Live Theatre (Broadway) Deductions

[SBC3]

I invested in a Broadway production; the show will be opening the summer of 2023. Per US Section 181, I believe I can take this deduction for the "taxable year in which costs of the production are first occurred." I have read that as I get paid back on my investment, I will have to declare capital gains for each distribution. 

However, Forbes wrote an article (The Ugly Truth About Section 181) saying you can only take the deduction against a narrow real estate income category.  181. https://www.forbes.com/sites/schuylermoore/2022/01/19/the-[product key removed]-section-181/?sh=31cd....

Does anyone know the answer to this? To be clear, I am a MINOR investor - not a named producer. 

I've also read Section 168 is relevant as well.  I'm soooo confused. 

[Anonymous_ · Accepted solution]

You really do need to consult with a local tax professional who has experience in this area.

My understanding, albeit horridly incomplete, is that you need qualifying passive income in order to take advantage of the deduction or producing must be your active trade or business.

Again, consult with a tax professional who is familiar with this Code section.

[Mike9241]

Forbes without citing the code section is probably referring to IRC code section 469 which deals with passive losses and credits. this code section states that a passive activity is any activity which involves the conduct of any trade or business in which the taxpayer does not materially participate. that would likely mean you. it goes on to state that for any taxable year that the taxpayer meets the above conditions neither the passive activity loss (PAL) nor the passive activity credits, for the taxable year shall be allowed. further, it states that PAL means the excess of losses over income from passive activities for the taxable year.

so to take the loss in the year it occurs you would need passive income of at least the same amount.

however, you probably should confer with an active tax pro.  

[Anonymous_]

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@Mike9241 wrote:

Forbes without citing the code section is probably referring to IRC code section 469.....

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The link posted by @SBC3 was caught by the board software so it does not work. However, the article addressed Section 181 specifically.