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IRS Wants to Heavily Tax Michael Jackson's Estate
Author: Scarinci Hollenbeck, LLC
Date: February 19, 2014
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It has been five years since Michael Jackson passed away, and that time has been filled with multiple controversies. It appears as though that is going to continue, as the King of Pop’s estate and the Internal Revenue Service are currently in a battle over how much his estate was worth at the time of his death.
Tax law requires that Jackson’s estate be charged based on the current estate tax rate, however, there is some confusion over just how much he was worth. The IRS recently informed Jackson’s executors that the estate owes $505 million in taxes and another $197 million in penalties, according to the Los Angeles Times.
When Jackson passed away, the executors of his estate claimed his net worth was around $7 million, but the IRS said it was $1.125 billion, which is the reason for the big tax bill. In addition to the $505 million in taxes owed, the IRS claimed that the inaccuracy was so great that the estate is charged a gross valuation misstatement penalty, which allows the government to double the 20 percent penalty for underpayment.
“This is something unusual,” estate tax expert Andrew Katzenstein told the news source. “He was one of the premier entertainers of our time. So there are really no comparables, and it leaves the valuation question open to a huge range of possibilities. Do I think his likeness was worth $2,105? No. But was it worth $400 million?”
According to Time Magazine, the Jackson estate could go a couple routes to pay off this tax bill. It might sell of some assets, or it could ask for a payment plan of around 15 years.
- Practices: Tax, Trusts & Estates
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IRS Wants to Heavily Tax Michael Jackson's Estate
Author: Scarinci Hollenbeck, LLC
It has been five years since Michael Jackson passed away, and that time has been filled with multiple controversies. It appears as though that is going to continue, as the King of Pop’s estate and the Internal Revenue Service are currently in a battle over how much his estate was worth at the time of his death.
Tax law requires that Jackson’s estate be charged based on the current estate tax rate, however, there is some confusion over just how much he was worth. The IRS recently informed Jackson’s executors that the estate owes $505 million in taxes and another $197 million in penalties, according to the Los Angeles Times.
When Jackson passed away, the executors of his estate claimed his net worth was around $7 million, but the IRS said it was $1.125 billion, which is the reason for the big tax bill. In addition to the $505 million in taxes owed, the IRS claimed that the inaccuracy was so great that the estate is charged a gross valuation misstatement penalty, which allows the government to double the 20 percent penalty for underpayment.
“This is something unusual,” estate tax expert Andrew Katzenstein told the news source. “He was one of the premier entertainers of our time. So there are really no comparables, and it leaves the valuation question open to a huge range of possibilities. Do I think his likeness was worth $2,105? No. But was it worth $400 million?”
According to Time Magazine, the Jackson estate could go a couple routes to pay off this tax bill. It might sell of some assets, or it could ask for a payment plan of around 15 years.