passy001
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You certainly were not joking. that I assure you. Your first post was a clear indictment of the executors.
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Michael Jackson’s Estate Challenges IRS in Tax Dispute
- Thread starter virginia_woolf
- Start date
You certainly were not joking. that I assure you. Your first post was a clear indictment of the executors.
passy001
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Wow!
Wow Indeed.
elusive moonwalker
Guests
if randy jackson was the executor would certain posters be saying what they are saying now. doubt it! but then we wouldnt have anything to worry about because there would be no assetts or money left anyway lol wanting mjs children to lose assets inorder to feel like you are getting one over on branca is very sad. where are the priorties . ill be honest with you stella id have respect for you if you just came out and said i support the family over mj and the estate and for the most part will support them regardless rather than trying to show the, what is imo fake objectivity as every thread i see you in interms of non music issues you support the family over mj and the estate you call mj a druggie and you attack the estate in this thread because they are trying to protect mjs childrens in heritance.
StellaJackson
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This is such a load of unfounded preposterous nonsense that it is not even worth responding to in any detail. Suffice to say that I have never referred to Michael as a druggie. In fact, I would like you to show one post where I call him that.
Last edited:
Petrarose
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Stella it is not that I am standing up for America, but it is not that the IRS inflate assets, what they do is use a different system for evaluation at times. If there are 2, they will use the one that gives them more money. Or, as Ivy showed, they will get experts, who most likely they have a contract with, to evaluate something, and then the experts may not be as good as a well-known expert working in the field. The IRS will hire someone cheap.
They have a measure for everything. They had their eyes on me because they like to target independent workers who have many deductions & those whose jobs consists of a lot of tips. I was sharing before, that they told me how much my rent is supposed to be. They have a register that tells them this. I think they use the zip code. Guess what, because it is an advantage for them, on their register, places, e.g., that have rents for 5,000 +, they show a rent of a little over 1,000. Now, when I did the taxes, and put the rent deduction, they recalculated for whatever crazy amount they have on their silly table. They said I owe them money, plus penalties. I guess a lot of people just send them a check, but I sent them proof that what they think is not the reality. Once you do that, they leave you alone. So I think that is why the estate is going to court and give their evidence.
xosweetseducingsighsxo
Proud Member
ILoveHIStory;3900594 said:Maybe off topic, but have you seen and read this?
What a comparison and a coincidence, ist´n it?
I know it's not relevant..but Michael looks super adorable right there!
And I know I'm extra late, but um..what's going on with the estate?AliCat
Proud Member
Deductions and audit's are what the IRS calculates upon. Just remember, when the IRS sends you a bill, complete with penalties, the IRS bill is based on a single person.
The Estate needs some offshore accounts, where large corporations pay 0% tax. Then the large corporation's play the sympathy card, they employ people. Oops they did it again, they shipped jobs overseas and now American's are out of work. Then the billionaires get offended because their slaves, I mean their employee's want to Unionize and have benefits. Yep, there go the jobs to where you get a bowl full of rice and should be grateful. Boo on the IRS, they should tax those bleeping corporations and then the US can set a better example to the rest of the planet of taking care of the poor in this country, instead of having a Tea Party organized to make it appear that the middle class are going to be taxed to death to pay for the poor and the needy.
At least Michael practices that motto, in helping out the needy. I suppose the IRS thinks they are needy by the tax bill they sent the Michael Jackson Estate?!
The Estate needs some offshore accounts, where large corporations pay 0% tax. Then the large corporation's play the sympathy card, they employ people. Oops they did it again, they shipped jobs overseas and now American's are out of work. Then the billionaires get offended because their slaves, I mean their employee's want to Unionize and have benefits. Yep, there go the jobs to where you get a bowl full of rice and should be grateful. Boo on the IRS, they should tax those bleeping corporations and then the US can set a better example to the rest of the planet of taking care of the poor in this country, instead of having a Tea Party organized to make it appear that the middle class are going to be taxed to death to pay for the poor and the needy.
At least Michael practices that motto, in helping out the needy. I suppose the IRS thinks they are needy by the tax bill they sent the Michael Jackson Estate?!
Bubs
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Protests Surge as IRS Sets Jackson Image at $430 Million: Taxes
By Alexander Ripps September 16, 2013
The IRS may be treating celebrities like they’re worth more dead than alive.
The Internal Revenue Service has started using “image and likeness” as a factor in determining the value of estates of deceased celebrities, raising concern among trust and estate lawyers, Bloomberg BNA reported.
Documents recently released in litigation between the estate of pop star Michael Jackson and the IRS showed that a large part of the dispute revolves around the value of Jackson’s image and likeness. While the estate assessed the value of his image at $2,105, the IRS’s valuation was more than $430 million.
The IRS is seeking more than $700 million in tax penalties from the estate, and the government has released valuations on everything from the car to his business interests and property after a U.S. Tax Court challenge in July from the estate.
The IRS valued his estate at more than $1.1 billion and said executors significantly undervalued his property, resulting in a tax deficiency of more than $505 million and additions to tax of more than $196 million, Bloomberg BNA reported.
The mere inclusion of Jackson’s image and likeness as a factor in his estate’s value is raising questions among some trust and estate lawyers. Attorney Matt Kadish of Kadish, Hinkel & Weibel in Cleveland said he’s “unaware of any cases to date that have addressed whether the value of a person’s image rights are subject to estate tax, and if so, how to value them.”
Several Tax Court decisions have addressed the value of a celebrity’s image and likeness for income tax purposes, such as when his firm represented professional golfer Retief Goosen in a dispute over sponsorship payments, Kadish said.
Value Test
“Those cases focused on allocations of income, and apart from some dicta, didn’t directly rule on whether image rights are a separate asset for tax purposes,” Kadish said.
The IRS didn’t respond to a request for comment.
The issue in a case such as Jackson’s is what the assets were worth when the person died, not what the IRS says they are worth after death, said Adam Streisand, head of Loeb & Loeb LLP’s trusts and estate litigation department in Los Angeles.
For Jackson specifically, Streisand said death positively impacted the value of his image and likeness.
While the IRS does test the value based upon subsequent events, the executor is entitled to value the property based on what was known on the valuation date, not on circumstances that one might speculate might exist in the future, Streisand said.
Kadish said he has “major concerns” about the IRS’s “sudden decision” to include image and likeness as part of a taxable estate “without having provided any prior guidance or opportunity for public comment.”
Kadish also raised the question of how celebrities are going to pay for this new tax liability.
“Are athletes, entertainers, and other celebrities going to have to buy life insurance, or engage in other new planning to avoid a ruinous ‘cash crunch’ shortly after their death?”
http://www.businessweek.com/news/20...s-irs-sets-jackson-image-at-430-million-taxes
By Alexander Ripps September 16, 2013
The IRS may be treating celebrities like they’re worth more dead than alive.
The Internal Revenue Service has started using “image and likeness” as a factor in determining the value of estates of deceased celebrities, raising concern among trust and estate lawyers, Bloomberg BNA reported.
Documents recently released in litigation between the estate of pop star Michael Jackson and the IRS showed that a large part of the dispute revolves around the value of Jackson’s image and likeness. While the estate assessed the value of his image at $2,105, the IRS’s valuation was more than $430 million.
The IRS is seeking more than $700 million in tax penalties from the estate, and the government has released valuations on everything from the car to his business interests and property after a U.S. Tax Court challenge in July from the estate.
The IRS valued his estate at more than $1.1 billion and said executors significantly undervalued his property, resulting in a tax deficiency of more than $505 million and additions to tax of more than $196 million, Bloomberg BNA reported.
The mere inclusion of Jackson’s image and likeness as a factor in his estate’s value is raising questions among some trust and estate lawyers. Attorney Matt Kadish of Kadish, Hinkel & Weibel in Cleveland said he’s “unaware of any cases to date that have addressed whether the value of a person’s image rights are subject to estate tax, and if so, how to value them.”
Several Tax Court decisions have addressed the value of a celebrity’s image and likeness for income tax purposes, such as when his firm represented professional golfer Retief Goosen in a dispute over sponsorship payments, Kadish said.
Value Test
“Those cases focused on allocations of income, and apart from some dicta, didn’t directly rule on whether image rights are a separate asset for tax purposes,” Kadish said.
The IRS didn’t respond to a request for comment.
The issue in a case such as Jackson’s is what the assets were worth when the person died, not what the IRS says they are worth after death, said Adam Streisand, head of Loeb & Loeb LLP’s trusts and estate litigation department in Los Angeles.
