Documentary filmmaker Lee Storey has emerged victorious in an IRS dispute over production-related tax deductions for expenses that allowed her to write off losses at the same time she earned substantial income as a lawyer, according to a Forbes magazine post. “I need to go celebrate. I need to pinch myself,’’ said Storey, producer and director of Smile `Til It Hurts: The Up with People Story, “The documentary film community is going to be thrilled. That’s a huge issue for them.” The IRS rejected
Storey’s claims and assessed $259,842 in back taxes and penalties. Tax court judge Diane L. Kroupa initially seemed to agree, suggesting that documentary filmmaking amounted to a hobby because “it’s not for profit. You’re doing it to educate. You’re doing it to expose.’’ The International Documentary Association and five other non-profit groups hurriedly filed a friend of the court brief. As the brief noted, “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.” In an about face to her earlier comments suggesting that Storey’s filmmaking amounted to an expensive hobby, Judge Kroupa ultimately decided in Storey’s favor, taking into consideration that she kept detailed records and conducted her filmmaking in a businesslike manner — writing and then modifying a business plan, seeking financing, hiring a bookkeeper, obtaining liability insurance and soliciting feedback from industry pros.
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“Smile Til It Hurts” is a fine documentary. See it and don’t let the tax story, important as it is, unduly overshadow her stellar achievement as a film maker.
Smile Til It Hurts is great since for a long time I swore that Up With People was strange religious cult and it turns out they were. They were like Patriotic Moonies. It’s an amazing film and deserves to be watched by anyone who remembers this lame act from halftime at all those Super Bowls.
Thanks to Lee Storey and her amici on behalf of all filmmakers, both documentary and fiction.
Congrats Lee Storey. Rod, tell her what she’s won.
She’s won a lifetime supply of yearly audits. She will be audited every year for the rest of her life. If she mistakenly expensesa a pack of gum improperly,she will end up defending it incourt. (croud cheers)
Matt, I think you overestimate the attention span of the IRS … and underestimate the willingness of lawyers for (Lee is one) to litigate if they are treated badly …
Regardless, her position is to be respected, her victory to be celebrated, and all those in the position of generating art, music, film, et cetera that fail to immediately realize a profit may be encouraged.
the IRS will do what they want. You can’t let the unknown or IRS dictate your life. if she gets harassed by the IRS she is a lawyer and knows how to handle it. they can waste their time auditing every year if they like! this comment adds nothing to the fact that they had no case in the first place. The question should be asked why did they audit to begin with! good luck lee Storey! Don’t worry about tomorrow. It will be good!! Look up always! Congratulations and bask!
Her tax crime was she she failed to make a profit for six straight years. Thanks IRS.
Just shows how OUT OF TOUCH the gov’t. and this “tax judge” are. Imagine, to call this just an “expensive HOBBY?!” Are you freakin’ kidding me? Do you really think ANYone goes into filmmaking for any other purpose than to hopefully MAKE MONEY? Geesh.
The IRS is not going after her for failure – if anyone can create a paper trail that suggests you have a real business while never making any profit, then it simply becomes a tax shelter. Rich investors did this all the time for years – they would simply buy into money-losing “businesses” and shelter their income from other places.
I’m sure she was sincerely trying to make good documentaries but you can’t lose money forever and claim a tax deduction. There is a larger principle here. Our tax code is enormously complicated not because of ordinary people, but because operators like this woman try to get the rest of us to subsidize their pursuit of happiness.
There have been documentary films that made money. Michael Moore’s films must be in the black. I am sure that is how he makes his living. It is frightening that this judge would think she knows the film business better than a filmmaker, but at least she came to her senses. And what is reality tv, but some insane-on- crack documentary??
The problem is that the IRS tax code is so complex that even a judge needs a year to figure out whether a rule applies to a situation. That ambiguity gets taken advantage of by people who game the system as well as those who just give up on trying to figure it out and take the lazy route of going whatever interpretation gives the least tax. The diligent and honest folks end up paying more taxes. Time to simplify the tax code.