[Fmpro] Tax issue

[Mark Northam]

Hi All -

Here's a nice happy post that is sure to cheer everyone up!

I've been asked by a list member who doesn't want to reveal their name to
see if anyone has any info/advice on a specific composer related IRS issue.
Normally we don't do "anonymous" postings but I thought given the
sensitivity of this matter it would be OK so I told the list member I'd post
this.

The list member is currently being audited by the IRS. At issue are ASCAP
royalties. The IRS has taken the position that a composer may not deduct
business expenses from ASCAP royalty income UNLESS the expenses are directly
related to the production of the specific music that the royalty is paying
on.

In other words, assume you write a piece of music in 2004. In 2007 you
receive an ASCAP royalty for performances of that music. The IRS is now
saying that business expenses may not be deducted against that royalty
income in 2009 since the production of the music was done in 2004.  The only
exception seems to be if the business activity in 2007 you want to deduct
can be directly traced to a specific activity that specifically markets the
2004 music, such as production of a CD, etc. But the IRS is telling this
FMPRO list member that if the deduction cannot be directly tied (with
documentary evidence) to the original work, the royalty is a "service" and
ordinary deductions like ongoing studio expenses may not be taken against
it.

Needless to say, the implications for composers and songwriters are huge.

Any thoughts or advice for our list member colleague?

Best,

Mark Northam