Georgia fans of Michael Jackson's music may be interested to learn that on Oct. 20, the Internal Revenue Service admitted to making an error in its valuation of the late musicians estate. The report stated that the mistake actually increased the estate tax by approximately $29 million.The mistake was made over several master recordings that the IRS originally believed were partially owned by Jackson when he died in 2009. However, it was later determined that he was the sole owner of these recordings, which dramatically increased the value of his interests in those assets from $11 million to $91 million.
Determining the valuation of an estate such as Michael Jackson's can be incredibly difficult because there are often intellectual assets involved. For example, the IRS valued Jackson's name and likeness at approximately $434 million while his estate valued his name and likeness at just over $2,000. Part of the problem stems from the fact that. following the deceased musician's death, his music experienced a sort of revival that resulted in profits of approximately $700 million.
Because taxes can drastically increase or decrease based on both physical and intellectual property that are a part of high profile estates, it is likely that initial valuations may be high on the part of the IRS. This often leads to negotiations that can last for quite a while. In this particular case, it is likely that the IRS will end up receiving less than it is asking for.
When the IRS is valuing an estate, an estate planning attorney can potentially assist clients in minimizing any estate or gift tax that the beneficiaries may be responsible to pay. Additionally, they may assist with the settling of any other debts as well as the distribution of the assets to the beneficiaries.
Source: Wealth Management, "The Valuations of Michael Jackson's Estate are "Off the Wall"", David H. Lenok, October 20, 2014