Wednesday, November 13, 2013
On July 26, 2013, the IRS sent a notice of deficiency to the Michael Jackson estate. The estate had reported a $7 million taxable value of the estate’s assets, including a paltry $2,105 valuation of the King of Pop’s name and likeness. The IRS valued the name and likeness at over $434 million and the entire estate at over $1.1 billion. The notice of deficiency demands over $505 million in estate taxes. The IRS also tacked on an additional $196 million, contending the executors significantly undervalued the estate’s property.
In response to the IRS notice, the estate filed a petition with the U.S. Tax Court, contending its valuations of assets was accurate and based on qualified appraisals. The IRS responded by detailing all of the proposed IRS valuations of MJ’s assets, including his name and likeness.
Since the King of Pop died, his estate has generated hundreds of millions of licensing dollars, which the IRS has undoubtedly factored into its valuation. The disagreement over the estate’s valuation has set the stage for a contentious legal battle.
See Michael R. Morris, Michael Jackson Estate’s Valuation ($2,105) Vs. IRS’ MJ Valuation ($434 Mil.), Billboard, Nov. 11, 2013.
Special thanks to Paul L. Caron (Pepperdine University School of Law, Editor of TaxProf Blog) for bringing this article to my attention.