Celebrities investing in movies to get tax credits are finding themselves in trouble with tax authorities, such as Annie Lennox and the Beckham's. Investments are supposed to be good and throw off income, while providing tax benefits, says Rob Wood, tax attorney with Wood, LLP in San Francisco, California. However, the question is, is it a legitimate transaction and how certain or aggressive is it, Wood asks.
People tend to run for cover when a deal goes bad, which is what happened when the UK authorities were claiming some investments were scams. The celebrities run for cover, saying they didn't know and invested for all the right reasons, Wood says.
Wood says "buyer beware," and if you're not able to look at the deal yourself to see that it's a legitimate deal, don't necessarily buy all of the hype and get professional help on your own, who's loyal to you, to look at it.
It's a very detailed issue, Wood says, that combines a multitude of tax rules. You buy into something and it's a bit of a shell game, he says. To the extent that anyone's guilty, it's not the celebrities but probably the behind he scenes people who are moving shells around. Ultimately, it's not just about the $10 write off you put in but rather the $100 and the question is, is the debt real and do you have to pay it back, notes Wood.
This is an economic substance, designed to serve as a back stop to many of the technical tax rules that end up getting people in trouble, says Wood.
For more information on the article written in Forbes magazine about this, click here. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.