An environmental Attorney named Lee Storey has recently won a case against the IRS which now allows Ms. Storey to deduct her losses in making the documentary film “Smile ‘Til It Hurts: The Up With People Story” from her income as a lawyer.
Initially, the IRS calculated deficiencies over $250,000 for the years 2006 through 2008 because Ms. Storey’s income as an attorney totaled more than $1 million during those years. The IRS characterized her film-making as a “hobby” and argued against Ms. Storey being able to deduct her losses in making the film against her income as an attorney.
The Court hearing the case made the determination that Ms. Storey’s tax elections were adequate and stated that the Court’s finding was based on the specific facts of the case. Some of the facts considered by the Court include the fact that Ms. Storey took a break from her job as a lawyer to learn filmmaking, conducted hundreds of hours of interviews to create the film, received several accolades for her film, including a Special Jury Prize at Michael Moore’s Traverse City Film Festival, best director award at the First Glance Film Festival, and was selected for Academy Award consideration by the International Documentary Association.
If the IRS chooses to not appeal this decision, the Court’s finding in this case is undoubtedly a huge win for many documentary filmmakers in a similar position to Ms. Storey.