michaeljackson-kingofpop

In August 2013, several media outlets reported that the estate of Michael Jackson planned to take the IRS to court to dispute a tax bill.

It seems that fight is ongoing. In fact, the pop star’s estate may face massive tax penalties since the IRS has claimed that the initial valuation of Jackson’s estate was so inaccurate that it “qualified for a gross valuation misstatement penalty, which allow[s] the government to double the usual 20% penalty for underpayment,” reports the LA Times.

Overall, the IRS wants the estate to hand over more than US$500 million in taxes and more than US$100 million in penalties.

In the summer, Jackson’s lawyers were said to be arguing that the IRS’s valuation of the pop star’s property was too high, reported Forbes, and therefore the tax amount owing should be lower. Bloomberg also found, “The estate filed a petition in response to an IRS notice of deficiency issued in May [2013] regarding the estate’s tax return.”

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Further, Forbes contributor Kelly Phillips Erb added the King of Pop’s estate has been pegged between $80 million and $500 million, while the estate tax exemption for 2009 was $3.5 million. Disputed are the values for Neverland Ranch, automobiles and amounts attributable to the singer’s image, likeness and intellectual property.

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Fortunately, “The valuations associated with ordinary people’s [estates] are much easier to assess because […] they boil down to a question of willing buyer and willing seller,” writes Erb, a U.S. tax expert. “But with celebrities, it’s a more difficult issue because so much of the value of an item is tied to how we view the celebrity. And over time, we forget about the bad stuff, including the scandals, the violence and the addictions.”

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The case is Estate of Michael J. Jackson v. IRS, 17152-13, U.S. Tax Court. Jackson died at age 50 in 2009.

For Erb’s full analysis, click here.

For more on estate planning, read:

How to deal with cross-border estate

5 common drafting problems with wills

Family of heiress takes her $300M will to court

Originally published on Advisor.ca

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