By: Barry E. Haimo, Esq.
March 29, 2018
Is Michael’s Jackson’s Name and Likeness Worth Only $2,105?
For estate tax filing, the executors for Michael Jackson’s estate claimed that the value of his name and likeness was tarnished, thus lowering its value. But is it worth only $2,105?
The IRS doesn’t think so.
They argued it should be valued quite a bit higher: at $434 million. This would mean $700 million in taxes and penalties against the estate.
After Jackson’s death in 2009, his legacy was complicated by allegations of erratic behavior, prescription drug abuse, plastic surgery obsessions, child abuse, and $400 million of debt, and the legal repercussions of those issues continue today.
However, the tragic circumstances of his death seemed to cause a resurgence of his popularity. In fact, since his passing, his estate has grown through a number of business deals:
- $290 million in gross revenue from “This Is It”, the documentary based on rehearsal footage from his last scheduled tour
- A $250 million deal with Sony to release 10 albums
- $360 million in box-office revenue from two Cirque du Soleil tribute shows
- A $750 million acquisition by Sony Corp of Jackson’s stake in Sony/ATV Music Publishing
However, for estate planning purposes, the value of assets at the date of death must be used. The question is: was the low valuation correct based on his “tarnish reputation”? Or were the future lucrative deals foreseeable, as the IRS claims, and thus should have been considered in the valuation?
The estate is arguing that the cause of this success was the business acumen of the estate executors who worked to revive Jackson’s image in order to produce revenue for his children.
At the end of 2017, a US Tax Court judge barred the IRS from seeking the full penalties sought due to a failure to comply with certain procedural requirements.
“The court’s order denying the IRS’s request to reopen the trial record was well reasoned and could prevent the government from seeking penalty assessments on their claim against the Estate of Michael Jackson,” according to a lawyer for Jackson’s estate, Howard Weitzman.
The case – Estate of Michael J. Jackson v. IRS, 17152-13, U.S. Tax Court (Washington) – is still ongoing and may have significant implications for how celebrities handle estate planning in the future. But there are also lessons to take away for those who are not celebrities.
If you own unique assets, which could include intellectual property, patents, arts, and antiques, it is wise to have an appraisal completed by an accredited third-party in order to protect yourself.
Additionally, it is important to select the right executors for your estate. Michael Jackson selected an entertainment attorney, John Braca, and a music executive, John McClain. The pair had the necessary skills and experience to make the most of his estate.
Don’t just consider how much you trust or love the individual you select as your executor, but also look at whether they have the know-how to help manage it successfully after you pass.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
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