That makes their profits on this movie negative. The IRS will not be able to collect taxes on the profits because there are none. Even more DC can argue that even though they make money on “Shazam!” and “Black Adam” they have lost money on “Bat Girl” and therefore have much less profit overall. This means they get to pay taxes on the reduced profits. That being said if they then decide to continue work on “Bat Girl” or sell the rights to it they would have to pay taxes on the full profits on this. They can not claim lower profits because of all the expenses they had with the movie because these expenses was used to reduce the taxes on the other movies they released. You can not claim the same expenses twice.
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