The IRS and Michael Jackson’s Estate – Challenges of Valuing Intangible Estate Assets
By Juli Findling, Paralegal
To understand just how far off the IRS can be when estimating an estate’s tax bill, one doesn’t need to look any further than recent tabloid headlines regaling the win by late singer Michael Jackson’s Estate.
On Monday, May 3, 2021, U.S. Tax Court ruling dashed the IRS’ hopes to get its hands on more than $500 million, which it claimed were owed by the Jackson estate for taxes and penalties based on his name, likeness, and two music-related business entities. Instead, U.S. Tax Court Judge Mark Holmes determined that those intangibles were worth just $111.5 million and will garner a significantly lower dollar amount to the IRS.
A key factor in the Court’s determination was the estate’s effectiveness in arguing that the value of its assets should be based on their value at the time of Jackson’s death in 2009 – when he was 50 years old and his career was waning. Further, and this may not surprise many, the IRS’ key expert witness, who was hired to value the estate, lied multiple times on the stand and faltered when explaining the bases for his valuations.
Your estate may not be as high profile as Michael Jackson’s, however, it may have assets that are challenging to value, such as land, timber, art, guns, or collectibles. And proper valuation and estate planning are the keys to avoiding IRS overreach. The IRS may have missed out this month, but with deficit spending at levels we’ve never seen before, you can be sure they will be doubling down on collections efforts.
For more information regarding estate planning or probate matters, please call us at 404-255-7400 or email us at info@hoffmanestatelaw.com.
