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Feb 19

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How Much is Michael Worth?

The IRS is taking serious issue with Michael Jackson’s estate over the value of various assets upon which taxes are due.  According to a recent article in the Los Angeles Times (“LAT”), there is over a billion dollar discrepancy between the value reported by his estate after his 2009 death and the amount concluded by the IRS.  The major difference derives from the value of various intangibles, which require expert opinion.

LAT reports the following items as among the major differences:

Value Per Jackson Estate

Value Per IRS

Jackson’s Likeness

$2,105

$434,264,000

Trust with Beatles and Jackson’s Songs

$0

$469,000,000

Share of Jackson 5 Master Recordings

$11,193,000

$45,500,000

Separate Trust Assets

$2,200,000

$60,600,000

MJJ Ventures Inc

$13,730,000

$81,130,000

Automobiles

$91,600

$250,000

Other Tangible Personal Property

$0

$47,467,000

The IRS has asserted that these tremendous differences in value qualifies for a rarely assessed “gross valuation misstatement penalty”, which enables the IRS to obtain a 40% penalty rate (versus the standard 20%).  As a result, the IRS is demanding $197 million in penalties beyond the claimed $505 million tax bill.

On its face, suggesting a Trust containing Beatles’ and Jackson’s songs is valued at zero seems ridiculous.  However this zero valuation may be impacted by theories that Jackson had attempted (apparently unsuccessfully according to the IRS) to transfer this Trust to his children or saddled the music catalog with substantial debt ($320 million according to a CPA who testified during his recent wrongful death trial).

There are a variety of factors which can impact the value of the intangible items listed above.  Additional information, including guidance on valuing celebrity likeness and right of publicity, can be found in this related article.

About the author

Renee Howdeshell

Renee Howdeshell is a founding member of Fulcrum Inquiry, an accounting, finance and economic consulting firm that performs damage analyses for commercial litigation, forensic accountings, royalty & distribution audits, financial investigations, and business valuations. Ms. Howdeshell holds a degree in Finance and Marketing from the University of Virginia's McIntire School of Commerce and is a Certified Public Accountant (CPA) and a Certified Fraud Examiner (CFE). She has testified as an expert witness in federal court, CA state court and arbitration regarding the results of her work. She can be reached at (213) 787-4112 and her resume is available at www.fulcrum.com.

Permanent link to this article: http://betweenthenumbers.net/2014/02/how-much-is-michael-worth/

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