The Internal Revenue Service has filed documents in U.S. Tax Court claiming that Michael Jackson’s estate has severely undervalued his image and music catalog, telling the pop star’s executors that the estate owes an extra $505 million in taxes, plus $197 million in penalties.
While the Jackson estate’s executors valued his net worth at a little over $7 million when he died in June 2009, the IRS claims it was more like $1.125 billion, according to the Los Angeles Times.
The tax agency viewed the undervaluation of the estate as so egregious that it assessed a gross valuation misstatement penalty of 40 percent on the estate. One of the items that the IRS is disputing is the value of Jackson’s likeness. While Jackson’s estate valued it at only $2,105, the IRS estimated it to be a whopping $434.264 million. The estate’s lowball estimate may be because Jackson’s public image was severely tarnished before he died because of widely publicized allegations of child molestation.
In addition, the estate valued Jackson’s interest in the trust that owns songs from his own music catalog and that of The Beatles at zero, while the IRS estimated it to be worth $469 million. A CPA testified at a trial last year over the wrongful death lawsuit against Jackson’s doctor Conrad Murray that Jackson had borrowed $320 million against the catalog, which may be why the estate had estimated the value at zero.
The estate also valued Jackson’s interest in a different trust at $2.2 million, while the IRS estimated it to be $60.6 million. While the estate valued Jackson’s interest in an investment entity known as MJJ Ventures at about $14 million, the IRS estimated it at $81.13 million.
Jackson’s estate also valued his rights to master recordings of the Jackson 5 at $11.193 million, while the IRS valued them at close to $45.5 million.