Variety (Jul 1946)

PICTURES P43Stt!Ft , Wedittxlay, July 31, 1946 dies Qaim Govt. Tax Crackdown Will 'Strangle Small Biz Competition Vs. Majors; Supreme Ct Fight Seen Hollywood, July SO, , ♦ Federal government's move lo col- lect from $18,000,000 to $25,000,000 in asserted "back income taxes" from independent film companies, operating - under; capital gains, was Interpreted over the weekend by a (pokesmah- for some of the leading indie producers as an action which "would strangle attempts of little business to create new film compan- ies. Most of the independent pro- ducers, who have been attempting to develop new film companies in face . of strong competition from the financially entrenched major studios, have long expected this Government action," a legal rep for some of the industry's leading indies told Varictt. "The Bureau of Internal Revenue's move will afford the independents a federal court action to prove the authenticity of their aims to develop new film companies," the attorney and tax authority, who asked not to be identified "at this time," declared. He continued it would have been impossible for "new, little film com- panies to get going in the three years prior to Jan. I. 1946 because of the then existing excess profits tax." A check several months ago by Variety covering corporate setups of the nearly 150 independent pro- ductions units, which have mush- roomed in past three years, revealed that practically all of them intended to "stay permanently in the busi- ness of making pictures." Among those contacted at that time were Jules Levey, Jerry Geisler, Mark Hellinger, Bruce Manning/ Jack Skirball, Walter Wanger, Frank Borzage, Preston Sturges, Frank Ross, Leslie Fenton, Bo Roos, Fred MacMurray, Seymour' Nebenzal and others. Majority of indie producers flatly disclaimed that taxes nursed the long forecast indie growth. Although a few thought some individual stars and other talent may have had taxes, or reduction of them, in mind when they started indie production, contention was that practically- all the loner setups were using the only practical and legal procedure ensuring them a "half-way chance" of "competing with big business" in the form of the major studios. It was strongly indicated that de> spite the current Federal income tax action the growth of the inde- pendents will continue unabated With the excess profits tax elimi- nated, the indies, operating under straight corporate taxes, currently pay little more than the 25'i capL tal gains tax take. New and ex paneled, indies like the Charles Ein feld-David Loew combo, Enterprise: Milton Sperling-Joseph . Bernhard's, United States Pictures; William Goetz-Leo Spitz, International Pic- tures; Walter Wanger-Fritz Lang Productions; Hal Wallis Produc tions; Frank Capra-William Wyler George Stevens-Samuel Briskin's Liberty Films, and others, indicated over the weekend a long-range pol- icy of 'expansion in production and distribution. Independent producers who indi cated aim of remaining in lower ranks included .Hunt Stromberg, William Cagney, Benedict Bogeaus, Edward Small, Sol Lesser, Charles R. Rogers, Andrew. Stone, Seymour Nebenzal, Jules Levey, Lester Cow- an, Preston Sturges, Howard Hughes, Frank Ross, Howard Hawks, Buddy Rogers-Ralph Conn's Comet Productions, Jesse Lasky and others.. Among the many film stars who have formed single-picture compa- nies are Bing Crosby, John Wayne, Constance Bennett, Bette Davis, Errol Flynn, Gary Cooper, Joan Bennett, Joan Fontaine, John Gar- field, Paulette Goddard, Pot O'Brien, Ginger Rogers and Burgess Mere- dith. Col's Aug. Octet ' Hollywood; July 30. . August will be a hot month for production at Columbia with . eight films slated to roll, starting this week with "Mr. District Attorney" and "Lone Star Moonlight." Six others going before the lenses during the month are "Quicker Than the Eye," "Blondie's Holiday." "I Don't Like to Die," "Over the Santa Fe Trail," "Chant of the Voodoo" and "Betty Co-Ed." ave Because of U. S. Tax Drive Seen Washington, July 30. Possibility of a string of Holly- wood bankruptcies is seen here if the Internal Revenue department wins in the courts in its drive to collect back taxes on the single pic- ture corporations. While a few who have made big money through independent produc- tion salted away a large chunk, just in case the Government ruled them wrong on paying only the 25% capi- tal gains tax, large bulk of the pro- ducers, directors, stars and writers spent it as fast as they made it, it's understood here. With them it was easy come, easy go, end nothing was held back for taxes if the corpora- tions were ruled illegal for tax pur- poses. Result is that bulk of the one-pic people do not have the cash to pay up the difference between the 25% capital gains tax and the 80 to 90% personal Income tax, plus 6% inter- est charged by the. Revenue Bureau. Estimates here are that it may take a year or more before these cases reach .final decision In the Su- preme Court. . By then, some of those who made big bucks during the war period through one-picture corporations, are* likely to be. earn- ing considerably less and unable to meet Uncle Sam's delinquency bite. Tax claims, like private debts, are wiped out through bankruptcy al- though taxes are first lien on the assets of the person goint, through the wringer. Thus, the easiest way out for .some of the biggest names in fllmdom is seen as bankruptcy— and some are expected to take ad- vantage of it. SMPE Eats Cake Hollywood, July