Michael Jackson’s estate says he was worth only $7 million when he died, but the IRS’s claims the Michael Jackson estate owes them $702 million in taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es and penalties on $1.125 billion in assets.
The IRS attributes a big chunk of that $1.125 billion to MJ’s image and likeness, which it values at over $434 million. It’s likely that Jackson’s estate is closer to $1 billion than $7 million, but a $434 million valuation on image and likeness brings up an important issue with the estate taxAn estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits, at the time of death. The tax is paid by the estate itself before assets are distributed to heirs. . From the Los Angeles Times:
“Most estates are much easier to value than Jackson's. You can look up the prices of stocks and bonds. You can check comparable properties for real estate. With a business, you can compare sales with a similar firm. But how do you value Jackson's likeness?”
This is a good question. When people think of the estate tax, they think of a large pile of cash transferring hands, and it just makes sense for the government to take a piece from the privileged. But this estate tax case isn’t this black or white. The Jackson estate could end up losing a lot of money due to the estate tax if the IRS gets its way.
This of course feeds into another major issue with the estate tax: the Jackson estate will be willing to pay a lot in legal fees in order to prevent the IRS from valuing the estate to be over a billion. One of the major problems with the estate tax is that is raises very little revenue for the U.S. government (approximately .42 percent of total federal collections), but it costs perhaps more than this in compliance costs (legal fees, estate planning, accountants, and life insurance providers). This is money that would have been otherwise spent in more useful ways than in fighting the IRS.Share