Legal Question in Tax Law in California
This year I took $100,000 from my traditional IRA and invested it in producing a U.S. film. The film is currently in post production and probably I will not get any taxable income from it except next year. I found an ad on Craig List for film financing and they said,� We have One Million dollars in cash and need another Million to complete the two Million dollar budget. The second Million will receive certain tax breaks and will receive a 30% (300k) tax break before production begins.� My question is: How can I get 30% tax break on my $100,000 I invested in producing a U.S. film?
3 Answers from Attorneys
Congratulations on finishing shooting on your film. My best guess is that the craigslist advertisers, if legitimate, are talking about shooting the film in some jurisdiction that subsidizes film production with taxpayer dollars, for example Canada.
It is very possible that ads on Craigs List could be scams. Do your homework and be sure the company is legitimate, as most legitimate film companies do not look for films on Craigs List. If it is, get local counsel and a local CPA to help you with the tax and legal ramifications.
There are certain tax breaks available for production activities in the US. If your film was produced in the US, you could qualify for a 9% deduction, not on the $100,000 that you invested, but on the income (profits) generated from the film. For example, if your $100,000 investment nets you a $500,000 profit over the next few years, you could have a $45,000 deduction available to you. My law firm specializes in consulting production companies, and their CPAs, with the proper documentation and calculation of this deduction.
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