For Jackson specifically, Streisand said death positively impacted the value of his image and likeness.
While the IRS does test the value based upon subsequent events, the executor is entitled to value the property based on what was known on the valuation date, not on circumstances that one might speculate might exist in the future, Streisand said.
Kadish said he has “major concerns” about the IRS’s “sudden decision” to include image and likeness as part of a taxable estate “without having provided any prior guidance or opportunity for public comment.”
Kadish also raised the question of how celebrities are going to pay for this new tax liability.
“Are athletes, entertainers, and other celebrities going to have to buy life insurance, or engage in other new planning to avoid a ruinous ‘cash crunch’ shortly after their death?”
http://www.businessweek.com/news/20...s-irs-sets-jackson-image-at-430-million-taxes
soulmum
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Ludicrous amount of money. What happened to all the tales of Michael dying broke? You can't have it all ways. Only MJ could start the trend of the IRS charging for your image and likeness and what they think it's worth. Maybe they used a fortune teller and a crystal ball? Absolutely stupid.
Bubs
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Interesting but long article
Putting an Estate Value on the Assets Unique to You
MICHAEL JACKSON and J. D. Salinger would seem to have had little in common beyond being famous, reclusive (to different degrees) and the subject of much speculation about their personal lives. But in death the King of Pop and the author of “The Catcher in the Rye” have become sources of fascination and speculation among estate lawyers and the people charged with putting a price on hard-to-value assets, like royalties that continue paying after they are gone.
Mr. Jackson, who died in June 2009, had revenue from his songs and his share in a music catalog; Mr. Salinger, who died in January 2010, had the royalty income from his books, which continue to be read and taught in schools.
But the speculation arises over what may not have been known or calculated at the time of their deaths. Mr. Jackson’s death was good for his earning potential — his estate now receives hundreds of millions of dollars a year, according to an analysis by Forbes. As for Mr. Salinger, a new documentary film claims that he had five finished manuscripts that will be published starting in 2015 and are likely to sell well.
In both instances, it would have been hard to know the value of those assets when their creators died, particularly in Mr. Jackson’s case. He had not had a successful record in many years, and the value of the record catalog was lower at the end of the recession than it is today. But trying to divine such values, however difficult, is an important part of settling any estate and avoiding the ire of the Internal Revenue Service. It also applies more broadly than many people think.
“The appraisal process is more of an art than a science,” said Richard A. Behrendt, director of estate planning at the financial services firm Baird and a former I.R.S. inspector. “When I was auditing returns, more than half the issues were valuation issues because of the speculative nature of appraisals. It’s very common.”
Property like a privately held small business, a big art collection, a share in rental properties or intellectual property like television or movie credits, patents or even Web site domain names are not as easy to value as, say, a stock portfolio.
Executors of estates for people who owned small businesses, particularly in service areas like law, accounting or medicine, where the revenue is reliant upon the owner, often face the opposite problem of the Salinger and Jackson estates: the values plummet when their owners are gone, but the I.R.S. still assesses a tax on the value at the date of death.
“My husband and I own a law firm, and part of the appeal of our law firm is us,” said Kelly Phillips Erb, a lawyer outside Philadelphia who has blogged on the tax matters related to the Jackson estate. “If we’re not around the next day, the value of the firm isn’t worth as much. The I.R.S. doesn’t care, and that presents a challenge for small-business owners.”
She said keeping detailed records, like minute books, and updating stock certificates helps in establishing a case for a certain valuation. An estate can also ask the I.R.S. to use an alternate valuation date that is six months after the date of death to take into consideration a loss of value.
Another debate occurs when the valuations are far apart. This happened in the Jackson case. When he died in June 2009, the recession seemed to be dragging on and his reputation was in tatters from years of lawsuits and accusations of molesting children.
After his death his reputation markedly improved and his music began selling again. The following year, in September 2010, the National Bureau of Economic Research declared that the recession had actually ended the previous June, around the time of his death, so in hindsight the future value of his record catalog was higher.
Yet the values assigned by the appraisers for Mr. Jackson’s estate and those for the I.R.S. were so far apart that the I.R.S. filed suit asking for $700 million in estate taxes and penalties. The issue now turns on whether Mr. Jackson’s estate was worth nearly as much in the moment before he died as the I.R.S. contends it was worth after.
Lance S. Hall, president of FMV Opinions, an appraisal firm that lost a bid to value the Jackson estate, said such wide disparities were becoming common, because the I.R.S. uses the higher value as a negotiating tactic.
“Suppose the real value of an estate is $20 million, and suppose the taxpayer’s expert comes in at $17 million,” Mr. Hall said. “The I.R.S.’s valuation engineer is likely to come in at $40 million. That’s going to scare the living daylights out of a person. But in the negotiation, the I.R.S. might get more because they could settle on $28 million.”
With the Jackson case, he added: “Assume we picked his death date as the valuation date but he continued to live. Would he have seen this rise in royalties? No, because he still would have been seen unfavorably.”
Mr. Hall said that there were not always ways to prevent such a dispute, but that he encouraged clients being audited to persist to the appeals stage, where the auditors either have to settle the case or bring in an outside appraiser who might have to defend his valuation in court.
The problem for the Salinger estate may be closer to what happens to people whose patents or other intangible property have zero value at death but a far higher value in the years to come.
Sarah T. Connolly, a partner at Nixon Peabody in Boston, said she dealt with many professors at the cutting edge of research who held patents that might be worth something only if others built on their work. She calls these “building blocks.”
“Say our decedent has block ‘E’ and he knows it’s going to be important one day,” she said. “It doesn’t have any value on the date of death, but it could explode in the future if someone comes up with blocks A to D and F to J.”
As long as people list that asset — and the I.R.S. does not challenge the value assigned to it before the three-year statute of limitation has expired — then they should be fine, Ms. Connolly said. The mistake people make is not listing something in the estate tax filing, which could open them up to an I.R.S. audit after the statute of limitations because they filed an incomplete report.
Yet there are areas where the I.R.S. is more understanding with taxpayers. One is when it allows a so-called blockage discount. Mr. Behrendt said one of the best known cases involved David Smith, the sculptor, who had 425 pieces of his own work when he died in 1965. Had they all been sold at once, their value would have been far less, so the I.R.S. allowed a lower valuation.
This can also apply to people who own large blocks of publicly traded stock. “I’ve seen it happen a couple of times with Berkshire Hathaway stock,” Mr. Behrendt said. “It trades over $100,000 a share. If you had 100 shares, it’s going to be tough to sell, so you get a lack of marketability discount.”
That discount is generally 3 to 5 percent, he said. The same holds true for a minority interest in a business or even a rental property, which would be valued lower because of lack of control.
More difficult still would be valuing a collection. Ms. Erb said her father had a room filled with Coca-Cola memorabilia. “It’s not worth what you think it is or even what you paid for it,” she said. “You’d have to find a niche buyer, and no one is walking around saying: ‘You know what I want? A room filled with Coca-Cola stuff.’ ”
Yet she said she would advise someone with an obscure collection to get it valued for estate tax purposes and to establish a basis for when the items would be sold.
Some figure they can coax an appraiser into lowering a valuation for them, but the I.R.S. has gotten wise to that. Mr. Behrendt said that when he was an auditor in the 1990s, the value of lake properties in Wisconsin was exploding but their valuations on estate tax returns remained low. So he called a local appraiser and asked, “Can you do something on the low end for me?” Mr. Behrendt said the appraiser replied: “Oh, sure. I do that all the time.”
The I.R.S. now has penalties for appraisers who come in with artificially low valuations. But for people needing a valuation for an estate — or other purposes, like a divorce or a business lawsuit — skimping on a qualified appraiser carries risks.
Chris M. Mellen, president of Delphi Valuation Advisors, pointed out that three of the 11 adequate-disclosure regulations had to do with establishing the credentials of the appraiser to even assign a value to something.
“If you don’t follow all of the adequate-disclosure rules and the I.R.S. catches a technicality, then the statute of limitations is gone and the client could be audited past Year 3,” Mr. Mellen said. “You need to know the rules of the game, given the purposes of the valuations.”
If the appraiser doesn’t, the other side could prevail — without any negotiation.
http://www.nytimes.com/2013/09/28/y...e-assets-unique-to-you.html?pagewanted=2&_r=0
Putting an Estate Value on the Assets Unique to You
MICHAEL JACKSON and J. D. Salinger would seem to have had little in common beyond being famous, reclusive (to different degrees) and the subject of much speculation about their personal lives. But in death the King of Pop and the author of “The Catcher in the Rye” have become sources of fascination and speculation among estate lawyers and the people charged with putting a price on hard-to-value assets, like royalties that continue paying after they are gone.
