Michael Jackson Estate Hit By $700m Tax Cheating Bill

The value put on singer Michael Jackson’s estate by his executors has hit a wrong note with the Internal Revenue Service (IRS).

The IRS suggests the estate’s valuation of $7 million is way out of tune with their estimate of Jackson’s net worth of $1.125 billion.

As a result of the dispute, the IRS has slapped a massive tax bill of $702 million on the estate, made up of $505 million in unpaid taxes and $197 million for deliberately misstating the value of the estate.

The IRS alleges the executors lied about the value of Jackson’s assets to keep down the tax bill.

One dispute is about how much publishing rights to the Beatles back catalogue are worth.

The estate said nothing, but the IRS called in experts who said the price was nearer $469 million.

Tax penalties doubled

The trust representing the late singer’s estate sold his memorabilia in a massive auction, which increased his net worth by millions of dollars.

The main point the IRS and the executors are arguing is the value of Jackson’s image rights – which involve payments from companies wanting to his photos, video or trademarks to promote their products.

The estate valued Jackson’s image rights at a little over $2,000, whereas the IRS felt the figure was $434,264 million.

Despite this, Jackson was the highest earning celebrity in 2013 – dead or alive – mainly due to $160 million coming in from a Cirque du Soleil show based on his life and music.

The IRS team working on the estate valuation claimed the executors unashamedly tried to cheat the government out of hundreds of millions of dollars of taxes, so doubled the typical misrepresentation fine from 10% to 20% of the estate value.

Huge discrepancy in valuations

Jackson’s Neverland ranch is owned by estate and another company. The estate owns 12.5% of the property

The IRS also said Jackson’s interest in another trust was worth $60.6 million, not $2.2 million, claimed by the executors.

The tax investigators also found the estate had undervalued a fleet of cars, including three Rolls Royces and a Bentley. The value on papers they filed was put at $96,000, whereas the IRS said the real value was nearly $50 million.

Jackson died in June 2009.

The investigation shows how the IRS is scrutinising returns, especially of high net worth individuals, to ensure they wring as much tax as possible from assets and income.

The estate is asking for 15 years to pay the bill – but the IRS is taking a tougher line suggesting the executors should sell off assets to pay the bill more quickly.

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