IRS and Jackson estate battle over intangible assets

Posted by Angela Holliday Hansen Esq. | Feb 16, 2014 | 0 Comments

Maryland readers may be interested to know that the case of Michael Jackson is in court again, but this time it is his estate that is in Tax Court. The main issue is a conflict in theĀ estate valuation; Mr. Jackson's executors say that it is in the $7 million range, while the Internal Revenue Service estimates a value of $1.125 billion. The latter valuation has caused the IRS to allege that $702 million is owed by the estate for taxes and penalties.

The difference is due to the fact that both the estate and the IRS are trying to place a value on the intangible asset of Mr. Jackson's image and how much income it will generate through the sale of such things as T-shirts and posters. The estate put the value of Mr. Jackson's likeness at $2,105, but the IRS alleges that it is worth $434 million. There are many unknowns regarding the value of a person's image, and experts say that the IRS does not have a defined method to make the determination.

One method that could be agreed upon is putting a value on what is called "remaining useful life" of the image, though there still may be disagreements over what will happen to the income that is provided by the image over time and whether it will increase or decrease. One of the ways that estate executors might handle this is to bring in an accountant, a skilled appraiser and an attorney.

Estate planning for the wealthy may bring complicated issues, though those of more modest means could learn something from it that may benefit their situation. For example, life insurance can be matched up to the value of what intangible assets may produce. Another solution is to place a value on the intangible assets and transfer them to a trust, thus removing them from the estate.

About the Author

Angela Holliday Hansen Esq.

Angela Holliday Hansen, Esq., is a former big firm corporate attorney who now practices family law in Rockville Maryland. Ms. Hansen oversees complex estate administration and drafts...

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