Seven years after it began, the estate of Michael Jackson has won big in U. S Tax Court. Following a ruling that found the singer’s name and likeness was worth far less at his time of death than what the IRS had claimed, the estate will pay far less than the $700 million initially deemed to be the tax bill.
After Jackson’s death, the executors of his estate went to work to rebuild the business of Michael Jackson. They re-built his brand, settled debts, and made new and profitable deals. Post-mortem Michael was a success, even if his reputation had been soured.
When he died in 2009, Jackson was at the nadir of his career. Lawsuits, including charges of child molestation (he was acquitted) and an eccentric lifestyle had taken a toll on the “King of Pop.” In 2020, his estate earned $48 million, estimates Forbes.
The case came down to three key assets and their value: Mr. Jackson’s name and likeness at the time of his death and two entities tied to the music business.
The tax judge wisely focused on the value of his public image at the time of death. At the time, he had no endorsements or merchandise deals that weren’t directly related to a musical tour or album.
The estate initially claimed the estate was worth $2,105. The judge called that “…at the price of a heavily used 20-year-old Honda Civic.”
Two other assets were highly valued: Jackson’s share of Sony/ATV Music Publishing, a company that controls millions of song copyrights, including most of the Beatles’ catalog, and Mijac Music, a catalog that owned Jackson’s songs and others he had purchased.
The judge ruled that the total assets at the time of his death was $111.5 million.
Other celebrities still pending include those of Prince and Aretha Franklin. Attorneys who represent celebrities are taking note. This was not a small mistake for the IRS, both in the valuation of the estate and its estimation of how skillful the estate’s tax attorneys would be in pushing back.
You don’t have to be the King of Pop to have a dispute with the IRS. But you do need a good estate and tax attorney to protect your loved ones.