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Storey v. Commissioner, T.C. Memo. 2012-115 (2012)
Although the tax code offers a deduction for certain expenses, personal and hobby expenses won’t make the cut. In Storey versus Commissioner, we explore how to differentiate between pursuing an Oscar-worthy project and simply making a home video.
Lee Storey was a successful, full-time attorney. However, upon learning about her husband’s participation in the group Up With People, Storey began producing a documentary film titled Smile ’til It Hurts: The Up With People Story.
Storey retained film experts, conducted over 400 hours of interviews, and performed extensive research. In addition, Storey formed a production company, hired a bookkeeper and accountant, and established dedicated financial accounts for the business. Storey dedicated significant time to producing the documentary, often taking time away from her legal practice. Storey spent several years compiling, editing, and screen-testing the film.
After completing her documentary, Storey actively marketed the film to festivals. Although the film was critically acclaimed and won several awards, Storey didn’t initially generate profit.
When Storey filed her taxes for the years spent working on the film, she deducted production-related expenses. The commissioner of internal revenue disallowed the deductions, claiming that Storey wasn’t engaged in filmmaking for profit.
Storey sought review of the commissioner’s determination in tax court.
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