Tax Treatment of Qualified Film Production

TAX FILE MEMO (7-81)

To: Tax file

From: Student researcher

Re: Tax treatment of film production partnership

____________________________________________________________________

Facts:

Three friends form a film production partnership.

Issue:

Will the operations of this partnership qualify for the domestic production activity in the current year?

Law:

Internal Revenue Code (IRC) Section 199(c)(4)(A) provides that domestic production gross receipts can be derived from any qualified film produced by the taxpayer.

Qualified film is defined under Section 199(c)(6). The term “qualified film” means any property described in section 168(f)(3) if not less than 50 percent of the total compensation relating to the production of such property is compensation for services performed in the United States by actors, production personnel, directors, and producers. Such term does not include property with respect to which records are required to be maintained under section 2257 of title 18, United States Code. A qualified film shall include any copyrights, trademarks, or other intangibles with respect to such film. The methods and means of distributing a qualified film shall not affect the availability of the deduction under this section.

Section 168(f)(3) describes films and video tape as any motion picture film or video tape.

Conclusion:

The Partnership should be able to qualify for the Section 199 deduction as long as their produced films are a qualified film under Section 199(c)(6).

(7-67) Revenue Ruling 2001-60

a. What is the ruling’s complete citation?

* Rev. Rul. 2001-60,2001-2 CB 587

b. What was the effect of Rev Rul 2001-60 on Rev Proc 99-49 and Rev Rul 55-290?

* Rev Proc 99-49: Modified and amplified to included change in accounting method

* Rev Proc 55-290: Modified and superseded

c. Which IRS Revenue Procedures favorably cite Rev Rul 2001-60?

* 2002-1

* 2002-3

* 2002-9

*...