Bucks Up

This week’s New York is largely devoted to a collection of short articles by Claude Bodesser-Akner about celebrity money. Shorter Brodesser-Akner: They make more but they have loads of expenses, the smart ones exhibit restraint, and most of them funnel their earnings through tax-friendly “loan-out” corporations. Oh, and Brangelina’s combined portfolio is worth about $270 million. And Zooey Deschanel lives reasonably .

  • VoiceOfReason

    That shit is fascinating! And disturbing. Don’t let Lex read this or he may actually follow through with his suicide threats.

  • Chicago48

    This is very telling,

    Baby Photos: Reportedly $14 million for photos of the twins, $4.1 million for photos of Shiloh, $2 million for postadoption pictures of Pax.

    Makes you wonder doesn’t it?

  • Chicago48

    I still don’t understand what “loan out corp” means….is that the company that holds their money and pays their bills?

  • mybrainismelting

    Chicago48 –

    A loan-out company is essentially a process of incorporating yourself. They take the form of an LLC, S- or C-corporation which you (the artist) owns completely. Then the corporation pays you.

    I know, strange, right? But basically what you’re doing is setting up a company into which all of your money is paid. You own the company (others may be members – in Brad and Angelina’s case, they probably have some kind of split 50/50, 60/40, whatever) but you are paid effectively as an employee. The IRS views loan-out companies as separate entities from you.

    So now the question is, why do you do this? Well, because a loan-out corp has all of the benefits of a separate company, the biggest of which is liability.

    Think of it this way: if your company does something shady that you had no hand in, the law clearly states you cannot be held personally liable. In other words, if your company dumps a shitload of toxic waste in someone’s backyard, they can’t come and repo your house (or savings, assets, etc.). A company provides protection for its employees because the company entity bears responsibility. This is an oversimplified case because if you did have knowledge of the wrongdoing or you participated, you can be found responsible but even then, probably only criminally, not civilly.

    Anyway, don’t want to go too deep down the funnel here, but the other benefits of a loan-out are you get to make deductions that might not otherwise have been available to you as a sole proprietor or non-corporate entity. For instance, if you work out of your home, the government limits the amount of rent/mortgage you can claim as a business expense. With a loan-out company, 100% of leasing expense can be claimed as a deduction (again, overly simplified – they’d never let you claim 100% of the house you live in as a deduction). Generally speaking, the loan-corp can claim deductions you as an individual cannot, or are limited in taking.

    See the article on Deschanel. 24K for clothes? Wow. Even if it is low for performers, that’s 2K/month. If that was Zooey making that claim, it could spell trouble. But as a loan-out, no problem.

    Lastly, in case you’re wondering, the IRS is not a huge fan of loan-outs because it’s easier to hide unqualified expenses, but they have not been successful in cracking down on them.

    Also, they’re not very beneficial for us mortals. A good rule of thumb is that loan-outs only really benefit you if you are making over 150K. And if you are an employee of another company, you can’t claim those wages under a loan-out. So there are rules but for actors, writers, directors, performers, etc., who are almost always contractors, it’s a smart move.

  • daytrippin6

    These 2 give a lot to charity through their Jolie-Pitt foundation, and IRS records showed the kids photo money went directly into the charity, not into their pockets. They give a lot in New Orleans and in Joplin Mo for example. Pitt has been very real estate wise in LA paying cash for his compound of modest houses in the Los Feliz area over a number of years, they also paid cash for their New Orleans home, he paid cash for his Malibu house he just sold to Ellen DG for $12mil, and he is also getting paid now as a producer through his company Plan B. Jolie makes top dollar for an actress when she works in a film which is less and less these days. They seem to spend money on their kids.

    I can’t find fault with anyone who has worked for years and been lucky enough to be well paid.

  • Chicago48

    Well, you said it — these two are very smart.

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