The IRS has a reputation of rarely admitting to mistakes. However, the truth is that the agency has no problem admitting it made a mistake, at least when it turns out that correcting the error is in its favor. That has now occurred in the battle over how much estate tax Michael Jackson’s estate should pay.
Previously, the IRS had claimed that Michael Jackson’s estate owed $702 million in estate taxes. Now, as Forbes reports in an article titled “IRS: We Made a Mistake Valuing Michael Jackson’s Estate,” the IRS claims the estate actually owes $731 million. The difference is due to the IRS mistaking Jackson’s percentage of ownership regarding certain songs. Litigation over exactly how much estate tax is due is likely to go on for a very long time as Jackson had a huge collection of personal items that still need to be valued.
The big issue in the litigation, however, is over how much Jackson’s name and likeness were worth at the time of his death. When Jackson passed away he was the subject of child molestation accusations and many other rumors. He was at that point not a highly sought after entertainer. Thus, his family valued his name and likeness at a few thousand dollars as of his date of death. The IRS values it at over $400 million.
It is important to note that even though Jackson has greatly increased in popularity since his death, that does not matter for estate tax purposes. Tax is only due on how much his name and likeness were worth at the time of his death.
A lesson can be learned in this litigation for non-celebrities. Over $250 million of the amount the IRS says is due are from fines and fees for the estate allegedly misrepresenting the value of the estate. It is very important that you value things correctly when you are administering an estate.
Please contact our office today at 239-225-7911 to schedule an appointment with Barbara M. Pizzolato if you are interested in protecting your legacy and need to create or update your estate plan. You may also wish to attend one of our free seminars.
Reference: Forbes (October 3, 2014) “IRS: We Made A Mistake Valuing Michael Jackson’s Estate“