US Tax Court Rules On Value Of Michael Jackson’s Name And Likeness

written on behalf of Feigenbaum Law

Nearly 12 years after the death of Michael Jackson, a US Tax Court has ruled on the value of the late pop star’s name and likeness. The dispute arose between Jackson’s estate and the Internal Revenue Service. The two parties had vastly different views about the value of Jackson’s name and likeness, particularly as a result of the allegations he faced of sexual molestation.

A huge gap in estimated values

The decision, which was reported about in the New York Times, stemmed after the IRS determined Jackson’s name and likeness were worth $161 million when the singer died, placing a huge tax burden on the estate. The estate, meanwhile, said that the singer’s reputation had been in tatters leading up to his death, and valued his name and likeness at just $2,015.

What caused the differences in valuation?

The decision tracked Jackson’s fame and finances through the singer’s life, which included a series of high and low points. In the later years of his life, Jackson’s reputation was all but ruined following allegations of sexual molestation. The court stated that “the fact that he had not earned a penny from his images and likeness in 2006, 2007 or 2008 shows the effect those allegations had, and continued to have, until his death.” When Jackson died he had been selling out a planned world tour, but his legal problems were making it difficult for him to find a sponsor or merchandise partner for a planned world tour.

Despite this, the IRS put the value of his name and likeness as well as two other aspects of his worth at $482 million. This included $161 million for his name and likeness. The other disputed aspects were his ownership of the catalogue for songs he wrote as well as his 50% stake in Sony/ATV Music Publishing, which owns the rights to 175 songs by the Beatles. The estate was eventually faced with a tax bill of $700 million, including a $200 million penalty for underpaying taxes owed.

Judge puts value on name and likeness

The court determined that Jackson’s name and likeness were worth just $4.15 million at the time of his death. The combined value of the music catalogues he owned was put at $320 million, though that amount was reduced to $107 million due to debts Jackson had at the time of his death.

In arriving at its valuation, the court said the IRS had focused on the singer’s huge success he experienced after his death, including the sales of assets, and a concert film while ignoring the issues he was facing 12 years ago. Meanwhile, he criticized the estate for estimating his name and likeness were only worth a little over $2,000, stating they were valuing “one of the best-known celebrities in the world — the King of Pop — at the price of a heavily used 20-year-old Honda Civic.”

The decision means the estate will not owe any additional tax. This must come as good news, despite reports that Jackson’s estate earned $48 million last year alone.

If you are facing a tax controversy issue, contact our tax lawyers, financial planners, and accountants for superior representation. Our team will take the time to understand the details of your case and create a nuanced plan to achieve results. Contact us about making your transition across the border as smooth as possible. We offer services to clients in the US, Canada and around the world. Contact us to learn more about how we can help or call us at (905) 695-1269 or toll free at (877) 275-4792.