In our previous post, we discussed how important it can be to ensure that a property has been properly evaluated, should the owner pass away. If mistakes are made in the valuation of a home, business or other asset, this can cause a great deal of headaches and confusion for those who are tasked with administering an estate and those who have something to gain or lose as a result.
Another example of how crucial it can be to have an accurate and comprehensive estate valuation in place, but on a much larger scale, can be seen in the estate of Michael Jackson. The iconic musician passed away in 2009, but disputes over his will and estate have stretched on for many years. The most recent issue appears to involve the Internal Revenue Service and an alleged misstatement of Jackson’s estate valuation. When estates have a very high value, it may be necessary to file an estate-tax return, which is where the IRS discovered some strange reports from Jackson’s estate executors.
According to reports, the IRS requested that Jackson’s estate must repay a whopping $702 million in taxes and penalties. The request stems from the fact that the IRS claims Jackson’s estate was undervalued by more than $1 billion in tax documents. So what is the reason for this extreme discrepancy?
Apparently, the estate and the IRS seriously disagreed when it came to assigning values to Jackson’s complicated assets. Most significantly in this case, the IRS reportedly believes Jackson’s image is valued at more than $434 million; the estate puts that number closer to just $2,000. And Jackson’s interest in a trust that owns songs by the late singer and the Beatles was valued by the IRS at $469 million; the estate claimed Jackson’s interest in the trust was actually zero. It could be a long time before an agreement is reached in this case.
There can be numerous challenges when it comes to placing a value on complicated assets that cannot simply be looked up or compared to other scenarios. When there is so much at stake, it can be crucial for people with complex estates and those who are tasked with executing the estate to speak with an attorney. In some cases, there may be ways to avoid enormous penalties and complicated legal disputes.
Source: The Los Angeles Times, “Michael Jackson estate embroiled in tax fight with IRS,” Jeff Gottlieb, Feb. 7, 2014