Michael Jackson Estate, IRS Still $500M Apart, Post-Trial
By David Hansen
Law360 (May 2, 2018, 5:11 PM EDT) -- More than a year after trial, the estate of Michael Jackson and the Internal Revenue Service are down to disputing the value of three assets — the singer’s post-mortem publicity and two trusts — with more than $500 million at issue, according to a post-trial brief filed by the estate Tuesday.
The IRS values Jackson’s right of publicity at $161.3 million. Its expert witness, Weston Anson, based the valuation on five “opportunities” a hypothetical purchaser might use to exploit Jackson’s image: a film; Broadway musical; branded merchandise; themed attractions, such as video games; and a Cirque du Soleil-themed production.
The value “defies credulity,” the estate's brief argued. A film, musical and Cirque show would be exempted from post-mortem rights under California law, it said. Projected revenues for themed attractions were calculated without analyzing if a market existed when Jackson died in 2009 or if California law exempts video games.
Anson’s projected value of branded merchandise was flawed because he compared it to contracts for merchandise of live celebrities, none of whom had “tainted reputations,” it argued.
Jackson’s image suffered greatly from his 1993 child abuse allegations, lowering the value of his after-death publicity, the estate said. It presented an expert witness at the February 2017 trial in U.S. Tax Court who valued Jackson’s post-mortem publicity at just over $3 million.
The IRS valued Jackson’s New Horizon Trust II at $206.3 million. It encompasses Jackson’s business interest in the Sony/ATV music publishing company. The brief said, however, the valuation overstated cash flow and didn’t account for Jackson’s lack of control over the trust, which would lower its value to an investor purchasing his rights. The valuation also did not account for more than $300 million that Jackson borrowed against it during his lifetime and had yet to repay, bringing its value to zero, the brief said.
Jackson’s New Horizon Trust III owns Mijac Music, a music publishing catalog owning interest in copyrights to songs Jackson wrote or co-wrote, and songs by other writers. The IRS inflated its value to $182.9 million, the estate said, saying the trust’s fair market value was much lower — $70.9 million — as determined by the estate’s expert witness. Adding cash balances and subtracting liabilities reduced the value to $2.27 million, the estate said.
Jackson’s estate had petitioned the tax court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.
According to the notice, the IRS had adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.
Legal representatives for the estate and the IRS could not be immediately reached for comment.
Jackson's estate is represented by Avram Salkin, Steven Richard Toscher, Robert S. Horwitz and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC, Jeryll S. Cohen of Freeman Freeman & Smiley LLP, and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.
The IRS is represented in-house by William M. Paul, Donna F. Herbert, Bruce K. Meneely, Sherri Spradley Wilder and Jordan Musen.
The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.
--Additional reporting by Bryan Koenig, Chuck Stanley and Jimmy Hoover. Editing by Robert Rudinger.
Der Estate und die Steuerbehörde liegen, obwohl der IRS die Vermögenswerte schon nach unten korrigiert hat, immer noch 500 Millionen Dollar auseinander.
Der Estate argumentiert, dass die Höhe der Vermögenswerte, die seitens der Steuerbehörde ermittelt wurden, leichtgläubig/naiv seien. So sei die Cirque Show nach kalifornischem Recht zB von Post mortem Rechten befreit. Die Steuerbehörde habe Einnahmen berechnet, ohne nachzuprüfen, ob es für gewisse Attraktionen überhaupt einen Markt gab als Jackson starb, oder ob das kalifornische Gesetz Videospiele ausnimmt.
Weiterhin sei der Wert von Markenartikeln seitens der Steuerbehörde fehlerhaft berechnet worden, weil sie mit den Verkäufen von Markenartikeln lebender Künstler, deren Image keinen Schaden erlitten habe, verglichen wurden, sagt der Estate. Jacksons Image litt unter den Missbrauchsvorwürfen, so der Estate weiter. Dieses verringerte den Wert seiner Werbung nach seinem Tod.
Beide Parteien konnten nicht sofort für eine persönliche Stellungnahme erreicht werden.