[LMB] Tax law and the publishing industry

[Richard Macdonald]

From: "Ed Burkhead" <edburkhead at insightbb.com>
>
> The third topic we discussed, relevant here, was about backlist books.
>
> The bookstore owner said that in the 1980s, Congress changed the tax law
> making it no longer profitable to keep backlist books.  He said that
> publishing companies used to make big print runs of an author's books and
> keep the extras in a warehouse, selling them slowly as orders came in. 
> The
> tax law changed this.

Actually it was not Congress but the Supreme Courts interpretation of the
Uniform Capitalization Rules that are still current tax law in "Thor Power
Tool" that there was no basis in the tax code to write diwn inventories to
their ned expected realizable value without reducing the inventory price
per item. With books, if you have an inventory and expect to sell only half
of them, you cannot write off half your inventory without either cuting the
price in half, ot disposing of half the inventory. This also happened about
the same time as the introduction of computerized typesetting that lowered
the print run set up costs and allowed smaller pribnt runs to be profitable.
The combination of the two led to smaller print runs to reduce inventories
in the warehouses that you could not write down.

Now for the real tax types, here is the actual decision:
http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=439&invol=522
--
Richard A. Macdonald, CPA/EA
SSG(Ret), USA, ADA, 16P34
Gib mir Schokolade und niemand wird verletzt!!!