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0 pointss1artibartfast2y ago0 comments

Taxpayers arent paying anything, Taxes are on profit after costs. The company spent 90M of its own money, and hasn't made any income?

Why souldnt they be able the claim the 90m they spent as an expense?

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graeme2y ago

My guess is this is actually an accelerated capital loss. From a profit-loss perspective the net loss is the same whether they release or not.

But the accounting net loss is smaller initially because the movie is on the books as having capital value. It might take decades to reduce that to zero.

Destroying the film does so instantly so you get to book the full loss immediately.

Never really understood why we use depreciation in the first place to be honest, rather than just making all expenses immediately deductible. Presumably there’s some explanation

Sebb7672y ago

> Never really understood why we use depreciation in the first place to be honest, rather than just making all expenses immediately deductible. Presumably there’s some explanation

It's actually advantageous for most companies. If your company makes 20M in yearly profits and builds a new HQ for 100M and you deduct it immediately, you'd have one year with no taxes and a loss of 80M and 9 years with full taxes. If you write it off over 10 years instead (which reflects you actually using that house for this amount of time), you'll pay less taxes in all those years and save more overall.

graeme2y ago

But can’t you carry forward the loss? With current capital rules at least in Canada you don’t have to claim capital expenses in a given year.

Politicians often grant accelerated depreciation rates as a tax incentive.

Also with inflation the sooner you can declare the loss the more it is worth. Especially if you have non capital expenses to offset.

The US govt has recently capitalized software expenses and this is seen as very bad for the industry and investment.

nerdponx2y ago

I don't think it's about deducting expenses, otherwise this would be entirely moot because they'd deduct for expenses no matter whether it was a hit or a flop. I understood the article to be about deducting taxable income for a loss.

tome2y ago

But a loss is just when expenses are greater than revenue. Deducting taxable income for a loss is just the same as deducting the expenses that caused the loss to be a loss.

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0 comments

graeme2y ago

My guess is this is actually an accelerated capital loss. From a profit-loss perspective the net loss is the same whether they release or not.

But the accounting net loss is smaller initially because the movie is on the books as having capital value. It might take decades to reduce that to zero.

Destroying the film does so instantly so you get to book the full loss immediately.

Never really understood why we use depreciation in the first place to be honest, rather than just making all expenses immediately deductible. Presumably there’s some explanation

Sebb7672y ago

> Never really understood why we use depreciation in the first place to be honest, rather than just making all expenses immediately deductible. Presumably there’s some explanation

graeme2y ago

But can’t you carry forward the loss? With current capital rules at least in Canada you don’t have to claim capital expenses in a given year.

Politicians often grant accelerated depreciation rates as a tax incentive.

Also with inflation the sooner you can declare the loss the more it is worth. Especially if you have non capital expenses to offset.

The US govt has recently capitalized software expenses and this is seen as very bad for the industry and investment.

nerdponx2y ago

tome2y ago

But a loss is just when expenses are greater than revenue. Deducting taxable income for a loss is just the same as deducting the expenses that caused the loss to be a loss.

j / k navigate · click thread line to collapse