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Michael Jackson Estate Wins Ruling in IRS Battle

CELEBRITY NEWS - Karen Smith Article

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The battle over the value of Michael Jackson’s assets has ended with a Los Angeles judge dealing a significant reduction — and a win for the Jackson estate in an ongoing tax dispute. Per the Los Angeles Times, U.S. Tax Court Judge Mark Holmes ruled on May 3 that Jackson’s assets were worth $111 million at the time of his 2009 death, more than three-quarters less than the IRS’s estimate of $482 million.

Jackson’s estate had been arguing for a lessened valuation after the IRS claimed it owed $700 million in unpaid taxes and penalties, claiming Jackson’s controversies (including allegations of child sexual abuse) and dip in popularity ahead of his death, along with his financial mismanagement, cut his assets’ worth significantly. Chiefly, the court valued Jackson’s likeness and image at his death at $4.15 million, significantly below the IRS’s estimated $161 million. According to the New York Times, the Jackson estate argued his likeness and image were worth just $2,105. Holmes also took issue with that number, ruling the estate was “valuing the image and likeness of one of the best known celebrities in the world — the King of Pop — at the price of a heavily used 20-year-old Honda Civic.”

Holmes found most of the value in Jackson’s assets came from his own catalogue, which he pinned at $107 million — close to the IRS’s suggested $114 million. Yet he valued Jackson’s then-50 percent stake in Sony/ATV Music Publishing at zero because of debts. (Sony/ATV bought out Jackson’s share of the catalog, which included the Beatles’ music, for $750 million in 2016.) Holmes maintained the assets’ value had to be for the time of Jackson’s death, while noting that was “much less than their value much later under the estate’s management.”

The New York Times observed that the ruling could have repercussions “as a guide for how celebrity estates may be valued, and for their tax liabilities,” especially for the currently disputed estates of Prince and Aretha Franklin. In a statement to the newspapers, the Jackson estate’s co-executors, John Branca and John McClain, said the ruling “clearly exposes how unreasonable the I.R.S. valuation was and provides a path forward to finally resolve this case in a fair and just manner.”

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