On the Michael Jackson estate

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.

Quite absurd:

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.

Seriously, what the fuck did those valuing the estate think they were doing? A zero valuation for the John and Paul songbook?

9 thoughts on “On the Michael Jackson estate”

  1. I’d put it at slightly more than zero. But then, I was always a Stones fan.

    Out of interest. Has anyone heard any Beatles radio play of late? I stream stations out the UK & can’t say i’ve heard any for yonks. Good to rock to Midnight Rambler yesterday, though.

  2. Why do they bother at all? Surely these things are worth what they get sold for – tax then due on the receipts?

  3. Hang on minute. If the assets are in a trust, they aren’t in his estate. Its entirely possible that he was just a beneficiary of the trust, a position that dies with him ie it cannot be given passed on to anyone else, and has zero value. Isn’t that the whole point of trusts? Assets are no longer under your control and out of the reach of the tax man?

  4. Jim, you’re half right. Yes, the point in issue was probably what interest his estate has in the song catalogue, not the value of that catalogue.

    But no, putting stuff in a trust doesn’t always get it past the taxman – see this case.

  5. The estate is *not* saying that the Beatles songbook was worth zero, but that it was worth less than the $320m that Michael Jackson had borrowed against it.

  6. You can bet that a few tax lawyers and CPAs are going to dinged on this one. The difference is too vast for this to be a matter of good faith differences in valuation. If the IRS is contending MJ’s interest in the trust exceeds $1 billion, there are valuation issues that go well beyond the Beatles songbook and are likely systemic.

    In this CPA’s professional opinion, the fact that the trust has earned $475 million since MJ’s death severely undermines the $7 million valuation of MJ’s interest (however small or large that interest may be). It’s that simple. Valuations by “professionals” are soft numbers, but valuations based on actual earnings are as hard as it gets in land of U.S. tax law. How the trust & MJ’s estate explain away nearly half a billion in earnings is going to be real interesting.

    The IRS is going to win this one, and they will get the penalty.

  7. Well, I hope Michael has some strong words with his estate. He isn’t going to be very happy with getting a big tax bill.

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