CCA 9932006: No ruling on film broadcast rights amortization changes

Plain-English summary

A company filed two Form 3115 applications for subsidiaries seeking to change how they amortized broadcast rights for feature films. The proposed method would spread each title's cost on a straight-line basis over the term it was available to show. The IRS issued “no rule” letters because a regulation project under section 167(g) was open and likely to address the questions. The memo says the IRS was tentatively adverse to the proposed method, but it did not decide whether the subsidiaries could use it.

Ruling snapshot

• Question: Would the IRS approve the proposed accounting method for film broadcast rights?
• Outcome: No ruling issued while a related regulation project remained open.
• Key authorities: IRC § 167(g); Form 3115.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
I N T E R N AL R E V E N U E S E R V I C E WASHINGTON, D.C. 20224

April 12, 1999

UIL: 167.05-05
CC:DOM:P&SI:6
167.14-06
CAM-114724-98
CAM-116039-98
Number: 199932006
Release Date: 8/13/1999

MEMORANDUM FOR DISTRICT DIRECTOR, DISTRICT CHIEF EXAMINATION DIVISION

FROM: Senior Technician Reviewer, Branch 6
CC:DOM:P&SI:6

SUBJECT: No Rule on Form 3115s

X =

Sub1 =

Sub2 =

Sub3 =

Sub4 =

Sub5 =

Sub6 =

Sub7 =

Sub8 =

CAM-114724-98; CAM-116039-98

Sub9 =

Sub10 =

Sub11 =

Sub12 =

Sub13 =

This memorandum is to inform you that we recently issued no rule letters in response to two Form 3115s (Application for a Change in Accounting Method), dated June 23, 1998. Both Form 3115s were submitted by X on behalf of its subsidiaries, Sub 1 through Sub13.

Both Form 3115s relate to the amortization of broadcast rights for feature films with limited run contracts. Currently, Sub1 through Sub10 use the income forecast method, which is a permissible method, and Sub11 through Sub13 use a method described as the greater of straight line over the contractual term or accelerated depreciation over the planned number of showings, which may not be a permissible method. Sub 1 through Sub13 propose to amortize the rights on a title- by-title basis using the straight line method over the contractual term each title is available to show.

Although we are tentatively adverse to Sub1 through Sub13’s proposed method, we issued no rule letters in response to the Form 3115s because of the

CAM-114724-98; CAM-116039-98

open regulation project under section 167(g) of the Internal Revenue Code. This regulation project will likely address issues raised in the Form 3115s.

Kathleen Reed
Kathleen Reed
Senior Technician Reviewer,
Branch 6
(Passthroughs and Special
Industries)