Mr. Jackson, who died in June 2009, had revenue from his songs and his share in a music catalog; Mr. Salinger, who died in January 2010, had the royalty income from his books, which continue to be read and taught in schools.
But the speculation arises over what may not have been known or calculated at the time of their deaths. Mr. Jackson’s death was good for his earning potential — his estate now receives hundreds of millions of dollars a year, according to an analysis by Forbes. As for Mr. Salinger, a new documentary film claims that he had five finished manuscripts that will be published starting in 2015 and are likely to sell well.
In both instances, it would have been hard to know the value of those assets when their creators died, particularly in Mr. Jackson’s case. He had not had a successful record in many years, and the value of the record catalog was lower at the end of the recession than it is today. But trying to divine such values, however difficult, is an important part of settling any estate and avoiding the ire of the Internal Revenue Service. It also applies more broadly than many people think.
“The appraisal process is more of an art than a science,” said Richard A. Behrendt, director of estate planning at the financial services firm Baird and a former I.R.S. inspector. “When I was auditing returns, more than half the issues were valuation issues because of the speculative nature of appraisals. It’s very common.”
Property like a privately held small business, a big art collection, a share in rental properties or intellectual property like television or movie credits, patents or even Web site domain names are not as easy to value as, say, a stock portfolio.
Executors of estates for people who owned small businesses, particularly in service areas like law, accounting or medicine, where the revenue is reliant upon the owner, often face the opposite problem of the Salinger and Jackson estates: the values plummet when their owners are gone, but the I.R.S. still assesses a tax on the value at the date of death.
“My husband and I own a law firm, and part of the appeal of our law firm is us,” said Kelly Phillips Erb, a lawyer outside Philadelphia who has blogged on the tax matters related to the Jackson estate. “If we’re not around the next day, the value of the firm isn’t worth as much. The I.R.S. doesn’t care, and that presents a challenge for small-business owners.”
She said keeping detailed records, like minute books, and updating stock certificates helps in establishing a case for a certain valuation. An estate can also ask the I.R.S. to use an alternate valuation date that is six months after the date of death to take into consideration a loss of value.
Another debate occurs when the valuations are far apart. This happened in the Jackson case. When he died in June 2009, the recession seemed to be dragging on and his reputation was in tatters from years of lawsuits and accusations of molesting children.
After his death his reputation markedly improved and his music began selling again. The following year, in September 2010, the National Bureau of Economic Research declared that the recession had actually ended the previous June, around the time of his death, so in hindsight the future value of his record catalog was higher.
Yet the values assigned by the appraisers for Mr. Jackson’s estate and those for the I.R.S. were so far apart that the I.R.S. filed suit asking for $700 million in estate taxes and penalties. The issue now turns on whether Mr. Jackson’s estate was worth nearly as much in the moment before he died as the I.R.S. contends it was worth after.
Lance S. Hall, president of FMV Opinions, an appraisal firm that lost a bid to value the Jackson estate, said such wide disparities were becoming common, because the I.R.S. uses the higher value as a negotiating tactic.
“Suppose the real value of an estate is $20 million, and suppose the taxpayer’s expert comes in at $17 million,” Mr. Hall said. “The I.R.S.’s valuation engineer is likely to come in at $40 million. That’s going to scare the living daylights out of a person. But in the negotiation, the I.R.S. might get more because they could settle on $28 million.”
With the Jackson case, he added: “Assume we picked his death date as the valuation date but he continued to live. Would he have seen this rise in royalties? No, because he still would have been seen unfavorably.”
Mr. Hall said that there were not always ways to prevent such a dispute, but that he encouraged clients being audited to persist to the appeals stage, where the auditors either have to settle the case or bring in an outside appraiser who might have to defend his valuation in court.
The problem for the Salinger estate may be closer to what happens to people whose patents or other intangible property have zero value at death but a far higher value in the years to come.
Sarah T. Connolly, a partner at Nixon Peabody in Boston, said she dealt with many professors at the cutting edge of research who held patents that might be worth something only if others built on their work. She calls these “building blocks.”
“Say our decedent has block ‘E’ and he knows it’s going to be important one day,” she said. “It doesn’t have any value on the date of death, but it could explode in the future if someone comes up with blocks A to D and F to J.”
As long as people list that asset — and the I.R.S. does not challenge the value assigned to it before the three-year statute of limitation has expired — then they should be fine, Ms. Connolly said. The mistake people make is not listing something in the estate tax filing, which could open them up to an I.R.S. audit after the statute of limitations because they filed an incomplete report.
Yet there are areas where the I.R.S. is more understanding with taxpayers. One is when it allows a so-called blockage discount. Mr. Behrendt said one of the best known cases involved David Smith, the sculptor, who had 425 pieces of his own work when he died in 1965. Had they all been sold at once, their value would have been far less, so the I.R.S. allowed a lower valuation.
This can also apply to people who own large blocks of publicly traded stock. “I’ve seen it happen a couple of times with Berkshire Hathaway stock,” Mr. Behrendt said. “It trades over $100,000 a share. If you had 100 shares, it’s going to be tough to sell, so you get a lack of marketability discount.”
That discount is generally 3 to 5 percent, he said. The same holds true for a minority interest in a business or even a rental property, which would be valued lower because of lack of control.
More difficult still would be valuing a collection. Ms. Erb said her father had a room filled with Coca-Cola memorabilia. “It’s not worth what you think it is or even what you paid for it,” she said. “You’d have to find a niche buyer, and no one is walking around saying: ‘You know what I want? A room filled with Coca-Cola stuff.’ ”
Yet she said she would advise someone with an obscure collection to get it valued for estate tax purposes and to establish a basis for when the items would be sold.
Some figure they can coax an appraiser into lowering a valuation for them, but the I.R.S. has gotten wise to that. Mr. Behrendt said that when he was an auditor in the 1990s, the value of lake properties in Wisconsin was exploding but their valuations on estate tax returns remained low. So he called a local appraiser and asked, “Can you do something on the low end for me?” Mr. Behrendt said the appraiser replied: “Oh, sure. I do that all the time.”
The I.R.S. now has penalties for appraisers who come in with artificially low valuations. But for people needing a valuation for an estate — or other purposes, like a divorce or a business lawsuit — skimping on a qualified appraiser carries risks.
Chris M. Mellen, president of Delphi Valuation Advisors, pointed out that three of the 11 adequate-disclosure regulations had to do with establishing the credentials of the appraiser to even assign a value to something.
“If you don’t follow all of the adequate-disclosure rules and the I.R.S. catches a technicality, then the statute of limitations is gone and the client could be audited past Year 3,” Mr. Mellen said. “You need to know the rules of the game, given the purposes of the valuations.”
If the appraiser doesn’t, the other side could prevail — without any negotiation.
http://www.nytimes.com/2013/09/28/y...e-assets-unique-to-you.html?pagewanted=2&_r=0
Michael Jackson Estate's Valuation ($2,105) Vs. IRS' MJ Valuation ($434 Mil.): Guest Post
NEWS
By Michael R. Morris | November 11, 2013 1:55 PM EST
Michael Jackson Estate's Valuation ($2,105) Vs. IRS' MJ Valuation ($434 Mil.): Guest Post
Still from Michael Jackson's "Thriller"
Michael Ochs Archives/Getty Images
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Michael R. Morris is an attorney with Valensi Rose PLC and is based in Los Angeles, California. As a former trial lawyer for the IRS and a Certified Specialist in Taxation Law, Michael has the educational background and practical experience that enables him to provide insightful solutions to his clients’ complicated tax, estate and business transaction issues.
With all of the media focus on the recent decision in the Jackson family's wrongful death suit against AEG, in which a jury found AEG not liable over Michael Jackson's death, there is another court battle generating less press but which could cost hundreds of millions of dollars. This case pits the estate of Michael Jackson against the Internal Revenue Service, and centers on the $7 million taxable value of the estate's assets which were reported to the IRS. There's little doubt that the valuation of Michael Jackson's name and likeness rights at a paltry $2,105 raised a few eyebrows at the IRS offices -- the IRS' valuation was greater than $434 million and, in all, valued Michael Jackson's estate at more than $1.1 billion. The IRS has issued a notice of deficiency -- a bill for debts owed -- of estate taxes totaling more than $505 million. And because the IRS contends the executors significantly undervalued the estate's property, it tacked on additions of $196 million for good measure!