SO. Thirtieth birthday was celebrated here by the Society of Motion Pic- ture Engineers, a group organized July 24, 1916, to solve technical problems in the production and ex- hibition of motion pictures. Don E. Hyndman, prexy, declared that . international standardization, television development and a-broad instruction program are the major projects of the near future.' On 22 Scripts Hollywood, July 30. With Philip Dunne assigned to re- vise the "Forever Amber" screen- play, the writing mill at 20th-Fox is grinding at full capacity on '22 scripts in various stages of com- pletion. Lamar Trotti is working on "Cap- tain from Castile"; Talbot Jennings on "The Black Rose," Jerome Cady, "The Foxes of Harrow"; Ring Lard- ner, Ji\, "The Dark Wood"; F. Hugh Herbert, "Scudda Hoo-Scudda Hay"; Samuel Hoffenstein and Elizabeth Reinhardt, "Honeyfpgling Time"; Richard Murphy, "Boomerang"; Eu- gene Ling, untitled FBI story; Har- ry Kleiner, "Stranger on the High- way"; Leonard Hoffman, "The Life of Lily Langtry"; Gene Markey, "The Night the World Shook," "Ma- rion Turk" and "Missouri Waltz"; Mary McCall, Jr., "The Band- wagon"; .Robert Hill, "Brooklyn Bridge"; Art Arthur and Robert Harari, "Christmas in Havana"; Si Bartlett, a whaling story, still un- titled; Dorothy Bennett, "Party Line"; Martin Berkeley, "Green Grass of Wyoming"; and Valentine Davis and Ira Wolfert on "Ballad of Furnace Creek." . Other Industries Graver Than Pix Washington, July 30. Formation of corporation* and other stunts for tax-dodging purposes is not confined' to Hollywood, Government source* say. Some of this bobbed up in war industries and is how under investigation. Some of the schemes are considered far more grave from the Government's viewpoint than the Hollywood development. One angle In the single-picture corporation, as pointed out by in. dustry sources here, Is that it will enable the major studios to regain control of .the stars and directors who have (lipped away in the past' few years to go Into independent production. That, in turn, means that the annual salary lists of $75,000 a year and over people will fatten up again. Many of Hollywood's top earners have gone off the lists in the past couple of years via the independent production route. Revenooers Goldwyn (5 Corps.) Case A Test for All Capital-Gains Indies Lonsdale H'wood Bound Hollywood, July 30. Frederick Lonsdale, signed to an. RKO writer contract last May, is leaving England for Hollywood shortly to take up his new job. Playwright stayed In England to await the opening, of his new legit drama, "But For the Grace of God." Eagle-Lion Cuts Scribes Into Pix-Profits Pie Hollywood, July -30. Eagle-Lion is offering participa- tion contracts to scripters in a move to corral top Hollywood writ- ing talent. First contractee under this kind of deal is Agnes - Christine Johnson, who is screenplaying "Clementine" lor a percentage of the profits. 2 MORE INDIE UNITS DESPITE TAX PROBE Hollywood, July 30. New indie production outfits con- tinue, despite the Internal Revenue crackdown on the capital-gains set- ups. Tay Garnett, Paramount director, has announced that he would go in for indie production as soon as he had finished his current chores on "The Big Haircut"' for Par. His first indie venture will be "The Legend of Tim my OTlourke," based on his own story. First starrer for Rosalind Russell under the .banner of Independent Artists, in which the' star is associat- ed with her . husband, Frederick Brisson, and Cary Grant and Dudley Nichols, will be "Happiness of Pur- suit, a comedy. True Boardman is writing the screenplay for an early autumn start. 25% MORE ENTRIES IN MG'S $125,000 CONTEST Metro got an increase of 25% in the number of entries this year in its' annual $125,000 contest for best novel to be published in the fall. Contest, which closed two weeks ago, drew 1 IT books, compared with 90 last year and 60 the year before, when the award gimmick was started. Current winner is expected to be announced in a few weeks. Topper in the contest^-which was only for Hovels which had already been set with publishers—will get a minimum of $125,000 from M-G for the screen rights, with an additional bonus for each copy sold until a ceiling of $175,000 is reached. In additlop, the publisher gets $25,000. Latter sum is his to do' with as he pleases, although Metro's purpose in awarding it is to provide additional promotional coin for the book se- lected. Company's aim in offering the coin is to tie up the cream of the novels on the fall lists until studio has a chance to determine which of them it wants. Although most of the books entered in the contest are also seen by other studios in ad- vance of publication, entrants obli- gate themselves not to sell to any- one else until Metro announces its winner. Tax Rule Protects Majors Stake In Top Name Talent Decision of the Federal Bureau of Internal Revenue to investigate the film production outfits established to produce one picture only under the capital gains tax setup has brought a sigh of relief to many Industry chiefs. Until the Government de- cree came through last week, many had long worried that the entry of their stars, directors and other name talent - into indie production . outfits would only hurt the latter in: the long run. Claiming that too many top Holly- wood names had gone "capital gains happy,"' N. Y. industry chiefs de- clared that the desire to be'able to "make and keep a buck" not only had the stars haywire on produc- tion setups but was