JACKSON’S ESTATE VALUE STILL HELD UP IN TAX COURT

Most of us are familiar with the meteoric and often controversial career of the King of Pop, Michael Jackson. Even though he passed away in June 2009, his estate is still facing a significant amount of legal action, with estate valuation playing a major role. Now, the battle continues to rage as administrators work to calculate estate taxes related to financial assets that have been accumulated since Jackson’s death.

Many Florida residents may not have realized that Jackson’s estate netted about $60 million for an advance on the biopic “This Is It” film that was released shortly after his death. Further, tribute tours and joint ventures with other acts, such as Cirque du Soleil, have proved profitable for the estate, even after Jackson’s death. Not only did his estate net about $170 million in 2011, but the profits continued to roll in, with an additional $145 million in 2012. The Internal Revenue Service, of course, wants its share of those profits.

Floridians who are working to finalize their estate plans should know that income earned by an estate is subject to the same income tax provisions as those earned by a living individual. Luckily, Florida does not have a state income tax, but the federal government can still seek its share. In Jackson’s case, the IRS alleges that the estate owes more than a half-billion dollars in estate taxes, on top of nearly $200 million in associated penalties. In 2009, when Jackson died, the personal exemption for estate taxes was just $3.5 million, far less than the value of his overall holdings. Now, the exemption has been raised to $5.25 million per person, after which assets can be taxed up to 45 percent.

Estate appraisal relies on one key calculation: assets minus liabilities. That is the only amount that is taxed. Even if an individual has $10 million in assets, if he or she is saddled with $9 million in debt, only $1 million is taxable. That is the fact that is contested in this case. Attorneys for Jackson’s estate say that his net value was just $2,105. The IRS is seeking taxes on a $434 million estate. As you can see, estate valuation can be a tricky subject that requires the guidance of a qualified team of probate attorneys.

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Written by Luis E. Barreto

Luis E. Barreto

Luis is a probate and guardianship litigator with over 23 years of experience in the field. Determination of heirs, will contests, breaches of fiduciary duty, removal of personal representatives, guardians and trustees are just some of the types of litigation he addresses. In addition, he administers non-contested estates and guardianships.