In response to the IRS' notice of deficiency, sent on on July 26, 2013, the Jackson estate filed a petition with the U.S. Tax Court, contending the valuations of the assets "were accurate and based upon qualified appraisals by qualified appraisers who had extensive experience valuing entertainment industry assets." On August 20, 2013, the IRS filed its response to that assertion, which detailed all of the proposed IRS valuations of Michael Jackson's assets, including his name and likeness. The disagreement has set the stage for a contentious valuation battle.
There's little doubt that the IRS knows that the exploitation of dead celebrity names and likeness is big business. What makes the estate of Michael Jackson's battle with the IRS of extreme interest is that, while the valuation of an estate's assets for federal estate tax purposes is usually made when a person dies (there is an election of value estate assets as of six months after the date of death), any subsequent dispute with the IRS over the worth of celebrity "name and likeness" rights rarely become public.
The rights of a deceased celebrity's estate to that celebrity's name and likeness rights are governed by state, not federal, law. So unless a deceased celebrity died a resident of a state affording posthumous protection for rights of publicity, such rights literally go to the grave along with that celebrity. This happened in the hotly litigated cases involving Marilyn Monroe, where the ultimate determination of her status as a New York and not a California resident meant Monroe's rights of publicity failed to survive her (since New York has no law protecting posthumous rights of publicity).
Conversely, California has for many years statutorily protected the rights of both living and dead celebrities in their names, voices, signatures, photographs and likenesses. In fact, these rights extend for 70 years after death, and, like most property rights, are licensable, transferable and descendible.
The holder of the deceased celebrity's right of publicity must, however, register the claim with the California Secretary of State (a simple procedure), and until that is done, damages cannot be recovered for any use prior to such registration.
To come within this statutory protection, California law requires that a decendent's right of publicity must have had "commercial value at the time of his or her death, or because of his or death."
Determining the value of intellectual property based on projected future earnings and discounted to a present value is not an exact science. In the case of the King of Pop, his estate has generated hundreds of millions of post-mortem licensing dollars, which the IRS no doubt factored into its valuation. So now the IRS and the estate of Michael Jackson are locked in a hotly contested battle over just how valuable the future earnings power of Michael Jackson's posthumous celebrity rights could be. While the Jackson case may settle prior to the Tax Court's adjudicating what these rights are worth, the litigation between the IRS and the Michael Jackson's estate could signal similar IRS scrutiny of other high-profile celebrities' name and likeness rights. Accordingly, the administrators of such estates need to be aware of the necessity to engage both qualified appraisers to value such rights and experienced tax professionals to defend against the inevitable IRS audit.
http://www.billboard.com/biz/articl...hael-jackson-estates-valuation-2105-vs-irs-mj
NEWS
By Michael R. Morris | November 11, 2013 1:55 PM EST
Michael Jackson Estate's Valuation ($2,105) Vs. IRS' MJ Valuation ($434 Mil.): Guest Post
Still from Michael Jackson's "Thriller"
Michael Ochs Archives/Getty Images
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Michael R. Morris is an attorney with Valensi Rose PLC and is based in Los Angeles, California. As a former trial lawyer for the IRS and a Certified Specialist in Taxation Law, Michael has the educational background and practical experience that enables him to provide insightful solutions to his clients’ complicated tax, estate and business transaction issues.
With all of the media focus on the recent decision in the Jackson family's wrongful death suit against AEG, in which a jury found AEG not liable over Michael Jackson's death, there is another court battle generating less press but which could cost hundreds of millions of dollars. This case pits the estate of Michael Jackson against the Internal Revenue Service, and centers on the $7 million taxable value of the estate's assets which were reported to the IRS. There's little doubt that the valuation of Michael Jackson's name and likeness rights at a paltry $2,105 raised a few eyebrows at the IRS offices -- the IRS' valuation was greater than $434 million and, in all, valued Michael Jackson's estate at more than $1.1 billion. The IRS has issued a notice of deficiency -- a bill for debts owed -- of estate taxes totaling more than $505 million. And because the IRS contends the executors significantly undervalued the estate's property, it tacked on additions of $196 million for good measure!
In response to the IRS' notice of deficiency, sent on on July 26, 2013, the Jackson estate filed a petition with the U.S. Tax Court, contending the valuations of the assets "were accurate and based upon qualified appraisals by qualified appraisers who had extensive experience valuing entertainment industry assets." On August 20, 2013, the IRS filed its response to that assertion, which detailed all of the proposed IRS valuations of Michael Jackson's assets, including his name and likeness. The disagreement has set the stage for a contentious valuation battle.
There's little doubt that the IRS knows that the exploitation of dead celebrity names and likeness is big business. What makes the estate of Michael Jackson's battle with the IRS of extreme interest is that, while the valuation of an estate's assets for federal estate tax purposes is usually made when a person dies (there is an election of value estate assets as of six months after the date of death), any subsequent dispute with the IRS over the worth of celebrity "name and likeness" rights rarely become public.
The rights of a deceased celebrity's estate to that celebrity's name and likeness rights are governed by state, not federal, law. So unless a deceased celebrity died a resident of a state affording posthumous protection for rights of publicity, such rights literally go to the grave along with that celebrity. This happened in the hotly litigated cases involving Marilyn Monroe, where the ultimate determination of her status as a New York and not a California resident meant Monroe's rights of publicity failed to survive her (since New York has no law protecting posthumous rights of publicity).
Conversely, California has for many years statutorily protected the rights of both living and dead celebrities in their names, voices, signatures, photographs and likenesses. In fact, these rights extend for 70 years after death, and, like most property rights, are licensable, transferable and descendible.
The holder of the deceased celebrity's right of publicity must, however, register the claim with the California Secretary of State (a simple procedure), and until that is done, damages cannot be recovered for any use prior to such registration.
To come within this statutory protection, California law requires that a decendent's right of publicity must have had "commercial value at the time of his or her death, or because of his or death."
Determining the value of intellectual property based on projected future earnings and discounted to a present value is not an exact science. In the case of the King of Pop, his estate has generated hundreds of millions of post-mortem licensing dollars, which the IRS no doubt factored into its valuation. So now the IRS and the estate of Michael Jackson are locked in a hotly contested battle over just how valuable the future earnings power of Michael Jackson's posthumous celebrity rights could be. While the Jackson case may settle prior to the Tax Court's adjudicating what these rights are worth, the litigation between the IRS and the Michael Jackson's estate could signal similar IRS scrutiny of other high-profile celebrities' name and likeness rights. Accordingly, the administrators of such estates need to be aware of the necessity to engage both qualified appraisers to value such rights and experienced tax professionals to defend against the inevitable IRS audit.
http://www.billboard.com/biz/articl...hael-jackson-estates-valuation-2105-vs-irs-mj
Bubs
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I think this bit should be highlighted as there are many Branca haters who thinks that Branca personally valuated Michael's image and stuff too low in order to avoid tax. It should be clear by now that they hired a company to do appraisals on assets.
Proof that the estate used company to do appraisals can be found from previous post:
"Lance S. Hall, president of FMV Opinions, an appraisal firm that lost a bid to value the Jackson estate, said such wide disparities were becoming common, because the I.R.S. uses the higher value as a negotiating tactic."
bluesky
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Trust Me, Michael Jackson Is Still Paying Taxes
The King of Pop vs. the IRS
Dec. 30, 2013
Robert Wood
Michael Jackson faced many legal struggles during his storied career. He fought sex abuse charges, copyright infringements and concert contract disputes. Sadly, the King of Pop died unexpectedly on June 25, 2009. Even now, though, his estate faces one more pitched battle in court, this time about estate taxes.
Michael Jackson has actually made a lot of money since his passing. His name, image and ongoing musical success have continued to pull in considerable income for his estate. Reports suggest that the Jackson estate has collected hundreds of millions of dollars.
There was a $60 million advance for the film “This Is It” and a new recording contract worth up to $250 million. There was also the high-grossing Michael Jackson Immortal World Tour, a joint venture with Cirque du Soleil. His estate reportedly collected $170 million in 2011 and $145 million in 2012. As always, the Internal Revenue Service wants its cut.
Indeed, just as with a living individual, the income collected by an estate is subject to income tax. Accordingly, the estate has reportedly already paid over $100 million in income taxes. You might assume that after collecting all that income tax, the IRS wouldn’t ask for more. But, estate tax is another matter. The IRS and Jackson’s estate are locked in a Tax Court battle over estate taxes.[1]
The IRS claims that Mr. Jackson’s estate owes a whopping $505.1 million in estate taxes, plus $196.9 million in penalties.[2] Fortunately for the estate, the penalties are based on the taxes due. If the tax charge is struck down, the penalties should go with it.
