Michael Jackson was larger than life, but even in his death he remains in the headlines. Sadly, the headlines haven’t been too uplifting, and the most recent example of this only strengthens that sentiment. The Jackson estate has been cited by the Internal Revenue Service for “gross valuation misstatement” after the estate’s executors said Jackson was worth $7 million at the time of his death. The IRS claims that Jackson was actually worth $1.125 billion.
The gross valuation misstatement entitles the IRS to up the penalty for underpayment on taxes, which normally is 20 percent. In gross valuation misstatement cases, the penalty can go up to 40 percent. In this case, the IRS says the Jackson estate owes them roughly $702 million in taxes and penalties.
There are a couple of aspects to this story that are noteworthy, and the first is the use of the term “gross valuation misstatement.” It is rare, especially with estate valuations, for this term to be invoked by the IRS.
However, at the same time, it isn’t too surprising that the Jackson estate was audited, given the spotlight and potential wealth that is associated his Jackson’s name. It is a common gripe about the IRS that it targets wealthier tax filings or estates, and depending on how you look at it, that strategy could be unfair or just logical. But in any case, it serves as a reminder to those who are dealing with the IRS and have significant assets, finances or taxes associated with the federal agency.
Source: Los Angeles Times, “Michael Jackson estate embroiled in tax fight with IRS,” Jeff Gottlieb, Feb. 7, 2014
