Friday Funday: How Taxes Led to Episode VII

Marketwatch.com recently noted the following:

"Disney will buy LucasFilm for $4.05 billion in cash and stock, the two companies announced Tuesday. By cashing out now, experts say the filmmaker has spared his family the need to pick up the pieces of his empire after he’s gone. It also allows him to focus his remaining years on his charitable endeavors — particularly Edutopia and the George Lucas Educational Foundation, which he founded in 1991. “I am dedicating the majority of my wealth to improving education,” Lucas wrote in 2010 (pdf) on GivingPledge.com , which invites the world’s wealthiest people to commit most of their money to philanthropy.

 

Since none of Lucas’s three adopted children plans to take over his film empire, financial advisers say the strategy will save his heirs the responsibility of managing their inheritance — and potentially going through the often long and fraught process of dividing it. “Mr. Lucas has obviously surrounded himself for years with world-class legal, estate and tax advisers,” Wade Westhoff, a financial adviser based in Danville, Calif., says of the Disney deal. “This is a textbook example of exit planning for a private business owner.” (Lucas and a spokesman for LucasFilm were not immediately available for comment.)

 

That Lucas struck a deal in 2012 may be no accident, either, advisers say. Long-term capital gains tax from the sale of assets held more than one year are taxed at a rate of 15% for investors in the 25% income-tax bracket or above (Lucas’s level), and zero for investors in the 10% or 15% bracket. Those rates are set to jump to 20% and 10%, respectively in January. “He probably wanted to take advantage of the lower rate on long-term capital gain while it’s certain,” says Bill Smith, managing director at CBIZ MHM, a national accounting and professional services provider." (emph. added).

 

Lucas himself was apparently only in the preliminary stages of developing additional chapters in the Star Wars saga. And, Disney's purchase was almost certainly linked to the prospects of developing new titles rather than the Star Wars/Indiana Jones back-catalogue. Therefore, if Bill Smith from the Marketwatch article was correct about Lucas' timing, logic would seem to dictate that the biggest stimulus behind an eventual Episode VII would be tax policy. It has a slightly Empire-ish feel to it, doesn't it?