Unlike income taxes, Move up http://i.forbesimg.com t Move down estate taxes are levied on property transferred from the decedent to his heirs. The tax due depends on the value of an estate as of the date of death, minus deductions. Alternatively, the estate can elect to value the assets six months after death. Executors often determine which value is lower and report that figure.
Federal estate tax law currently allows $5.25 million per person to be passed tax-free. But in 2009, the year Jackson died, the exemption was only $3.5 million. Excess assets for those who died in 2009 are taxed at up to 45 percent. As you might imagine, Jackson had significantly more than $3.5 million in assets.
Under the estate tax, only net value—assets minus liabilities—is taxed. That’s a key concept for Jackson, who reportedly had many assets but many debts too. Beyond this fundamental rule about debts, specific assets must be valued. Jackson owned a 50 percent share in a valuable Sony music catalogue, his own music catalogue, real estate and art.
And, who can forget Neverland Ranch? For most decedent’s property, it’s usually possible to determine the value of real estate based on other parcels, possible development use, restrictions, etc. Jackson’s Neverland Ranch, on the other hand, is truly unique and is, arguably, tied to Jackson’s image. These facts make its value particularly difficult to fix.
The core of the tax dispute concerns the value of the pop icon’s image, likeness and intellectual properties. The IRS is said to have valued the estate’s rights to Jackson’s image and likeness at $434 million. The estate pins that value at $2,105 (not a typo). Clearly, both sides are exaggerating, and both will probably have to compromise.
However, the estate has a legitimate argument that the meteoric rise in Jackson’s fortunes after his death couldn’t have been foreseen. Future payments to the estate for Jackson’s continuing sales are valued for federal estate tax purposes by the projected future worth discounted to present value. Those calculations aren’t easy when the subject’s earnings have fluctuated wildly.
Yet, Jackson’s past legal and public relations challenges may help his estate’s tax case now. When he died in 2009, Jackson was said to be spending more than he was making. His album production was low, and the value of his likeness and image was on the decline. Between sexual abuse charges, controversies over his physical appearance, gaffes with his kids and his Martin Bashir interview, Jackson’s star was fading, not rising.
His estate can be expected to exploit this history. The estate might claim that the “This is It” movie was successful because of the star’s death, not in spite of it. Viewed objectively before his passing, one could argue that his scheduled concert tour was a huge gamble. And, even if it had succeeded, there are degrees of success.
As you would expect, the Jackson estate employed an appraiser to value the assets, and the IRS has one too. As such, this will be a legal battle as well as a battle of the appraisers. Mr. Jackson’s fortunes soared after his death, as reflected in the estate’s high earnings, on which it paid income tax. But, that does not mean the estate was worth all of that money on the date of his death.
Because estate tax matters so often hinge on valuation, there are special IRS penalties. If the estate is found to have misrepresented the value of items on its federal estate tax return, these penalties could run as high as 40 percent. That only adds to the Thriller-sized dollars at stake.
Of course, most disputes end up being compromised. With the polarized valuation figures here, there is considerable room between the IRS’ and the estate’s numbers. But, with a treasure trove of debts, lore and gossip at its disposal, I would wager that the estate may have to compromise much less than the Service. Beat it, IRS.
See Estate of Michael Jackson v. Commissioner (017152-13 U.S. Tax Court).
See Patrick Temple-West, “U.S. agency says Michael Jackson estate owes $702 million in taxes,” Reuters (Aug. 23, 2013).
http://wealthmanagement.com/estate-planning/trust-me-michael-jackson-still-paying-taxes
The King of Pop vs. the IRS
Dec. 30, 2013
Robert Wood
Michael Jackson faced many legal struggles during his storied career. He fought sex abuse charges, copyright infringements and concert contract disputes. Sadly, the King of Pop died unexpectedly on June 25, 2009. Even now, though, his estate faces one more pitched battle in court, this time about estate taxes.
Michael Jackson has actually made a lot of money since his passing. His name, image and ongoing musical success have continued to pull in considerable income for his estate. Reports suggest that the Jackson estate has collected hundreds of millions of dollars.
There was a $60 million advance for the film “This Is It” and a new recording contract worth up to $250 million. There was also the high-grossing Michael Jackson Immortal World Tour, a joint venture with Cirque du Soleil. His estate reportedly collected $170 million in 2011 and $145 million in 2012. As always, the Internal Revenue Service wants its cut.
Indeed, just as with a living individual, the income collected by an estate is subject to income tax. Accordingly, the estate has reportedly already paid over $100 million in income taxes. You might assume that after collecting all that income tax, the IRS wouldn’t ask for more. But, estate tax is another matter. The IRS and Jackson’s estate are locked in a Tax Court battle over estate taxes.[1]
The IRS claims that Mr. Jackson’s estate owes a whopping $505.1 million in estate taxes, plus $196.9 million in penalties.[2] Fortunately for the estate, the penalties are based on the taxes due. If the tax charge is struck down, the penalties should go with it.
Unlike income taxes, Move up http://i.forbesimg.com t Move down estate taxes are levied on property transferred from the decedent to his heirs. The tax due depends on the value of an estate as of the date of death, minus deductions. Alternatively, the estate can elect to value the assets six months after death. Executors often determine which value is lower and report that figure.
Federal estate tax law currently allows $5.25 million per person to be passed tax-free. But in 2009, the year Jackson died, the exemption was only $3.5 million. Excess assets for those who died in 2009 are taxed at up to 45 percent. As you might imagine, Jackson had significantly more than $3.5 million in assets.
Under the estate tax, only net value—assets minus liabilities—is taxed. That’s a key concept for Jackson, who reportedly had many assets but many debts too. Beyond this fundamental rule about debts, specific assets must be valued. Jackson owned a 50 percent share in a valuable Sony music catalogue, his own music catalogue, real estate and art.
And, who can forget Neverland Ranch? For most decedent’s property, it’s usually possible to determine the value of real estate based on other parcels, possible development use, restrictions, etc. Jackson’s Neverland Ranch, on the other hand, is truly unique and is, arguably, tied to Jackson’s image. These facts make its value particularly difficult to fix.
The core of the tax dispute concerns the value of the pop icon’s image, likeness and intellectual properties. The IRS is said to have valued the estate’s rights to Jackson’s image and likeness at $434 million. The estate pins that value at $2,105 (not a typo). Clearly, both sides are exaggerating, and both will probably have to compromise.
However, the estate has a legitimate argument that the meteoric rise in Jackson’s fortunes after his death couldn’t have been foreseen. Future payments to the estate for Jackson’s continuing sales are valued for federal estate tax purposes by the projected future worth discounted to present value. Those calculations aren’t easy when the subject’s earnings have fluctuated wildly.
Yet, Jackson’s past legal and public relations challenges may help his estate’s tax case now. When he died in 2009, Jackson was said to be spending more than he was making. His album production was low, and the value of his likeness and image was on the decline. Between sexual abuse charges, controversies over his physical appearance, gaffes with his kids and his Martin Bashir interview, Jackson’s star was fading, not rising.
His estate can be expected to exploit this history. The estate might claim that the “This is It” movie was successful because of the star’s death, not in spite of it. Viewed objectively before his passing, one could argue that his scheduled concert tour was a huge gamble. And, even if it had succeeded, there are degrees of success.
As you would expect, the Jackson estate employed an appraiser to value the assets, and the IRS has one too. As such, this will be a legal battle as well as a battle of the appraisers. Mr. Jackson’s fortunes soared after his death, as reflected in the estate’s high earnings, on which it paid income tax. But, that does not mean the estate was worth all of that money on the date of his death.
Because estate tax matters so often hinge on valuation, there are special IRS penalties. If the estate is found to have misrepresented the value of items on its federal estate tax return, these penalties could run as high as 40 percent. That only adds to the Thriller-sized dollars at stake.
Of course, most disputes end up being compromised. With the polarized valuation figures here, there is considerable room between the IRS’ and the estate’s numbers. But, with a treasure trove of debts, lore and gossip at its disposal, I would wager that the estate may have to compromise much less than the Service. Beat it, IRS.
See Estate of Michael Jackson v. Commissioner (017152-13 U.S. Tax Court).
See Patrick Temple-West, “U.S. agency says Michael Jackson estate owes $702 million in taxes,” Reuters (Aug. 23, 2013).
http://wealthmanagement.com/estate-planning/trust-me-michael-jackson-still-paying-taxes
LETTER TO THE EDITOR
In Uncategorized on 11/19/2013 at 19:27
The latest issue of our State’s Bar Association Journal carried a story with the fetching title “Jackson Estate Says, ‘Beat It, IRS’.”
