Michael Jackson Estate Charged With $702M Tax BillBy: Rachel Kolman - February 9, 2014
Michael Jackson’s estate is being heavily pursued by the IRS for “undervaluing assets” and now faces a $702 million charge. In U.S. Tax Court documents, executors estimate that Michael’s net worth at his time of death in 2009 was around $7 million; the IRS is now arguing that his worth was actually $1.125 billion. The tax collectors are reporting that the claims are so grossly inaccurate that they qualify for the gross valuation misstatement penalty, which doubles the usual penalty from 20% to 40%. That’s $505 million in tax charges, and $197 million extra in penalties.
The dispute centers around an argument on the value of Michael’s “image and likeness,” which the estate estimated at only $2,105. The IRS says it’s closer to $434 million. The Estate also valued Michael’s interest in a trust that owned songs by The Beatles at zero (really?), when it’s actually $469 million by the IRS’ calculations.
Not surprisingly, the Estate is fighting these charges, saying in a statement: “The Estate of Michael Jackson disputes the IRS position in its entirety…the Estate used independent, nationally-recognized and highly-qualified expert appraisers in determining the value of the Estate’s assets. The IRS consultant’s values are not based on standard appraisal methodology, but rather are speculative and erroneous assumptions unsupported by the facts or law. The Estate has paid over $100 Million dollars in taxes and is in full compliance with the tax laws.”
In the four years since his death, the Estate has reportedly generated $500 million, with $60 million coming from the film This Is It and $250 million for the Michael Jackson Immortal World Tour. However, if the court rules in favor of the IRS, the Estate will turn that money over to the government, most likely in the form of a payment plan over the next 15 years.
Image via Wikimedia Commons