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IRS Goes After Michael Jackson's Estate for $702 Million Tax Bill
Author: Scarinci Hollenbeck, LLC
Date: September 20, 2013
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The estate of the late pop icon Michael Jackson is embroiled in a bitter battle with the IRS over a tax bill, interest, and penalties that involve a range of his assets. The agency issued an official Notice of Deficiency to the estate in May.
The $702 million tax bill revolves around Jackson’s Neverland Ranch, his image and likeness, and several recording properties. Although the estate is challenging the tax agency’s assertion, it has yet to reveal any specific amounts for which it may be liable, Reuters reports. Jackson’s attorneys did pay estate taxes when the pop star passed, the value of the estate is in question, which may be lead to a lengthy dispute in the U.S. Tax Court. This is largely because some of the assets in question – such as Jackson’s image and likeness – may be challenging to quantify.
This has been evidenced by the year-long struggle between attorney’s for the estate and the IRS to reach a resolution.
“The government believes estates of celebrities likely have a significant audit potential,” a representative of Jackson’s estate told Reuters. “The estate believes the estate tax return properly reflected the interests of Mr. Jackson as of the date of his death.”
Forbes noted that federal estate tax return for Jackson’s estate reported a taxable estate of approximately $9 million. However, many tax analysts estimate the total worth of the estate to be around $400 million, leaving a large gap in what was paid and what still may be owed, especially once interest and penalties are assessed. Under existing tax law, the penalties for Jackson’s estate could be as high as 40 percent of the difference between the taxes paid and those allegedly owed for some of the assets in question.
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