The Exhibitor (1950)

i»it iti: i\ THEATRES SECTION Until comparatively recent years the drive-in theatre represented but a small segment of the motion picture industry; thus its problems, especially financial ones, were not a major concern to either the industry itself as a whole, or to the U. S. Government for tax purposes. Since the war, however, the outdoor theatre business has grown by leaps and bounds to the point where it occupies a formidable place in the very fore of the industry. Although only a handful of drive-ins were in operation before the war, the years which have elapsed since the termination of hostilities have wit¬ nessed the construction of nearly 2,000. This extraordinary growth has been so rapid that the U. S. Treasury Depart¬ ment has not yet reviewed or published any rulings on the calculation of depre¬ ciation for tax and financing. This dearth of official legislation on the subject has, of course, been greatly due to the fact that the depreciation on the equipment and other fixed assets of a drive-in thea¬ tre differs materially from that of the regular type of motion picture theatre. The principal point of distinction is that certain types of equipment for the out¬ door theatre, screens, and speakers, for example, are subject to much greater wear, tear, and depreciation, in view of their exposure to the elements. In spite of the lack of Treasury De¬ partment rulings, the owners of drive-ins must continue to pay taxes and, there¬ fore, have to figure depreciation of their equipment, just as indoor theatres cal¬ culate depreciation on their carpeting over a period of years. To meet this need for a definite means whereby depre¬ ciation on drive-in equipment may be equitably computed, there are presented below two methods which are suggested as temporary expedients until official rulings are promulgated. First Method This method results from the thinking and experience of a highly esteemed firm of Certified Public Accountants who have specialized in handling theatre financial questions for 30 or more years. The firm is further eminently qualified to present a proposed method of tax depreciation analysis for two reasons: first of all, it leans on the knowledge gained about the depreciation of equipment similar to that used in a drive-in which it has ac¬ quired through working in other fields; secondly, since the organization has worked closely with the Bureau of Inter *Reprint from 191,9-50 Edition of THEATRE CATALOG June 28, 1950 nal Revenue on a great diversity of tax problems, it is well acquainted with the Bureau’s thinking and methods of ap¬ proach to various questions. This group of experts suggests the fol¬ lowing outline as a guide in determin¬ ing the main divisions of depreciation charges for drive-in theatres and cal¬ culating amortization time and charges thereon: 1. Improvements to the Property This item will include all charges for filling in the ground, grading, road PHYSICAL THEATRE DEPARTMENT of EXHIBITOR bed, building of ramps, electric signs, construction of buildings, architects’ fees, and all other types of charges which are required to put the grounds in useable condition for a drive-in operation. If improvements are made on leased land, then the cost of im¬ provements are to be amortized over the term of the lease. However, if improvements are made on property which is owned by the operator of the theatre, the rate of amortization should be 10% per year. DEPRECIATION— BASED ON USE AND REPLACEMENT Based on Depreciation °7c Use Life of — Adding Machines . . 10% 10 yrs. Architects’ or Engineers’ Fees . . 10% 10 yrs. Attraction Boards and Signs . . 10% 10 yrs. Automobiles or Jeeps . . 25% 4 yrs. Blacktopping on Ramps and Drives . . 20% 5 yrs. Cabinets, Confection Stand . . 10% 10 yrs. Chairs . . 10% 10 yrs. Chairs and Seats, Outdoor . . 20% 5 yrs. Construction of Buildings . . 10% 10 yrs. Decorative and Foundation Planting . 20% 5 yrs. Desks . . 10% 10 yrs. Direction Signs, Outdoor . . 20% 5 yrs. Dispensers, Confection Stand . . 10% 10 yrs. Electric Signs, Display . . 10% 10 yrs. Filing Cabinet . . 10% 10 yrs. Filling and Grading . . 10% 10 yrs. Film Cabinets . . 10% 10 yrs. Fire Extinguishers . . 10% 10 yrs. Generators . . 10% 10 yrs. Grilles, Confection Stand . . 10% 10 yrs. In-Car Speakers and Junction Boxes . 20% 5 yrs. Jacks and Repair Tools . . 25% 4 yrs. Lamps . . 10% 10 yrs. Lawn Plowers, Motor Driven . . 25% 4 yrs. Lighting and Light Poles, Outdoor . 20% 5 yrs. Microphones . . 10% 10 yrs. Playground Equipment . . 20% 5 yrs. Projection Bases . . 10% 10 yrs. Projection Lamps . . 10% 10 yrs. Projectors . . 10% 10 yrs. Ramps Grading . . 10% 10 yrs. Record Players . . 10% 10 yrs. Rectifiers . . 10% 10 yrs. Refrigerators, Confection Stand . . . . . 10% 10 yrs. Rewind Tables and Machines . . 10% 10 yrs. Road Bed Construction . . 10% 10 yrs. Roller or Drags, Motor Driven . . 25% 4 yrs. Safes . . 10% 10 yrs. Screen Tower . . 20% 5 yrs. Sound System . . 10% 10 yrs. Speaker Posts . . 20% 5 yrs. Ticket Choppers . . 10% 10 yrs. Ticket Registers . . 10% 10 yrs. Trucks, Pick-up . . 25% 4 yrs. Typewriters . . 10% 10 yrs. Underground Cable . . 20% 5 yrs. Tax And Finance Depreciation* Methods Of Computation Being Applied By Drive-In Owners Pending Federal Rulings PT-19