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Old 03-21-2006, 06:42 PM   #10
the_logos
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Join Date: Sep 2002
Location: Mill Valley, California
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Well, that's not how valuation really works, though again, I'm certainly not an accountant (thank god). You don't get to just set what you think something is worth and then write it off unless you can back it up with some reasonable evidence that this is what the market says that is worth. You'd have a difficult time convincing an IRS agent that your sword is worth a million dollars unless other people had paid a million dollars for them (or something in that ballpark) previously.

Now, an interesting question arises when you consider that the marginal cost of manufacture for your sword is 0. Once you have one sword, the cost of making the 2nd sword is effectively 0. So look at Iron Realms, for instance. Let's say we sell a certain virtual sword for $150, and do so repeatedly, establishing that the value is reasonably somewhere around there. Could we just create a hundred copies and donate them to a charity, then take the write-off? I would certainly assume not, but I don't nkow what regulation or whatnot would prevent us from doing so.

The reason I assume that doesn't work is because the marginal cost of manufacture for almost all software is 0 or approaching 0. I'm sure the clever fellows at Microsoft would have figured out a way to donate the heck out of software to charities that probably wouldn't buy their software and thus don't represent an opportunity cost for Microsoft (for instance, perhaps charities that have committed to using Linux) if MS donates non-transferable Windows licenses to them, were this legal.

I'm heading to our accountants' offices in a few minutes actually. I will ask how this works and report back.

--matt
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