[Fmpro] Tax issue

[John Stone]

Mark & "unknown member", 
 
The only way the FBI put Al Capone in prison was for tax violations. 
Capone got away with murder but not with tax evasion.  
Maybe this fmpro member can actually put a certain PRO into the national
spotlight when he/she proves their manipulation of the income
stream generated by legally deducted expenses being denied him/her.
 
Proper studio production, legal, expenses, labor, overhead are all perfectly legal 
deductions for any business.  This should be a valid use of the Schedual C form 
filed for the year of creation, no matter when the music was sold and royalty revenue was garnered. 
My CPA will only allow me to claim my deductions the year of creation.
But marketing, vending, internet, post, legwork to sell a work is legitimate to
expense over a period of time until the work is sold, and should be deducted.
 
How many authors, film makers, composers keep their property in the "can" even after its been created?,
but still go out to sell their product and expense their efforts with paper trails?  
 
In this case there seems to be a grossly misinterpreted tax code which favors not the creator but the consumer; either the PRO or the IRS must prove that deductions can only be claimed if income is earned
in the same year, many of us would be in the same boat when working on speculation.  
 
Does the member use a CPA and what is their opinion?
 
Best JS  



> Date: Fri, 2 May 2008 06:12:56 +1000> From: markn at gmocorp.com> To: fmpro at nxport.com> Subject: [Fmpro] Tax issue> > 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> > > > _______________________________________________> The Film Music Pro List is sponsored by Film Music Magazine - http://www.filmmusicmag.com> > Best of FMPRO: http://www.fmproquotes.com - Quotes site by Billy Hale Music> > To edit your list options or unsubscribe, visit:> http://nxport.com/mailman/listinfo/fmpro
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