Many people in California have been following the court battles spawned by Michael Jackson’s death. There could be yet another battle brewing for the late singer’s family — this one in the United States Tax Court. The IRS has made a seemingly arbitrary decision about how much Jackson’s “image and likeness” is worth for tax purposes.
According to the estate, his likeness and image were only worth just over $2,100 at his death. Recently, the IRS decided that this “asset” was worth $430 million. Obviously, this creates a huge disparity in what each side believes will be owed in estate taxes.
According to the IRS, the executors of Jackson’s estate grossly undervalued it. The IRS has decided that the value of Michael Jackson’s estate is over $1.1 billion, which includes the estimate of his image and likeness. That would make the taxes due on his estate somewhere in the neighborhood of $700 million. Many in California may already know that assets are to be valued on the date of death, not what they may be worth in the future. It is likely that Jackson’s popularity increased after this death, which would theoretically make him worth more now, but that isn’t the generally accepted standard.
The IRS says that there is precedent in tax case law, but others argue that the issues were not the same in those cases. In this case, it will be necessary to not only determine a quantifiable formula regarding Jackson’s likeness and image, but also to clarify that that value should be based on the date of death. The answers to these issues will have a profound effect on the amount of taxes the estate will have to pay.
Source: Bloomberg, Protests Surge as IRS Sets Jackson Image at $430 Million: Taxes, Alexander Ripps, Sept. 16, 2013