GM wants to incentivize the result and not a larger down payment from the client. This fee arrangement makes the transaction more of a fiduciary fee arrangement.

Fee Arrangement and Circular 230 Compliance 

At G|M, we pride ourselves on delivering comprehensive and tailored tax advice intended to optimize our clients’ tax efficiency and wealth preservation goals. As part of our unique service offering, we may recommend transaction- or investment-based tax strategies that we believe will meet your planning objectives and risk tolerances. These strategies are meticulously investigated, evaluated, and structured based on a rigorous and ongoing due diligence process, involving our own resources as well as those of other collaborating advisors, with the goal of generating the best outcomes and client experience. 

You will be charged a flat fee for the tax planning and related services described in this engagement letter. The flat fee will be communicated to you after all information regarding your case has been received and analyzed.  This engagement is not a contingency fee arrangement, and the fee is not contingent upon the outcome of any tax strategy, the amount of tax benefit actually realized, or any specific result which is ultimately reflected on filed or accepted tax returns. The fee is determined in advance, based on the anticipated value and benefit of the services to you, including but not limited to potential tax savings, the complexity of the engagement, and the expertise required.  The fee will not be adjusted or modified after tax filings have occurred.  

This fee is not calculated as a percentage of any actual tax savings, refund, or other tax result, and is not dependent on any tax position being sustained by the IRS or any other taxing authority. Rather, the fee is set to reflect the overall anticipated economic benefit of the planning, and is capped at 20% of the estimated Net Economic Benefit (as defined below) to ensure you retain a sufficient return on your investment in these services and the transaction contemplated. 

The flat fee also includes amounts that may be paid to third-party vendors engaged by our firm to assist in the planning process. In some cases, a portion of the fee may be reserved to cover the costs associated with ongoing operations and compliance of any structures or entities established as part of your tax planning. Furthermore, any compensation, rebates, or payments received by our firm from third-party vendors in connection with this engagement will be fully disclosed to you. The fees identified in this engagement are estimated based on initial assumptions and recommendations related to the anticipated “Net Economic Benefits” of the planning. Prior to final invoicing, we will confirm these assumptions with your designated financial or accounting advisor. G|M will pay other outside consultants and advisors[1][2] from the fees received in connection with the implementation and maintenance of the strategy, and you will not be responsible for paying any advisors engaged to work with G|M in the development and implementation of the strategies. 

Net Economic Benefit and Fee Calculation 

The “Net Economic Benefit” will be determined by taking the net value of deductions and credits received as part of the planning (reduced by your investment “cost”), multiplied by 20% (reduced by credits discussed below). This is accomplished by taking the value of the anticipated deductions determined relative to your pre-planning estimated tax rate (i.e., your pre-planning effective tax rate x deductions/expenses arising from the planning), plus any tax credits valued on a face value basis, plus the current value of any depreciation carryforwards or Net Operating Loss (“NOL”) carryforwards based on the pre-planning effective tax rate. 

Example:

If you have a pre-planning effective tax rate for the year in question of 33%, and invest $300,000 in strategies and as a result receive $1,000,000 of deductions and $500,000 of credits, then the planning fee of 20% of economic benefit would be calculated as follows:(($1,000,000 x 33%) + $500,000 - $300,000) x 20% = $106,000.

Circular 230 Compliance Statement 

This engagement, including the fee arrangement described above, is expressly intended to comply with all requirements of Circular 230 and applicable professional and ethical standards. Under these rules, practitioners are generally prohibited from charging fees that are based in whole or in part on the outcome of a tax position, the amount of tax savings, or the result reflected on a filed or accepted tax return, except in very limited circumstances. 

Our fee is a one-time, fixed amount, agreed upon in advance, and is not calculated as a percentage of any actual tax savings, refund, or other tax result. The fee is not dependent on any tax position being sustained by the IRS or any other taxing authority, nor is it contingent upon the outcome of any tax strategy or the amount of tax benefit actually realized. Rather, the fee is determined based on the anticipated value and benefit of the services to you, including the complexity of the engagement, the expertise required, and the overall estimated net economic benefit of the planning, and is capped at 20% of that estimated benefit to ensure fairness and client value. 

