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By David Bloodsaw
Michael Jackson made a song entitled Money in 1995 and now that has been a major theme in his life and now his death. A litany of controversies have clouded the last days and death of the late iconic singer and now it’s the Internal Revenue Service’s turn.
The L.A. Times reports at the time of Jackson’s death, his estate filed with the U.S. Tax Court that he was worth a little over $7 million when he died. The IRS puts the Jackson Estate’s worth at $1.125 billion. So now, the IRS reports that the estate owes a total of $702 million. The reason for the vast difference in the dollar amount is because the IRS said that Jackson’s tax return was incorrect and it qualified for a gross misstatement penalty. According to the IRS, they can tack on double of the 20% penalty.
Few estates have enough value that they have to file a return. Most estates are audited by the IRS. In 2012 only 9,400 estates filed tax returns and very few end up in tax court.
Michael Jackson’s likeness is the reason for the discrepancy of his total worth. His interest in a trust that holds some of the Beatles’ catalog is up for debate too. So naturally, the estate values the total amount less than the IRS. One particular item that caught the Internal Revenue’s attention is that the estate valued Jackson’s and the Beatles’ songs at zero.
Edward McCaffery a professor at the USC Gould School of Law said “Estate planning is like playing a game of hot potato, and the potato is wealth, and you don’t want to die with the potato in your hands.”
Jackson’s estate value is difficult to evaluate because it involves his likeness and music, as opposed to stocks or bonds. Jackson hadn’t toured or released a CD in several years and his image took a hit because of the child molestation charges. However, since the pop star’s death his music is a new hot commodity, which can account for the IRS and their higher value for the estate. Amazingly, Jackson was the highest paid celebrity in 2013. Only thing, a lot of that came from 2 Cirque du Soleil shows based on his music.
The Jackson’s have hired top tax litigators in Los Angeles, Hochman, Salkin, Rettig, Toscher & Perez. The IRS has not deterred, taking a hard line stance and not backing down according to USC Professor Edward McCaffery.
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