I fired off a letter to the editor, but my e-mails kept bouncing because the e-address given is inactive.
So I posted this to the Association’s LinkedIn page. And if that doesn’t give it sufficient publicity, here it is again.
Sir, Robert W. Wood, Esq., is rather more sanguine than I about the outcome in Estate of Michael J. Jackson, Deceased, John G. Branca, Co-Executor and John McClain, Co-Executor v. Com’r., Docket No. 017152-13, in his article “Jackson Estate Says ‘Beat It, IRS’.”, Nov/Dec 2013.
While I haven’t any hard statistical evidence to give independent support to this conclusion, I must agree with James Edward Maule, who stated the case almost 15 years ago in Instant Replay, Weak Teams, and Disputed Calls: An Empirical Study of Alleged Tax Court Judge Bias, 66 Tenn. L. Rev. 351, 353, 401 (1999). According to Mr. Maule, the IRS rarely loses in Tax Court, opinions are rarely appealed (in Tax Court, an opinion states the law, or what non-Tax Court practitioners would call a decision; a Tax Court decision fixes the amount of tax due, if any, or what the non-Tax Court practitioner would call a judgment), and even if appealed, are rarely overturned in the Circuit Courts of Appeal.
Few courts see more valuation cases than Tax Court. And the sums involved run into the hundreds of millions. See, for example, Eaton Corporation (transfer pricing; arms’-length valuation), 140 T. C. 18, 6/25/13 ($368 million, plus interest); and the plethora of façade easement cases (e.g., Dunlap; Scheidelman; Gorra). Although Second Circuit did overturn Scheidelman I, taxpayer lost in Scheidelman II.
And of course a case that settled, but excited considerable interest in the art world, Estate of Ileana Sonnabend, Docket No. 649-12, which settled a $65 million deficiency for $1.3 million, the case of the prohibited eagle. There the issue for trial would have been the worth of a work of art that could not be sold, bartered or exchanged without incurring criminal penalties.
Moreover, Tax Court is no stranger to valuing a person’s image. See Retief Goosen, 137 T. C. 1, 6/9/11; cf. Sergio Garcia, 140 T. C. 6, filed 3/14/13. Garcia is interesting for its contrast with Goosen, a “global icon” as contrasted with a “brand image”.
I will await the outcome of Jackson with interest, but much less certainty than Mr. Woods’ article suggests.
The cases cited can all be found on the Tax Court website, www.ustaxcourt.gov. Use either the link for Opinion Search or Docket Search. Tax Court’s website is user-friendly.
http://taishofflaw.com/2013/11/19/letter-to-the-editor/
In Uncategorized on 11/19/2013 at 19:27
The latest issue of our State’s Bar Association Journal carried a story with the fetching title “Jackson Estate Says, ‘Beat It, IRS’.”
I fired off a letter to the editor, but my e-mails kept bouncing because the e-address given is inactive.
So I posted this to the Association’s LinkedIn page. And if that doesn’t give it sufficient publicity, here it is again.
Sir, Robert W. Wood, Esq., is rather more sanguine than I about the outcome in Estate of Michael J. Jackson, Deceased, John G. Branca, Co-Executor and John McClain, Co-Executor v. Com’r., Docket No. 017152-13, in his article “Jackson Estate Says ‘Beat It, IRS’.”, Nov/Dec 2013.
While I haven’t any hard statistical evidence to give independent support to this conclusion, I must agree with James Edward Maule, who stated the case almost 15 years ago in Instant Replay, Weak Teams, and Disputed Calls: An Empirical Study of Alleged Tax Court Judge Bias, 66 Tenn. L. Rev. 351, 353, 401 (1999). According to Mr. Maule, the IRS rarely loses in Tax Court, opinions are rarely appealed (in Tax Court, an opinion states the law, or what non-Tax Court practitioners would call a decision; a Tax Court decision fixes the amount of tax due, if any, or what the non-Tax Court practitioner would call a judgment), and even if appealed, are rarely overturned in the Circuit Courts of Appeal.
Few courts see more valuation cases than Tax Court. And the sums involved run into the hundreds of millions. See, for example, Eaton Corporation (transfer pricing; arms’-length valuation), 140 T. C. 18, 6/25/13 ($368 million, plus interest); and the plethora of façade easement cases (e.g., Dunlap; Scheidelman; Gorra). Although Second Circuit did overturn Scheidelman I, taxpayer lost in Scheidelman II.
And of course a case that settled, but excited considerable interest in the art world, Estate of Ileana Sonnabend, Docket No. 649-12, which settled a $65 million deficiency for $1.3 million, the case of the prohibited eagle. There the issue for trial would have been the worth of a work of art that could not be sold, bartered or exchanged without incurring criminal penalties.
Moreover, Tax Court is no stranger to valuing a person’s image. See Retief Goosen, 137 T. C. 1, 6/9/11; cf. Sergio Garcia, 140 T. C. 6, filed 3/14/13. Garcia is interesting for its contrast with Goosen, a “global icon” as contrasted with a “brand image”.
I will await the outcome of Jackson with interest, but much less certainty than Mr. Woods’ article suggests.
The cases cited can all be found on the Tax Court website, www.ustaxcourt.gov. Use either the link for Opinion Search or Docket Search. Tax Court’s website is user-friendly.
http://taishofflaw.com/2013/11/19/letter-to-the-editor/
No, it was a lawyer. I added some info below
An author, teacher, advocate and trusted advisor, Lew Taishoff is a New York City-based attorney with 46 years of experience in corporate and individual tax and real estate matters. He is an Enrolled Agent, examined and admitted to practice before the Internal Revenue Service, and admitted to practice before the United States
AliCat
Proud Member
The IRS is always interested in receiving their fair share of revenue.
With that being said, this Case, involving Michael Jackson's Estate, may go to Court. Why? Because no one knows for sure how well Michael's 'tour' would have gone. It wasn't until Michael died that his image earned large amounts of money.
Since when it comes to an Estate, the amount of $5 and a half million dollars was mentioned, as an example of what is not taxed. The Republican's tried to repeal that a few years back and the law stayed the same.
Michael's Estate has received large amount's of money since Michael's death and that's where the case hinges. What exactly is considered revenue and what is the Estate's fair share to pay.
So in other words, the video simplified what we are awaiting to happen and since it is that time of the year when the Federal and State government want their fair share of taxes on our revenue, it was good publicity for the individual being Interviewed. After all, we want an expert to talk to us so that we can understand exactly what our money is doing for us, whether we save/invest or pay our bills!
With that being said, this Case, involving Michael Jackson's Estate, may go to Court. Why? Because no one knows for sure how well Michael's 'tour' would have gone. It wasn't until Michael died that his image earned large amounts of money.
Since when it comes to an Estate, the amount of $5 and a half million dollars was mentioned, as an example of what is not taxed. The Republican's tried to repeal that a few years back and the law stayed the same.
Michael's Estate has received large amount's of money since Michael's death and that's where the case hinges. What exactly is considered revenue and what is the Estate's fair share to pay.
So in other words, the video simplified what we are awaiting to happen and since it is that time of the year when the Federal and State government want their fair share of taxes on our revenue, it was good publicity for the individual being Interviewed. After all, we want an expert to talk to us so that we can understand exactly what our money is doing for us, whether we save/invest or pay our bills!
Michael Jackson estate embroiled in tax fight with IRS
Executors say Michael Jackson was worth $7 million when he died. The IRS says it's more like $1.125 billion and wants $702 million in taxes and penalties.
The tax return filed by the estate of Michael Jackson was so inaccurate, the IRS said, that it qualified for a gross valuation misstatement penalty, which would allow the government to double the usual 20% penalty for underpayment.
By Jeff Gottlieb
February 7, 2014, 7:51 p.m.
The spectacle that was Michael Jackson's life shows no signs of abating with his death.
There was the conviction of the doctor who gave him the fatal overdose of a powerful anesthetic, battles over his will, attempts to remove the executors of his estate and the wrongful death suit against the promoter of his doomed comeback tour.
Now, Jackson's estate is in the midst of a fight with the Internal Revenue Service.
The agency has told Jackson's executors that the estate owes $505 million in taxes and an additional $197 million in penalties, for a total of more than $702 million.
According to documents filed with the U.S. Tax Court in Washington, Jackson's executors placed his net worth at the time of his June 2009 death at slightly more than $7 million.