This engagement letter clearly communicates the scope of services, the method by which the fee is determined, and all inclusions and exclusions, including amounts paid to third-party vendors and any rebates or compensation received by our firm in connection with this engagement. Our goal is to provide full transparency and to ensure that the fee represents a fair exchange of value, is reasonable, and is not unconscionable. 

If you have any questions about this fee structure or its compliance with Circular 230, we encourage you to discuss them with us before signing this agreement.

All planning, project K1 prep for 5 years, Audit defense up to trial for entity, CPA personal tax prep if needed for years in which are impacted, corporation administration, and quarterly investment updates for 5 years.

No, there will not be additional fees due

This is to level out the ROI across the project for each investor

Indefinitely

A decision will be made among the owners of the project based on whether the project is profitable or not. It can be kept and the loan extended if the note is not paid back or canceled out with the producer. If the film is profitable, dividends can continue in its current form, or the film can be rolled up into a more diversified pool of films.

Goodspeed Merrill Engagement Letter, Operating Agreement, Agreement to Purchase, Assignment and Attornment Agreement of Film Rights, Assumption of Purchase Money Note, Distribution Agreement, Film Re-Sell Agreement, Purchase Money Note, Tax Opinion Letter Engagement

The debt is structured as a loan assumption which has the same legal liability as a personal guarantee.  This level of legal responsibility for the debt makes the value of the obligation “at risk” thus permitting the investor to take a deduction for the expensing of the full cost of the film.

Your investment group will be organized as a partnership in year one. Upon the first dollar of revenue, it will switch to a C-Corp.

No, the outstanding note and the IP are placed together into a corporation and offset each other. The corporation is closed out.

The producer whom you are buying the IP from is making what is, in essence, a seller-held note.

No, one spouse needs to do the household hours.

The revenue received from the proceeds is grossed up by 125% when paying back the loan, so there is 25% to pay for corporate taxes.

The market values each film. The market can include banks or bonding company underwriting, known resale values for starring or supporting actors in different global markets, genre, directors, and other producers attached to the project. There has never been an IRS value adjustment to the value of a film we have been involved with.

Our investment in the 181 eligible portions of the movie for the IP is usually towards the bottom of the mezzanine stack since our investment is leveraged and not paying dollar for actual production costs.

We hire a third-party CPA firm to put the tax return together and issue the K1 to each investor.

Yes, each entity is provided with legal audit defense up until the need for the IRS to go to Trial. Audit defense is provided by Film Finance Company attorneys from whom we purchase the project. There has never been a need to go to trial and there have been 18 no change audits conducted on these investments as of 2025.

Section 181 has been around since 2004. It was not renewed during the Tax Cuts and Jobs act of 2016 but due to an alarming amount of film moving outside the country was reinstated retroactively and extended in 2019 . We do not expect 181 to go away anytime soon.

The ownership structure flips to 85% original producer, 12.5% investment group, and 2.5% Film Finance Company. Income is paid out as dividends at the corporate shareholder level.

Yes, it would not be deductible if it was not.

K1

Heirloom Tax Solutions will be your main point of contact after intake all the way through project maturity

Heirloom Tax Solutions provides ample travel and event coordination, film set visits, festival credentials, and online content and readings to help you easily achieve your active hour requirement. We provide you a login to Clockify, a software where we can help you track and document your hours.

Both the Down payment and the Fees are due after confirmation of your plan with the Goodspeed Merrill Team and commitment via the signed proposal. Money will be held in escrow until a project, in its entirety, is pieced together and funded.

Goodspeed Merrill, Heirloom Tax Solutions, Appalachian Strategies, Streamline Global, Cyprus Services