19-1 Deferred taxes1

19-1 Deferred taxes1 - Tax Breaks for Bad Scripts Get...

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Tax Breaks for Bad Scripts Get Harder Source: Wall Street Journal, 23 June 2004 It's unfortunate enough that Hollywood studios get stuck every year with tons of bad scripts. Now they may have to wait years to get a tax break for losses associated with those flops. When studios have to write off the cost of a script that may never become a movie, they naturally hope for a corresponding tax deduction. But a new guide- line from the Internal Revenue Service makes it clear that such an immediate break is going to be hard to come by. Instead, studios may have to wait for the tax benefit. Investors can expect to see those potential deductions pop up in the form of "deferred tax assets" on the balance sheets of entertainment companies. These deferrals will likely start appearing on their year-end books, which, on the positive side, would offset their payments to Uncle Sam down the road. The IRS guideline, issued last month, involves the tax-reporting treatment of losses associated with scripts, screenplays, and any other "creative proper- ties" not set for production within three years of their acquisition. As a result of the ruling, there will be "substantial differences" between the way movie companies treat those losses on their tax returns and in their public financial statements, said Robert Willens, the tax and accounting specialist at Lehman Brothers. "These differences will be accompanied by increasingly larger deferred tax asset balances that will populate Hollywood balance sheets," he said. Generally, the U.S. tax code allows a corresponding
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19-1 Deferred taxes1 - Tax Breaks for Bad Scripts Get...

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