Tax-Scam Labels

[JSngry]

http://www.shit-fi.c...onMilenski.html

http://badcatrecords...IEW_TAXLOSS.htm

Interesting stuff...

[Big Beat Steve]

Interesting indeed ...

This reminds me of my very early collecting days in the mid- to late 70s when two local record stores here always used to have VERY well-stocked cut-price bins with U.S. pressing cutouts (and it really was virtually only U.S. pressings all the time, hardly any European ones at all). I remember buying cutouts of a few major labels/subsidiaries such as Chess, Prestige and Cotillion there that fell within my musical interest but they also had a LOT of obscure contemporary stuff on obscure labels that I'd never heard about and would not have touched. But somehow the covers on the Badcat Records site look like stuff that might have been in there. Might have been a sound investment picking them up then if we had known what it was all about ...

Of coure I cannot be sure there was some (worldwide) connection there but what baffled me at the time (and now does again as I read this and come to think of it) is why there were these (comparatively) HUGE masses of U.S. pressing cutouts available over here in record stores (stores selling NEW items! Independent stores but not really back alley underground shops) in the late 70s whereas this cutout thing somehow disappeared totally here in the 80s.

Too bad there is no time machine to go back and find out.

[Ken Dryden]

A little different twist. One of the artists who appeared on a veteran producer's last label, told me that it was odd that he didn't put much marketing effort behind them, other than sending out review and radio copies. After his death, it was discovered that he had sold over 100% of the profits from the operation to investors, causing the label to fold immediately. It was surmised that he just wanted to record people he enjoyed near the end of his life.

I don't feel comfortable publicizing the name of the artist or label, for obvious reasons--no written proof.

[marcello]

Having a business for a "tax write off' is a myth. Who in their right mind, would intentionally loose money by starting a jazz label?

This is one of those jazz business myths that musicians use to explain why they aren't getting the proper label support.

There's lots of easier ways to bring down your tax liability. There always was.

There is a history of more profitable and nefarious reasons why some of the operators started these cut rate labels.

[JSngry]

FWIW, the labels mentioned in the original articles were not jazz labels.

[kh1958]

What is described is not a "tax loophole"; it's fraud.

If you invest $100 in an LP and lose the money, you get a $100 deduction (as long as the LP was made with the hope of making a profit), which gives a tax benefit equal to the applicable tax rate. There is a net economic loss (with a 35% tax rate, you have lost $65).

It sounds like phony costs were created and allocated to Lps that were not really produced with the hope of making a profit. If you don't actually spend the money and claim a loss you can come out ahead (by offsetting the loss against other profits), but if the IRS catches you, jail is in your future. Alternatively, perhaps there were real costs associated with successful LPs that would have been deductible over time (the useful life of the successful LP), but instead some of the costs were allocated to the tax scam LPs and deducted sooner than they should have been (a timing benefit).

[JSngry]

Along those lines, it's not unheard of for "backers" to sink big bucks into a recording project for no other purpose than to lose money for a tax write-off. Studio time? no problem. Fancy arrangemnets? Bring 'em on. Additional players? Make the calls. Time to go to press, take out ads, schedule gigs, etc...well...not right now. Or only up to a point.

Very little in this business is as it seems...

[Big Beat Steve]

Along those lines, it's not unheard of for "backers" to sink big bucks into a recording project for no other purpose than to lose money for a tax write-off. Studio time? no problem. Fancy arrangemnets? Bring 'em on. Additional players? Make the calls. Time to go to press, take out ads, schedule gigs, etc...well...not right now. Or only up to a point.

Very little in this business is as it seems...

I understand Louis Jordan was rather sore at Ray Charles because to him it seemed his album produced and released on the Tangerine label was seen more like a tax deduction stunt by Ray than an actual release (hence the lack of promotion).

[AllenLowe]

slightly different thing, but years ago I worked for Minuteman Records, a store in Cambridge, Massachusetts - which had a warehouse full of cutouts from Roulette, great stuff, lotsa nice jazz.

Years afterwards I read about what a scam the whole cutouts things was, as a way of taking LPs off the books so royalties would not have to be paid (somebody wrote a whole and very fascinating book on this topic).

well, one of the silent partners in this record store where I worked (which is now, by the way, Strawberries) - was Morris Levy, who I met on several occasions when I worked in the warehouse. He grunted a lot (as in "hey, kid...").

IIRC he was one of the original owners of Roulette, and so was probably skimming these LPs for years.

Edited May 19, 2010 by AllenLowe

[The Magnificent Goldberg]

Of coure I cannot be sure there was some (worldwide) connection there but what baffled me at the time (and now does again as I read this and come to think of it) is why there were these (comparatively) HUGE masses of U.S. pressing cutouts available over here in record stores (stores selling NEW items! Independent stores but not really back alley underground shops) in the late 70s whereas this cutout thing somehow disappeared totally here in the 80s.

Too bad there is no time machine to go back and find out.

Yes - I always thought it odd. We had a shop in Cardiff called Buffalo that had LOADS of US cutouts. They sold new items - no second hand LPs but they also sold jeans. But so much that was in their racks was cutouts. I could never work out how anyone was making a profit on shipping tons of LPs accross the Atlantic and flogging them off at REALLY cheap prices to stores like Buffalo. I got a nice pile of Peacock/Songbird LPs for 0.50p and I reckon there was still a little bit of profit in that for the shop.

Interesting to see the Dobre label mentioned.

MG

[clifford_thornton]

A quick hit on Popsike for some of that Tiger Lily catalog, and the stuff gets pretty expensive nowadays...