A few years ago, a conversation like this took place.
“Hello, Michael Jackson estate? This is the IRS. Sorry for your loss, but we have to do our job and we need some information for tax purposes. At the time of Mr. Jackson’s death, what was the value of his name and image?”
“We estimate that it was worth $2,015.”
“Two–what? I’m sorry, but can you repeat that?”
“Michael Jackson’s name and image were worth $2,015.”
“Well, uh, there seems to be some discrepancy. We put the value of these assets at–let’s see…$435,000,000. Can you explain the difference?”
“Nope. See you in court.” [Click]
The battle over how much tax the Jackson estate should pay keeps getting weirder. The Hollywood Report tries to unravel it–at least a bit.
Of all the befuddling legal matters in the entertainment business, there’s perhaps none that causes attorneys to scratch their heads like the battle between Michael Jackson and the Internal Revenue Service over what the late entertainer should be paying in estate taxes. In the years after his death in 2009 at age 50, Jackson has experienced a commercial rebirth thanks to the savvy executors who have managed his assets. The 2009 documentary This Is It grossed $261 million, a Cirque du Soleil tribute show packs in fans, and there have been albums, video games and other lucrative memorials. Now the IRS wants its share, claiming the value of Jackson’s name and image upon death amounted to more than $434 million. The estate’s own valuation? Just $2,105.
That’s a huge discrepancy, and even that difference undersells the stakes. With interest and penalties, lawyers estimate the case — set for trial at a Los Angeles tax tribunal in 2017 — could be worth more than $1 billion. Some tax specialists even wonder if it could lead to criminal tax evasion charges. The outcome could impact celebrity estate planning. “This is the biggest estate tax case I’ve ever seen,” says attorney and tax specialist Gary Wolfe.