American Entertainment 1978: New York Night Fever

Chapter 110 Property Investment Tax Avoidance

After the screening, the lights came on, and the next segment was a Q&A session with the creative team. Zeke had no interest in this public relations-oriented Q&A and got up to find Larry Harris, who was standing in the corner sipping his drink.

"Larry, I have to go. Sorry, I have to go to Staten Island to look at houses tomorrow morning."

Larry, holding a wine glass and sporting a businesslike smile, patted Zeke on the shoulder: "It's okay, go ahead. The party's going to last until four in the morning, and the later activities—aren't really for you."

Tino leaned closer and couldn't help but lower his voice to ask, "Larry, this movie looks like—"

Larry waved dismissively, downing his drink in one gulp: "To be honest, I knew it all along. Promoting this film with a straight face isn't easy; the script went through multiple rewrites and was influenced by conflicting opinions from the Casablanca and Motown camps. But the film's obvious flaws are irrelevant to its sales; *Saturday Night Fever* is the real competitor we can only dream of—"

After saying goodbye to Larry, Zeke and Tino walked out. Zeke frowned and asked, "Has 'Saturday Night Fever' still not been pulled from theaters?"

He clearly remembered that the film was released during last year's Christmas season, and he and Henry had even robbed the soundtrack together back then.

Judy's flop film "The Castle" was also released in that period, but it was pulled from theaters in less than a month. But now, almost half a year later, "Saturday Night Fever" is still showing.

"Yeah, this movie is a huge hit," Tino exclaimed. "It's multiplied by word of mouth and the viral popularity of the Bee Gees soundtrack—I saw on TV the other day that it's already grossed over $90 million in North America and over $180 million worldwide. Paramount has made a fortune this time."

"Shit, movies really make money—" Zeke's eyes lit up when he heard about the box office of over 100 million US dollars. "Saturday Night Fever" had already been thoroughly analyzed by the media countless times, and its production cost was only 3.5 million US dollars. That's dozens of times the profit! Even drug trafficking doesn't make that much money.

"That's not all," Tino continued, adding fuel to the fire. "Paramount's new movie, *Grease*, is set for June 16th, and the promotion has already begun, perfectly taking over the summer blockbuster season. Just think about it: John Travolta, who became a sensation overnight, plays the lead role in a disco romantic musical, with RS0 Records producing the soundtrack—the exact same formula as *Saturday Night Fever*. This time, they've added country singer Olivia Newton-John as the female lead, and she and Travolta both sing on the simultaneously released double vinyl soundtrack. Casablanca has really run into a tough opponent this time."

Zeke thought for a moment, and compared to John Travolta, Paul Jabara, and Donna Summer in musicals, who dances better? The answer is obvious; that guy is already known as the King of Dance in America! Only the soundtrack has a chance to compete.

"Indeed, Tino." Zik turned his head. "In the meantime, help me pick out some more people, and hire an executive to help me manage the publishing company. I can't wait to join the game."

"No problem, what are your requirements?"

"Cheap and easy to use, experienced, reliable, and preferably able to help me manage the record company, as I definitely won't have much time to spend on management in the future."

"The publishing industry isn't that simple. Do you want to focus on the domestic market or the international market?"

"Yes, the international market. Tino, you should focus more on the domestic market in the US, and make use of your existing connections."

You've seen how much money my songs make; I also get a cut of the business you bring in.

"No problem, leave it to me." Tino had also earned tens of thousands of dollars today, enough to buy a luxury mansion in the suburbs outright, and he was full of energy.

The next day, Rossi and his family went to Annadale, Staten Island, with a real estate agent to look at houses.

"Mr. Rossi, this custom-built colonial-style house will definitely meet all your family's needs." The agent pointed to the large house in front of him, speaking with confidence. "It has a three-car garage and a circular driveway, with more than an acre of land, surrounded by woods, offering excellent privacy."

"How big exactly?" The house looked very nice and was brand new, Zeke asked.

"The building area is 4,500 square feet," the real estate agent said as he led the family inside for a tour. "Five bedrooms, three bathrooms, and a full-height basement that can be converted into a private rehearsal room or recording studio—"

The house came fully furnished; all that was needed was to add furniture and appliances before moving in. Joey fell in love with it almost instantly: "This is huge, Zeke! Can I choose a room?"