a virus that | contaminated every aspect of the industry. As one h.o. chief pointed out: "Forget the fact that we. think our stars may be dissipating their future values and minimizing their professional longevity. I can only cite the instance of Fenime Star Who Shall Be Nameless Here and i Continued on page 44) 20th'slo?eMe'-'tarner' Dno Sets RKO Record Against unfavorable weather, in the first group. of 25 RKO houses in the Greater New York area the dual bill of 20th-Fox's "Do . You Love Me?" and "Dark Corner" last week ran up a record gross for the summer of $241,000. Two additional groups of RKO theatres remain to be played. Twentieth also holds the alltime high for any picture playing the RKO Greater N. Y. chain, when "Leave Her fo Heaven" grossed $525,000 last winter. CoL's Arnold Albert Dickers 'Mistress' Play Preliminary negotiations for pur- chase of screen rights to "O Mistress Mine," Broadway legit hit starring Lunt and Fontanne, were entered into last week by Arnold Albert, Columbia producer. Col reps are continuing talks this week with the producers, Theatre Guild ~nd John C. Wilson. Albert is seeking the play as his initial picture at Col, where, he re- ported Monday (29) after a stretch at Warner' Bros. He returned to the Coast over the weekend follow- ing a sojourn in New York. Number of studios have at verious times. expressed interest in {"Mis- tress," particularly in a combination deal with the Lunts starred. Lunts have indicated that they would be willing to appear in a film version. . UNA MEBKEL'S PIC COMEBACK Una Merkel will make her first film in many years with a part in the Eagle-Lion picture, "It's, a Joke, Son" starring Kenny Delmar (Sena- tor Claghorn). Deal* was completed last week through the Coast office of Frederick Bros. L A. to N. Y. William Bendix Joseph Bernhard Richard J. Brenner Phil Brito Kay Campbell ' Homer Canfield Bryan Foy E. P. Gomersall Jascha' Heife.tz Harry Houser. Marsha Hunt Arthur Rowland Jones Col. Jason Joy Charles Laughton Ely Levy Lou Levy Anita Loos Dave Lundy David Niven Katina Paxinou ZaSu Pitts Robert Presnell Howard Strickling Sidney Strotz Clifton Webb N. Y. to L A. Pal Allen Ben Bloom' George Brown . Ned Dcpinet Henry Ginsberg Dudley Nichols Milton Pickman Monte Proser Phil Rcisman Dorothy Stewart Orson Weiles- N. Y. to LONDON Sir Alexander Korda Marcel Achard Washington, July 30. 'Following up on the Samuel Gold- wyn case which broke last week, Bureau of Internal Revenue has given its Los Angeles office the green light to start action against the rest of Hollywood's one-picture corporations. The step technically involved sending to the Coast a copy of the new ruling by Commissioner Joseph .' D. Nunan, Jr., which states in effect that such corporations are phoney and for the purpose of tax-dodging.. Procedure is for the Revenue agerrts on the Coast to figure who owes what, and to send deficiency assessment bills for collection. These bills Include 8% Interest for the time .that the alleged tax deficiencies are due. Despite some reports that, the Bu- reau might take it easy in handling the matters because the ruling has just come out, Revenue officials made clear here that they are' going after all the money which they claim is due. Under the Statute of Limita- tions in such cases, they can go back for a full three years—or to the middle of 1943. Under the law the . 6% interest claim cannot be waived. However, no effort will be made to levy any charges of fraud, it is understood, since the single picture corporation operation was aboveboard and the rule that it is wrong is only a week old. Goldwyn, the first to be notified, was informed directly from Wash- ington that five one-picture corpora- tions he set up were not recognized for tax purposes and that he must pay taxes on the regular, personal income tax basis, rather than on a capital gains basis. The capital gains tax on . properties held for six months or more is only 25%. .Under the income tax rates, many of the big figures in Hollywood will be called upon to pay up from 80 to 90% of their take realized from the so-called "phoney" corporations. The crackdown by the Govern- ment follows two years pf orelimi- nary investigation. During that time Nunan went to the Coast with John P. Wienchel, chief counsel for Internal Revenue, to make a first- hand study of the situation. Scores of leading figures in the film capital will receive deficiency assessment bills, and Internal Rev- enue confidently expects to collect several million dollars. Goldwyn, himself, is understood to have re- quested the ruling in his case. In the majority of the cases-there will probably be a long time lag between presentation of the bills and payment—if ever. Revenue rulings are subject to court review and a test case will probably be taken up to the Su- preme Court. The Goldwyn case may be the guinea pig on this. However, since no publicity will be given to cases in which payment is made, some the industry people Will probably pay "under protest" tojuck the limelight while await- ing final determination. Nelson Asks Labor Peace Los Angeles, July 30. Plea for labor peace, as a means of keeping, this country's economy going at full speed, was voiced by Donald M. Nelson, prexy of the So- ciety of Independent Motion Picture Producers at a meeting of Town Hall here. . Nelson proposed the establishment of peace panels, consisting of five members each representing labor, management and the general public, 1 to settle problems of industry.