The IRS placed it at $1.125 billion, a difference so vast it looks like a typo.
Jackson's return was so inaccurate, the IRS said, that it qualified for a gross valuation misstatement penalty, which would allow the government to double the usual 20% penalty for underpayment.
"I've never even heard of the gross valuation misstatement penalty being asserted," said Andrew Katzenstein, an estate tax expert at the law firm Proskauer Rose in Los Angeles.
Few estates are valuable enough that they are required to file with the IRS. In 2012, the latest year for which statistics are available, only 9,400 estate-tax returns were filed in the nation. Because the value of the estates that file is relatively high, they usually are audited, tax experts said, but few end up in Tax Court.
"Estate planning is like playing a game of hot potato, and the potato is wealth, and you don't want to die with the potato in your hands," said Edward McCaffery, a professor in USC's Gould School of Law. "You want to get it out to your kids or into trusts."
Most of the dispute is over the value of Jackson's image, along with his interest in a trust that includes the rights to some of his songs and most of the Beatles catalog, including "Yesterday," "Sgt. Pepper's Lonely Hearts Club Band" and "Get Back."
The estate valued Jackson's likeness at just $2,105.
The IRS put it at $434.264 million.
A dead celebrity's image and likeness, used on things such as T-shirts and television commercials, can be a lucrative source of income. Elizabeth Taylor, for example, directed that 25% of the income from her image go to the Elizabeth Taylor AIDS Foundation.
The estate put the value of the pop star's interest in the trust that owns the Beatles' and Jackson's songs at zero. The IRS put it at $469 million.
A certified public accountant testified during the wrongful death suit last year that Jackson had taken a $320-million loan against the music catalog.
The IRS also said Jackson's interest in another trust was worth $60.6 million, not $2.2 million, as the estate claimed.
Experts agreed that it was hard to imagine that someone would price a catalog that included some of the world's most memorable songs at zero and think it would pass muster with the IRS.
McCaffery and Katzenstein suspected that while he was living, Jackson may have tried to pass the catalog on to his children as a trust but that the IRS found problems with the transfer.
Neither the IRS nor Howard Weitzman, the attorney for Jackson's estate, would comment.
Tax experts said the Jackson estate would have hired appraisers to determine how much his assets were worth at the time of his death, including his likeness. One document mentions a report by the venerable firm Bonhams & Butterfield.
Most estates are much easier to value than Jackson's. You can look up the prices of stocks and bonds. You can check comparable properties for real estate. With a business, you can compare sales with a similar firm. But how do you value Jackson's likeness?
"This is something unusual," Katzenstein said. "He was one of the premier entertainers of our time. So there are really no comparables, and it leaves the valuation question open to a huge range of possibilities.
"Do I think his likeness was worth $2,105? No. But was it worth $400 million?"
The Jackson estate probably would argue that before he died, the singer had neither toured nor released a CD for several years, and his public image had been severely damaged by allegations of child molestation. Companies were not exactly begging Jackson to endorse their products or trying to make deals with him.
Since he died, Jackson's recordings have gained new life. The estate had earned $475 million, according to a court filing in July 2012. Forbes magazine reported in October 2013 that Jackson was the highest-paid celebrity that year — dead or alive — earning $160 million.
Much of the money, according to Forbes, came from two Cirque du Soleil shows based on Jackson's music, one at Mandalay Bay Hotel and Casino in Las Vegas and another that tours the world.
"You have the Jim Croce effect," McCaffery said, referring to a singer who was killed in an airplane crash in 1973. "Before he dies, everyone is tired of his songs. But after the tragic death, there is a spike up."
The court documents also list other disagreements between the estate and the IRS. The documents often refer to assets, such as a company or a trust, but do not go into detail about them and often do not explain why the IRS disputes the estate's figures.
Listed under stocks and bonds, the IRS said MJJ Ventures Inc. was worth $81.13 million, $67.4 million more than the estate said.
The IRS also took issue with the valuation of Jackson's share of the rights to the Jackson 5 master recordings. The estate valued them at $11.193 million, while the IRS placed their worth at nearly $45.5 million.
The tax court documents show that Jackson had three Rolls-Royces and a 2001 Bentley Arnage that the IRS said were worth $250,000, not the $91,600 the estate placed on them.
The IRS also found other automobiles, saying, "Tangible personal property including vehicles not reported otherwise" were worth $47.467 million instead of the $0 the estate reported.
If it is found liable for the taxes, the Jackson estate could pay them off by selling assets or asking the IRS if it could pay over 15 years, Katzenstein said.
Although most inheritance tax disputes are settled before trial, the Jackson estate appears to be taking a hard line, having hired the top tax litigators in Los Angeles — Hochman, Salkin, Rettig, Toscher & Perez — Katzenstein said.
"They're trial lawyers," he said. "They're a firm not afraid of litigating these matters to resolution."
But the IRS, McCaffery said, signaled it is not backing off when it said Jackson's likeness was worth $434 million. "They're saying, `Bring it on.'"
http://www.latimes.com/local/la-me-jackson-taxes-20140208,0,3089248.story#ixzz2sho8CDpd
Executors say Michael Jackson was worth $7 million when he died. The IRS says it's more like $1.125 billion and wants $702 million in taxes and penalties.
The tax return filed by the estate of Michael Jackson was so inaccurate, the IRS said, that it qualified for a gross valuation misstatement penalty, which would allow the government to double the usual 20% penalty for underpayment.
By Jeff Gottlieb
February 7, 2014, 7:51 p.m.
The spectacle that was Michael Jackson's life shows no signs of abating with his death.
There was the conviction of the doctor who gave him the fatal overdose of a powerful anesthetic, battles over his will, attempts to remove the executors of his estate and the wrongful death suit against the promoter of his doomed comeback tour.
Now, Jackson's estate is in the midst of a fight with the Internal Revenue Service.
The agency has told Jackson's executors that the estate owes $505 million in taxes and an additional $197 million in penalties, for a total of more than $702 million.
According to documents filed with the U.S. Tax Court in Washington, Jackson's executors placed his net worth at the time of his June 2009 death at slightly more than $7 million.
The IRS placed it at $1.125 billion, a difference so vast it looks like a typo.
Jackson's return was so inaccurate, the IRS said, that it qualified for a gross valuation misstatement penalty, which would allow the government to double the usual 20% penalty for underpayment.
"I've never even heard of the gross valuation misstatement penalty being asserted," said Andrew Katzenstein, an estate tax expert at the law firm Proskauer Rose in Los Angeles.
Few estates are valuable enough that they are required to file with the IRS. In 2012, the latest year for which statistics are available, only 9,400 estate-tax returns were filed in the nation. Because the value of the estates that file is relatively high, they usually are audited, tax experts said, but few end up in Tax Court.
"Estate planning is like playing a game of hot potato, and the potato is wealth, and you don't want to die with the potato in your hands," said Edward McCaffery, a professor in USC's Gould School of Law. "You want to get it out to your kids or into trusts."
Most of the dispute is over the value of Jackson's image, along with his interest in a trust that includes the rights to some of his songs and most of the Beatles catalog, including "Yesterday," "Sgt. Pepper's Lonely Hearts Club Band" and "Get Back."
The estate valued Jackson's likeness at just $2,105.
The IRS put it at $434.264 million.
A dead celebrity's image and likeness, used on things such as T-shirts and television commercials, can be a lucrative source of income. Elizabeth Taylor, for example, directed that 25% of the income from her image go to the Elizabeth Taylor AIDS Foundation.
The estate put the value of the pop star's interest in the trust that owns the Beatles' and Jackson's songs at zero. The IRS put it at $469 million.
A certified public accountant testified during the wrongful death suit last year that Jackson had taken a $320-million loan against the music catalog.
The IRS also said Jackson's interest in another trust was worth $60.6 million, not $2.2 million, as the estate claimed.
Experts agreed that it was hard to imagine that someone would price a catalog that included some of the world's most memorable songs at zero and think it would pass muster with the IRS.
McCaffery and Katzenstein suspected that while he was living, Jackson may have tried to pass the catalog on to his children as a trust but that the IRS found problems with the transfer.
Neither the IRS nor Howard Weitzman, the attorney for Jackson's estate, would comment.
Tax experts said the Jackson estate would have hired appraisers to determine how much his assets were worth at the time of his death, including his likeness. One document mentions a report by the venerable firm Bonhams & Butterfield.
Most estates are much easier to value than Jackson's. You can look up the prices of stocks and bonds. You can check comparable properties for real estate. With a business, you can compare sales with a similar firm. But how do you value Jackson's likeness?
