In the entertainment industry, volatility isn’t a bug in the system — it’s the system. A project can go from hot pre-sale buzz to financial disappointment in weeks. Streaming valuations swing wildly. Theatrical box office numbers, once predictable, now oscillate in the wake of shifting audience habits.
For lawyers, accountants, and bookkeepers working with high-net-worth clients in this space, that volatility can be both a challenge and an opportunity. One of the most effective tools for managing it — and one that’s gaining more attention in the industry — is tax loss harvesting.
What Is Tax Loss Harvesting?
At its simplest, tax loss harvesting is a strategy where an investor sells an underperforming asset at a loss to offset taxable gains from other investments. By “realizing” the loss on paper, they can reduce the amount of income subject to capital gains tax — and in some cases, offset ordinary income as well.
Unused losses can often be carried forward to future years, giving the strategy long-term utility. The key is that it’s not about avoiding taxes illegally — it’s about managing taxable events within the existing rules.
For advisors, this means turning what might be perceived as a failure — a film flop, a streaming deal that never recoups, a music catalog sale below expectations — into a concrete financial advantage for the client.
Why It’s Especially Valuable in Entertainment
The entertainment industry produces highly irregular cash flows:
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Big wins: A box office breakout, a massive streaming buyout, a hit series syndicated globally.
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Big losses: Films shelved before release, distribution deals falling apart, tech platforms failing after launch.
For every “win,” there’s often a “loss” lurking somewhere else in the portfolio. Tax loss harvesting lets you link the two.
Example:
Your client sells a Malibu beach house for a $4 million gain in 2025. That same year, a $2.5 million investment in a boutique streaming service tanks. By harvesting the $2.5 million loss before year-end, you reduce the taxable gain to $1.5 million. Depending on their blended federal/state capital gains rate, that could save the client upwards of $800,000 in taxes.
Why Lawyers Care
1. Structuring Flexibility
Entertainment deals are often structured through special-purpose vehicles (SPVs), co-financing agreements, or complex partnership arrangements. Lawyers can ensure contracts allow for flexibility in when and how an investor’s stake can be sold — crucial for timing tax loss harvesting transactions before year-end deadlines.
2. Avoiding Wash Sale Pitfalls
The IRS’s wash sale rule disallows a loss deduction if a “substantially identical” asset is purchased within 30 days before or after the sale. Lawyers play a key role in determining what “substantially identical” means in the context of entertainment assets, where rights packages, equity stakes, and distribution agreements can blur the lines.
3. Protecting Confidentiality
High-profile clients may not want news circulating about divesting from a failing project. Lawyers can help structure discreet transactions that still meet the IRS’s realization requirements without compromising reputational considerations.
Why Accountants Like It
1. Clear, Measurable ROI
Accountants can point to a specific dollar amount of taxes saved as a direct result of the strategy. This makes tax loss harvesting one of the most tangible, easy-to-justify recommendations in their toolkit.
2. Smoothing Volatile Returns
By offsetting large gains with realized losses, accountants can help clients maintain a more predictable after-tax income stream — vital for budgeting both personal and business expenses in an industry where income can be feast-or-famine.
3. Integration Across Asset Classes
Entertainment clients often have holdings in real estate, art, tech, and traditional equities. Accountants know that losses from one sector can offset gains in another — making entertainment downturns useful for managing broader portfolio tax exposure.
Why Bookkeepers Value It
1. Cleaner Year-End Books
Realizing losses at strategic times can simplify the presentation of financial statements, making them more palatable for lenders, partners, or future investors.
2. Basis Tracking
Bookkeepers are often on the front lines of tracking the original purchase price (basis) of entertainment assets. Accurate basis records are critical for identifying harvesting opportunities in time to act.
3. Coordinating with the Advisory Team
When bookkeepers spot significant unrealized losses mid-year, they can flag these to accountants and lawyers for coordinated action, ensuring no opportunities are missed before the calendar closes.
Case Study: The Film Slate Advantage
In 2023, a Beverly Hills family office invested in a 12-film slate with a major studio. By year three:
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Four films overperformed, generating $6 million in gains.
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Five films broke even.
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Three were commercial flops, with a combined $3.8 million in unrealized losses.
Working with their accountants, the family office sold their positions in the flops in November, realizing the $3.8 million loss. This directly offset $3.8 million in taxable gains from the hits, saving approximately $1.4 million in combined federal and California capital gains taxes.
Importantly, the sale didn’t sever their overall relationship with the studio — they reinvested the proceeds into a new set of projects in January, carefully observing the wash sale rule.
Timing: Awards Season for Taxes
Like a release schedule, timing matters. The best results come when the team — lawyer, accountant, and bookkeeper — reviews unrealized gains and losses quarterly. This ensures decisions aren’t left to the final days of December, when liquidity or market conditions might make execution difficult.
Pro tip for professionals:
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Mid-year check-ins can identify loss candidates before year-end rush.
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Align sales with known income events (e.g., property closings, streaming deal payouts).
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Consider partial sales — sometimes harvesting a portion of the loss is enough to optimize the tax result.
Risks and Realities
While powerful, tax loss harvesting is not without its caveats:
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Missed rebound risk: Selling an asset before it recovers in value can mean locking in a loss permanently.
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Liquidity constraints: Some entertainment assets can’t be sold quickly due to contractual lockups or lack of buyers.
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Complex wash sale interpretations: Especially relevant when dealing with multiple tranches of rights or layered financing structures.
That’s why the strategy works best when it’s part of a coordinated, multidisciplinary approach — lawyer, accountant, and bookkeeper working in sync.
The Bigger Picture
For high-net-worth entertainment clients, tax loss harvesting isn’t about being pessimistic — it’s about being opportunistic. It acknowledges that losses are an inevitable part of investing in a volatile industry. The difference between a smart loss and a wasted one often comes down to the professionals around the table.
As one veteran entertainment CPA told me:
“In Hollywood, you can’t control the audience, but you can control the tax consequences of their reaction.”
For lawyers, accountants, and bookkeepers who understand the rhythm of the entertainment business, tax loss harvesting isn’t just a year-end tactic — it’s an ongoing, proactive discipline. Done right, it turns bad box office news into good financial news, keeps clients loyal, and cements the advisor’s role as an indispensable part of the production that is their financial life.
Joe Winger (Joe Wehinger) is a filmmaker, entrepreneur and entertainment finance professional with over two decades of experience in the film industry. A graduate of Chapman University with a BFA in Film Production, Joe gained early recognition with his student film, starring 5-time Golden Globe winner, 7 time Emmy winner Edward Asner. He went on to write and direct his first feature film in 2006 starring Golden Globe winner and Emmy winner James Brolin; and has since played pivotal roles in raising capital for independent entertainment, live event and e-commerce projects. With certifications in feature film financing, investor agreements, and entertainment tax incentives, Joe bridges the creative and financial sides of filmmaking. He has also completed advanced coursework in the business of feature films, equipping him to guide projects from concept to screen with strategic insight and fiscal discipline.
