Perverse Tax Incentives and the Destruction of Creative Works

In late 2023, Warner Bros. Discovery announced that it would be permanently shelving Coyote vs. Acme, a complete and hotly anticipated film about popular Looney Tunes characters. This announcement was widely understood—and admitted by Warner Bros. Discovery in its Securities and Exchange Commission filings—to be motivated, at least in part, by a desire to “write off” the film’s costs for tax purposes. This Article is the first to (1) provide a full account for the tax rules that govern what constitutes a “loss” for purposes of unreleased creative works, (2) evaluate whether those rules make sense from both a technical and policy perspective (concluding that they do not), and (3) compare the relative merit of other approaches to allowing tax losses for unreleased creative works. In so doing, this Article makes two necessary contributions to current tax scholarship: first, it links the robust property scholarship on waste to tax policy, setting forth a framework through which critical reappraisals of long-entrenched tax laws and policies can be conducted, identifying ossified policies that no longer comport with our policy goals and revenue-raising needs and developing ways to improve them. Second, it also offers guidance in the ways that the law can think about the ownership, abandonment, and taxation of intangible assets.