German film fund cleared by tax office

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COLOGNE, Germany -- At least one of Germany's film funds has obtained a clean bill of health from the country's tax authorities.

Vif Filmproduktion, the group that bankrolled cult sci-fi series "Lexx" along with such indie features as "Where Eskimos Live," "The Unscarred" and "Kids World," was cleared by the German tax office after a three-year audit.

Vif announced Friday that investors in its Vif1 fund will now be able to write off their investment in the fund against taxes, as originally planned.

The $20 million Vif fund is one of the smaller of Germany's many film funds, tax-deferral structures that for decades have been used by investors to funnel billions of dollars to mainly Hollywood productions.

It also is one of the few to have avoided the ever-widening investigation into film funds by German public prosecutors.

Leading fund VIP Medienfonds, which backed features including "Perfume: The Story of a Murderer," Paul Verhoeven's "Black Book" and "Lucky Number Slevin," is the prosecutor's biggest target.

VIP's former CEO Andreas Schmid has been in jail for more than a year now as the investigation into alleged fraud continues.

Another major fund, Victory Media, filed for insolvency last month in the wake of an investigation by authorities alleging tax fraud and violation of investor trust.

Prosecutors also have searched the Munich offices of Equity Pictures, the fund that backed Brian De Palma's "The Black Dahlia," Richard Donner's "16 Blocks" and, together with Avi Lerner's Nu Image/Millennium Films, the upcoming Al Pacino starrer "88 Minutes" and "Rambo IV: Pearl of the Cobra."

So far, however, prosecutors have not charged anyone with criminal wrongdoing.
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