Click to Skip Ad
Closing in...
Indiewire logo

Doc Filmmakers Win Fight Against I.R.S.; Work Not Hobby, But Profit-Losing Biz?

ReelPolitik By Anthony Kaufman | ReelPolitik April 22, 2012 at 11:44AM

It's a pyrrhic victory for documentary filmmakers eveywhere. Last Thursday, a U.S. Tax Court judge ruled that filmmaker Lee Storey could write off hundreds of thousands of dollars in losses from the making of her film "Smile `Til It Hurts: The Up with People Story" (see picture below). Documentarians--including some who are currently under audit by the I.R.S.--were watching the case closely, as the outcome severely impacts their bottom line. But while the Storey case has effectively shifted the government's view from considering the profession a mere hobby, which would not allow a right-off, it also highlights the money-losing nature of the form.
0
"Smile Til It Hurts"
"Smile Til It Hurts"

It's a pyrrhic victory for documentary filmmakers eveywhere. Last Thursday, a U.S. Tax Court judge ruled that filmmaker Lee Storey could write off hundreds of thousands of dollars in losses from the making of her film "Smile `Til It Hurts: The Up with People Story" (see picture below). Documentarians--including some who are currently under audit by the I.R.S.--were watching the case closely, as the outcome severely impacts their bottom line. But while the Storey case has effectively shifted the government's view from considering the profession a mere hobby, which would not allow a right-off, it also highlights the money-losing nature of the form.

According to the Forbes article that broke the news, the case had set off alarm bells among filmmakers because the judge had questioned whether doc filmmaking could be considered a for-profit business, saying at one point in the trial, “By its very nature, a documentary to me means that it’s not for profit. You’re doing it to educate. You’re doing it to expose."

A brief on the part of the filmmaker argued the contrary: “A judicial pronouncement that documentary filmmakers are not engaged in a profit-making activity would have a chilling effect on the documentary filmmaking industry, as documentarians would no longer be able to claim deductions for their business expenses.”
 
According to Forbes, the verdict allowed for documentary filmmaking to be considered a legitimate business, and also recognized it as one where the unprofitable start-up phase may be longer than normal and allowed Storey ever penny of her claimed losses. 
 
More specifics about the IRS's rules for new business and start-up losses can be found in the Forbes story.


“We said, hey, even if it takes six years, the making of a documentary, in spite of educational and public good, is also a business,’’ attorney Michael C. Donaldson, who wrote the brief for the film industry, told Forbes.

But is it a good business?

"Smile ‘Til It Hurts" received a Special Jury Prize at Michael Moore’s Traverse City Film Festival in 2010 and while the movie has been shown on cable TV in Canada, the film received no U.S. sale. Storey is now selling copies of the movie on DVD for $19.99 to raise money for legal fees. She told Forbes she has run up $120,000 in tax lawyers’ bills.

Follow us

E-Mail Updates



Recent Comments

By Bob Connors: The thing to remember is the video has some actual data but it's conclusions are far fetched and inaccurate. This is a Progressive propaghand…

Who is "Politizane" and What's Next for the Income Inequality Viral Video

Mar 21th, 2015 8:47am

By Ostlee: This makes very sad reading - i feel for the people of Maldives. Everyone should boycott the island as a holiday destination until Nasheed…

Documentary Filmmakers and Activists Call for Release of "Island President" Nasheed

Mar 13th, 2015 5:35pm

By Ahmed Shahid: Release the first democratically elected president. The only president of Maldives who has reached the people of Maldives, heard them and…

Documentary Filmmakers and Activists Call for Release of "Island President" Nasheed

Mar 12th, 2015 9:37am

By Hanne Neve: Please take care of your country and the climate by freeing your real selektet president.

Documentary Filmmakers and Activists Call for Release of "Island President" Nasheed

Mar 11th, 2015 9:09am

By Iqbal: Please release President Nasheed

Documentary Filmmakers and Activists Call for Release of "Island President" Nasheed

Mar 10th, 2015 10:27pm

By Martha Robertson: I strongly urge the immediate release of Nasheed!

Documentary Filmmakers and Activists Call for Release of "Island President" Nasheed

Mar 10th, 2015 9:37pm

By Ned Rollins: Bad business, going to bite you.

Documentary Filmmakers and Activists Call for Release of "Island President" Nasheed

Mar 10th, 2015 3:47pm

By John Painter: The guy isnt a terrorist.

Documentary Filmmakers and Activists Call for Release of "Island President" Nasheed

Mar 10th, 2015 12:00pm

By Sofia Vera: I support Presdient Nasheed and add my name to this letter of support for his release.

Documentary Filmmakers and Activists Call for Release of "Island President" Nasheed

Mar 10th, 2015 11:14am

By Margarett R Mulkey: A civilized society is required of the current government of the Maldives. The world is watching injustice and crimes, and many realized thes…

Documentary Filmmakers and Activists Call for Release of "Island President" Nasheed

Mar 10th, 2015 10:53am