"This is something unusual," Katzenstein said. "He was one of the premier entertainers of our time. So there are really no comparables, and it leaves the valuation question open to a huge range of possibilities.
"Do I think his likeness was worth $2,105? No. But was it worth $400 million?"
The Jackson estate probably would argue that before he died, the singer had neither toured nor released a CD for several years, and his public image had been severely damaged by allegations of child molestation. Companies were not exactly begging Jackson to endorse their products or trying to make deals with him.
Since he died, Jackson's recordings have gained new life. The estate had earned $475 million, according to a court filing in July 2012. Forbes magazine reported in October 2013 that Jackson was the highest-paid celebrity that year — dead or alive — earning $160 million.
Much of the money, according to Forbes, came from two Cirque du Soleil shows based on Jackson's music, one at Mandalay Bay Hotel and Casino in Las Vegas and another that tours the world.
"You have the Jim Croce effect," McCaffery said, referring to a singer who was killed in an airplane crash in 1973. "Before he dies, everyone is tired of his songs. But after the tragic death, there is a spike up."
The court documents also list other disagreements between the estate and the IRS. The documents often refer to assets, such as a company or a trust, but do not go into detail about them and often do not explain why the IRS disputes the estate's figures.
Listed under stocks and bonds, the IRS said MJJ Ventures Inc. was worth $81.13 million, $67.4 million more than the estate said.
The IRS also took issue with the valuation of Jackson's share of the rights to the Jackson 5 master recordings. The estate valued them at $11.193 million, while the IRS placed their worth at nearly $45.5 million.
The tax court documents show that Jackson had three Rolls-Royces and a 2001 Bentley Arnage that the IRS said were worth $250,000, not the $91,600 the estate placed on them.
The IRS also found other automobiles, saying, "Tangible personal property including vehicles not reported otherwise" were worth $47.467 million instead of the $0 the estate reported.
If it is found liable for the taxes, the Jackson estate could pay them off by selling assets or asking the IRS if it could pay over 15 years, Katzenstein said.
Although most inheritance tax disputes are settled before trial, the Jackson estate appears to be taking a hard line, having hired the top tax litigators in Los Angeles — Hochman, Salkin, Rettig, Toscher & Perez — Katzenstein said.
"They're trial lawyers," he said. "They're a firm not afraid of litigating these matters to resolution."
But the IRS, McCaffery said, signaled it is not backing off when it said Jackson's likeness was worth $434 million. "They're saying, `Bring it on.'"
http://www.latimes.com/local/la-me-jackson-taxes-20140208,0,3089248.story#ixzz2sho8CDpd
Soundmind
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The estate's estimation is consistent with what the media has claimed for years before his death. why are they acting all shocked?
Was not his finacial state in 2003 what led him to molest Gavin according to mad dog Sneddon?:smilerolleyes:
Was not his financial state in 2009 that led him to use propofol and supposedly to fatally inject himself?
I am sure for the last ten years every freak in the media has claimed he was bankrupt . The estate obliviously believed them as they are such a trustworthy source.
Was not his finacial state in 2003 what led him to molest Gavin according to mad dog Sneddon?:smilerolleyes:
Was not his financial state in 2009 that led him to use propofol and supposedly to fatally inject himself?
I am sure for the last ten years every freak in the media has claimed he was bankrupt . The estate obliviously believed them as they are such a trustworthy source.
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passy001
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The media is ani-MJ. anything that hurts MJ and his estate they will vouch for it. it's that sinple. so if paying more tax can hurt Mj estate they will support it.
Petrarose
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It seems^^ no new news about this situation to date. Jeff is just rewriting old news.
I find this interesting, although it is speculation:
McCaffery and Katzenstein suspected that while he was living, Jackson may have tried to pass the catalog on to his children as a trust but that the IRS found problems with the transfer.
^^We all know that the IRS doesn't like you trying to give large money items or money to your heirs before you die. They want their taxes.
I can imagine the amount of money the estate has to pay to that law firm to handle the trial. It will be in the millions.
I find this interesting, although it is speculation:
McCaffery and Katzenstein suspected that while he was living, Jackson may have tried to pass the catalog on to his children as a trust but that the IRS found problems with the transfer.
^^We all know that the IRS doesn't like you trying to give large money items or money to your heirs before you die. They want their taxes.
I can imagine the amount of money the estate has to pay to that law firm to handle the trial. It will be in the millions.
Bubs
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That piece Jeff G wrote is making its way to every tabloid and news papers? Have they got memory of goldfish and can't remember that tax dispute was already published?
Good to see that the estate isn't just going to hand out the money but are prepared to go on court. In "worst"(for some) case scenario if they lose, executors have to start cutting back how much they pay out every month. KJ have to start tightening her belt, which means her cubs needs to start earning their own money, she can fire her accountant as she will not have that much money to account for, fire all or half of her lawyers, no need any of them
I wonder if what family claimed Michael's worth during the wrongful death trial could effect on what tax people are after and use those numbers to support their case?
Good to see that the estate isn't just going to hand out the money but are prepared to go on court. In "worst"(for some) case scenario if they lose, executors have to start cutting back how much they pay out every month. KJ have to start tightening her belt, which means her cubs needs to start earning their own money, she can fire her accountant as she will not have that much money to account for, fire all or half of her lawyers, no need any of them
I wonder if what family claimed Michael's worth during the wrongful death trial could effect on what tax people are after and use those numbers to support their case?
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Bubs
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The Michael Jackson Estate is in the crosshairs of the IRS for allegedly cheating taxpayers out of a fortune ... and now the taxman wants the Estate to pay the piper -- to the tune of more than $700 million.
The allegations are stunning. According to legal docs -- obtained by the L.A. Times -- when Michael died the executors told the IRS his net worth was around $7 million. The IRS now says MJ's net worth was actually $1.125 BILLION!
And in a HIGHLY unusual move, the IRS claimed executors so grossly misled the agency, it doubled the tax penalty -- from 20 - 40%. So the IRS claims the Estate didn't pay $505 million worth of taxes, and when you add the 40% it comes to more than $702 Million.
As for what the agency says was under-reported:
-- The Estate valued MJ's likeness at $2,105. The IRS says the value is actually more than $434 million.
-- The Estate valued Michael's interest in a trust that owns songs by MJ and the Beatles at ZERO! The IRS says its more like $469 million.
-- There's another MJ trust the Estate claims is worth $2.2 mil. The IRS says it's worth $60.6 mil.
-- The Estate valued the Jackson 5 master recordings at $11.2 mil. The IRS says $45.5 mil.
It's pretty clear the Estate will fight this like crazy, but worst case scenario the taxes could wipe out what the Estate has made since MJ's death ... which could be devastating for Michael's kids.
We contacted a rep for the Estate who says they stand by their initial statements on the matter ... telling us, "The Estate of Michael Jackson disputes the IRS position in its entirety."
The rep adds, "The Estate used independent, nationally-recognized and highly-qualified expert appraisers in determining the value of the Estate’s assets. By contrast, 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."
Source TMZ
The allegations are stunning. According to legal docs -- obtained by the L.A. Times -- when Michael died the executors told the IRS his net worth was around $7 million. The IRS now says MJ's net worth was actually $1.125 BILLION!
And in a HIGHLY unusual move, the IRS claimed executors so grossly misled the agency, it doubled the tax penalty -- from 20 - 40%. So the IRS claims the Estate didn't pay $505 million worth of taxes, and when you add the 40% it comes to more than $702 Million.
As for what the agency says was under-reported:
-- The Estate valued MJ's likeness at $2,105. The IRS says the value is actually more than $434 million.
-- The Estate valued Michael's interest in a trust that owns songs by MJ and the Beatles at ZERO! The IRS says its more like $469 million.
-- There's another MJ trust the Estate claims is worth $2.2 mil. The IRS says it's worth $60.6 mil.
-- The Estate valued the Jackson 5 master recordings at $11.2 mil. The IRS says $45.5 mil.
It's pretty clear the Estate will fight this like crazy, but worst case scenario the taxes could wipe out what the Estate has made since MJ's death ... which could be devastating for Michael's kids.
We contacted a rep for the Estate who says they stand by their initial statements on the matter ... telling us, "The Estate of Michael Jackson disputes the IRS position in its entirety."
The rep adds, "The Estate used independent, nationally-recognized and highly-qualified expert appraisers in determining the value of the Estate’s assets. By contrast, 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."
Source TMZ
elusive moonwalker
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you would have to laugh at the irony if it wasnt so pathetic. twisted and turned to suit an agenda at any given time.