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Destroying 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.

>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?

https://www.irs.gov/publications/p547#en_US_2023_publink1000...

bhpm 859 days 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.”

The 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.

Sure. 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.

Right, and the studio is deducting all the resources it spent making the movie. If you decide to invest in a bunch of money into developing a product, and then not commercialize it, all the r&d money that went into it is still deductible. It gets tricky when amortization and accruals are involved, but in the end it's approximately the same principle.

There is no law that specifically prevents it, just as there is no law the specifically prevents you from deducting, say, money that you pay to buy groceries. What there is is a very long list of things you can deduct, and grocery money, and losses that you suffer from willful destruction of your own property, are not on that list.

[1] https://news.ycombinator.com/item?id=39339672

> What there is is a very long list of things you can deduct, and grocery money, and losses that you suffer from willful destruction of your own property, are not on that list.

Actually if you read the sibling comment[1], such list of "things you can't deduct" does exist, albeit it's seemingly for personal taxes.

That list is advisory. It is not part of the law. I can't point you to a law that says, "You cannot deduct destroyed movies" just as I cannot point you to a law that says, "You cannot deduct grocery expenses."

prepend 859 days ago

> analogous to burning your house down for the insurance money

It’s very different because insurance pays out to make whole. Taxes are just taxes.

It’s the equivalent of burning your house down and then writing off the depreciated value because it burned down. Totally legal. Because it’s worth less after burning it down. Assuming you burn it in a legal, controlled manner and not arson.

Every tax dollar you don't pay is a dollar someone else has to pay instead, or a dollar that gets added to the national debt. And burning your house down and writing off the depreciated value is absolutely not legal.

> Assuming you burn it in a legal, controlled manner and not arson.

Yes, well, that is a might big assumption. I doubt you could point me to a single instance of someone actually burning down their house in a "legal, controlled manner".

It ultimately boils down to details. If there really were a legitimate reason to destroy a film (or a house) rather than selling it to the highest bidder then you might have a case. But you'd be very hard-pressed to come up with a set of legitimate circumstances for either one.

>Every tax dollar you don't pay is a dollar someone else has to pay instead, or a dollar that gets added to the national debt. And burning your house down and writing off the depreciated value is absolutely not legal.

nobody is entitled tax revenue. Laws generally support taxes on income/profit, and arent just a bill.

It isn't illegal to work less and pay less taxes.

It is absolutely legal to knock down your house so you dont have to pay property or sales tax on it.

>It is absolutely legal to knock down your house so you dont have to pay property or sales tax on it.

Generally property taxes are on the land and its improvements (eg. houses), so burning down the house wouldn't relieve you of property tax obligations. Moreover, destroying the house would actually reduce your tax obligations, and AFAIK isn't illegal.

It would relieve you of property tax for the house, which is my point.

It would also allow you to avoid taxes on the sale of the house.

nobody is entitled tax revenue. Laws generally support taxes on income/profit, and arent just a bill.

It isn't illegal to work less and pay less taxes.

It is absolutely legal to knock down your house so you dont have to pay property or mortgage tax on it.

> It is absolutely legal to knock down your house so you dont have to pay property or mortgage tax on it.

Yes, that's true. But that's not the same thing as claiming the resulting loss as a deduction on your income tax.

s1artibartfast 858 days ago

>but that's not the same thing as claiming the resulting loss as a deduction on your income tax

which you can also do. If you knock down your house, then sell it, you will have a pretty heafty capital loss, which you can then use as a income deduction for up to 8 years, or until it runs out.

peterleiser 859 days ago

Businesses are allowed to destroy inventory and then write that off. In this case I guess the movie is the inventory.

Only in the case when they can't profitably dispose of that inventory any other way. So unsold books, for example, can be destroyed and deducted, but an unoccupied office building cannot.

latortuga 859 days ago

Did we read the same article? That's literally the authors point. Arguing that it is defensible because it is legal is wrong.

nobody is paying the company money.

It is closer to burning down your house to avoid property or sales tax.

No, it isn't. If there were a tax on the movie as an asset that would be true, but there isn't so it isn't.

ok_dad 859 days ago

If 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.

In 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 859 days ago

And 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.

>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 858 days ago

The deception is that normal people won’t expect you can destroy your own property and claim insurance without being put in the clink.

shadowgovt 859 days ago

It'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 859 days ago

A 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 858 days ago

But 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 858 days ago

Maybe 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 858 days ago

They 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 858 days ago

The 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.

nirvdrum 859 days ago

The 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.

>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

There's no way that you can save taxes by doing this.

nirvdrum 859 days 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.

jrflowers 859 days ago

You 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.

2OEH8eoCRo0 859 days ago

We 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.

If 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?

https://en.wikipedia.org/wiki/Hollywood_accounting

dymk 858 days ago