UPDATE: Michael Jackson's Estate

More than seven years after his death in 2009, controversy continues to plague Michael Jackson’s estate.  The remaining problem, and it’s a big one, is the federal estate tax.

Jackson’s reputation was at a low point when he died, and his debts totaled half a billion dollars. His executors valued his name and likeness at just $2,105, and they tallied the total net estate at $7 million.  We don’t know what their reasoning was, but given the enormous size of Jackson’s debts, some observers at the time expected the estate to be bankrupt.

The IRS disagreed on the valuations.  Most importantly, the IRS figured that Jackson’s celebrity value was an astounding $434 million, which contributed to a total estate value of $1.3 billion!  Taxes and penalties could have run to $700 million.  Negotiations between the estate and the IRS have been ongoing since 2013, and the Service reportedly has backed off on the celebrity value, down to $161 million.

Even that figure is completely unrealistic, according to the lawyer for Jackson’s estate.  That is a far higher value than any other celebrity identity ever has commanded, and it is far more than Jackson himself earned from his celebrity (as opposed to his music) during his entire life!

The evidence that the estate low-balled the value of Jackson’s assets comes from the fact that the executors have netted about $1 billion for the estate during the period of administration.  This includes music sales, the documentary “This Is It,” a Cirque du Soleil tribute show and the sale of Jackson’s 50% stake in Sony/ATV Music Publishing.  They have paid off all of the debts owed at Jackson’s death and now have roughly $500 million for his heirs.

But there is still that estate tax to be paid, and a trial on the valuation began in February. The tricky question presented is, how much were Jackson’s assets worth at the moment of his death?  Without the skilled work of his chosen executors, they most likely would have been worth nothing at all.  How much of the success of those executors was foreseeable at Jackson’s death?  Certainly, he left them a lot to work with.  But was the surge in popularity of Jackson’s music and image foreseeable when he died?

This is a case for the record books.

(March 2017)

© 2017 M.A. Co.  All rights reserved.

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