"Of course," Zeke said with a smile. "Maria, you can pick one too. The master bedroom is fine for Mom and Dad."

"Thank you, Zeke." Maria was also overjoyed. She took Tony's hand and then picked up little Mary to go see the room.

Tony, come with me.

The elderly Rossi couple looked at the grand mansion, somewhat bewildered. Mrs. Rossi whispered, "Zick, this is too big. The smaller houses we saw before were enough for us—"

They had just looked at another smaller unit next door, which was priced at less than a third of this one, around 40,000, with standard renovations, but Zik didn't like it.

Old Rossi pulled the real estate agent aside, his brow furrowed: "How much is the property tax for this house?"

"Property taxes, plus maintenance and holding costs, are about two percent of the property value in this community," the real estate agent replied quickly. "Including homeowner's insurance."

"That's too high. This house costs $150,000, which works out to more than $3,000 a year," Old Rossi muttered. "The commuting costs are high too. Maria and I have to pay two dollars a day to cross the bridge, plus gas, which adds up to more than $2,000 a year. We could buy a new house in a few years!"

Zik laughed and put his arm around his father's shoulder, pulling him aside to do the math: "Forget about the small change, Papa. I'm a millionaire now, so I need to find more ways to avoid taxes. Thirty percent down payment on this house, $105,000 loan."

Interest expenses can be directly deducted from taxable income, essentially meaning that the government pays part of the cost of the house, using money from the bank.

"By registering the property under the company's name, we can offset paper losses against income through accelerated depreciation. The environment here is indeed very good. I not only want to buy one, but two. I also plan to buy the smaller one next door. We'll live in the big one, and we'll renovate the small one to rent out."

Zeke wasn't exaggerating. With the large sum of royalties he just received, plus his previous savings and income from his Domino's Eye Mask business, his net worth is now well over a million dollars; he's a true millionaire.

Going to the extreme to avoid taxes was unavoidable. When Zik and Tino signed their brokerage contract, no one expected Zik's income to reach this level in 1978. Herbert's decision to help him adjust the proportion of his income deposited in trust to 50% now seems somewhat inappropriate.

Even if the money is collected through Rossi Brothers Copyright, this restriction cannot be circumvented, because the real source of the money is still his royalties.

Of his income from licensing fees, services, or creative work, half can only be accessed after he turns eighteen, but when filing taxes, that 50% of income is still registered under Zeke's name and is still subject to taxation.

This is the real pain point: your money is locked up, but your tax bill won't wait for you.

This means that if Zeke doesn't go to great lengths to avoid taxes, the amount of money he can freely dispose of isn't even enough to cover tax obligations. Once his income reaches one million, the combined tax rate (including state tax) approaches 80%.

"But the risk is too great. Tax bills can change every year, and New York's finances have just recovered. Taxes are likely to only go up and never down. In the future—" Old Rossi was still not happy, fearing that he would be trapped by high property taxes.

"Don't worry, this tax won't keep up with inflation, nor will it keep up with my income growth—experts on TV predict that the inflation rate will exceed nine percent this year. Turning money into real estate is the best way to combat the devaluation of the dollar."

Zeke continued his persuasion, painting a rosy picture of the future: "Isn't this place wonderful? Tony and Mary will have a place to play, and we can build them a treehouse in the trees in the yard. Maria and Joey will be proud to have classmates or relatives come over. There's plenty of space around, so we can dig a swimming pool and have barbecue parties. There's a dock nearby, so you can take a small boat out fishing on weekends. I wouldn't trade this life for being president!"

After further persuasion, the Rossi couple finally relented.

"I'll take this set, and the smaller one from before," Zeke said, seizing the opportunity and making the decision immediately.

The real estate agent's eyes lit up instantly. He rubbed his hands excitedly and said quickly, "No problem, Mr. Rossi! If you buy both houses together, I can negotiate a package price with the seller, rounding down the price, and even including a set of high-end curtains for the whole house and a year of lawn maintenance! As for the mortgage, I know the best loan officer on the island who can guarantee to get you the lowest possible interest rate and smooth off the paperwork!"