Michael Jackson Foundation Challenges $702 Million Tax Bill
Michael Jackson has earned more than half a billion dollars since his death, and now “Uncle Sam” wants his share. It seems that in a time of economic turmoil, the government is also trying to cash in on the huge name of Michael Jackson—especially for a staggering $702 million!
Michael Jackson has remained one of the most newsworthy stars even four years after his death. It has recently been reported that his foundation, on July 26, objected to a tax bill dated May, issued by the U.S. tax authority. The foundation protested the high amount of tax assessed and, in its protest form, wrote that the value of Michael Jackson’s assets—including real estate, cars, and so on—had been estimated at more than their actual value.
Over the four years since Michael’s death, his name has consistently appeared among the rich in Forbes magazine. In 2010 and 2011, he was the highest-earning person among both living and deceased artists. In 2012, after Elizabeth Taylor—who had died the previous year—he ranked second. Last month, The Independent wrote that four years after his death, Michael Jackson is still the highest-earning artist among the dead and the living. In 2011, the Michael Jackson Foundation had income of $170 million, and in 2012 it had $145 million.
News reports, Michael’s enormous impact on the media, his boundless fame, and his die-hard fans—along with his saint-like image as the “King of Pop” and an everlasting legacy after his death—have all contributed to the idea that Michael Jackson’s wealth is limitless.
While the case regarding the role of AEG in Michael Jackson’s death is still ongoing, another court case will be formed to address Michael Jackson’s finances and clarify the fate of this assessed tax.
If the tax authority concludes that the foundation underestimated the value of the assets, it could impose a heavy penalty on them. In this situation, the Michael Jackson Foundation insists that the tax authority made a mistake in its estimates. They are unhappy that the agency has stepped beyond its limits.
The IRS bill of $702 million includes $505.1 million in taxes and $196.9 million in tax penalties.
Howard Weitzman, the foundation’s lawyer, said in a statement that they believe the court’s ruling will be in the foundation’s favor, and also that so far the foundation has paid more than $100 million in taxes to the government and is fully compliant with tax laws.
The foundation would not have to pay any penalties unless the court rules in favor of the tax authority. But Forbes writes that, for certain reasons, it is unlikely that the IRS will be able to convince the court.
First, the tax claimed by the IRS is income tax of the deceased individual, not income tax on the person’s personal assets—and therefore it should be calculated based on the individual’s assets at the time of death. In 2009, the year Michael died, the maximum tax rate on net assets was 45%. The IRS believes that at the time of death Michael had $1.5 billion in wealth, which is not true.
Although the King of Pop had far more business and commercial intelligence than people think, and during his career amassed a huge amount of assets and wealth, at the time of his death he was certainly not a billionaire. His name did not appear in Forbes’ list of billionaires that year—or in any year.
Michael Jackson had hundreds of millions of dollars in assets—for example, a 50% stake in the Sony/ATV catalog, which was worth $750 million at the time and is now worth even more. There were other assets as well, such as the Michael Jackson catalog (his songs), real estate, and a vast collection of artworks.
But he also had debts close to half a billion dollars, meaning his net worth was under one billion dollars and less than the $702 million tax assessed today.
Reports also indicate that most of the estimated tax by the IRS comes from valuing Michael Jackson’s name and reputation at $434 million, while the foundation has stated that figure as $2,105. Although the latter number is very low, the $434 million figure was also extremely high at the time of Michael’s death. Based on the idea that after 1993 (following the accusations), he had not signed any advertising contract with any company, and in 2008—one year before his death—he was not listed among Forbes’ highest-earning musicians. That year, the band Police, with income of $115 million, took first place.
The value of every item related to Michael Jackson has skyrocketed after his death. His name and image have once again become more powerful in the world of advertising, from Pepsi soda cans to powerful and strong gaming devices. Two Cirque du Soleil shows based on Michael Jackson’s music are currently being held—one in Las Vegas and the other around the world—and his music remains as popular as ever.
However, the deceased person’s tax is calculated based on the value of his assets at the time of death, not at the time the tax bill is issued. In other words, the tax taken from the Michael Jackson Foundation should be based on what Michael Jackson had in 2009, not in 2013. For this reason, Forbes writes that it is unlikely the $702 million tax case will be approved by the court.
Forbes also notes that if Michael had died one year later, in 2010, he would not have owed any tax, because due to certain legal changes, in that year the tax on the deceased person would not have been collected.
Source: eMJey.com / Forbes & Bloomberg
Michael Jackson has earned more than half a billion dollars since his death, and now “Uncle Sam” wants his share. It seems that in a time of economic turmoil, the government is also trying to cash in on the huge name of Michael Jackson—especially for a staggering $702 million!
Michael Jackson has remained one of the most newsworthy stars even four years after his death. It has recently been reported that his foundation, on July 26, objected to a tax bill dated May, issued by the U.S. tax authority. The foundation protested the high amount of tax assessed and, in its protest form, wrote that the value of Michael Jackson’s assets—including real estate, cars, and so on—had been estimated at more than their actual value.
Over the four years since Michael’s death, his name has consistently appeared among the rich in Forbes magazine. In 2010 and 2011, he was the highest-earning person among both living and deceased artists. In 2012, after Elizabeth Taylor—who had died the previous year—he ranked second. Last month, The Independent wrote that four years after his death, Michael Jackson is still the highest-earning artist among the dead and the living. In 2011, the Michael Jackson Foundation had income of $170 million, and in 2012 it had $145 million.
News reports, Michael’s enormous impact on the media, his boundless fame, and his die-hard fans—along with his saint-like image as the “King of Pop” and an everlasting legacy after his death—have all contributed to the idea that Michael Jackson’s wealth is limitless.
While the case regarding the role of AEG in Michael Jackson’s death is still ongoing, another court case will be formed to address Michael Jackson’s finances and clarify the fate of this assessed tax.
If the tax authority concludes that the foundation underestimated the value of the assets, it could impose a heavy penalty on them. In this situation, the Michael Jackson Foundation insists that the tax authority made a mistake in its estimates. They are unhappy that the agency has stepped beyond its limits.
The IRS bill of $702 million includes $505.1 million in taxes and $196.9 million in tax penalties.
Howard Weitzman, the foundation’s lawyer, said in a statement that they believe the court’s ruling will be in the foundation’s favor, and also that so far the foundation has paid more than $100 million in taxes to the government and is fully compliant with tax laws.
The foundation would not have to pay any penalties unless the court rules in favor of the tax authority. But Forbes writes that, for certain reasons, it is unlikely that the IRS will be able to convince the court.
First, the tax claimed by the IRS is income tax of the deceased individual, not income tax on the person’s personal assets—and therefore it should be calculated based on the individual’s assets at the time of death. In 2009, the year Michael died, the maximum tax rate on net assets was 45%. The IRS believes that at the time of death Michael had $1.5 billion in wealth, which is not true.
Although the King of Pop had far more business and commercial intelligence than people think, and during his career amassed a huge amount of assets and wealth, at the time of his death he was certainly not a billionaire. His name did not appear in Forbes’ list of billionaires that year—or in any year.
Michael Jackson had hundreds of millions of dollars in assets—for example, a 50% stake in the Sony/ATV catalog, which was worth $750 million at the time and is now worth even more. There were other assets as well, such as the Michael Jackson catalog (his songs), real estate, and a vast collection of artworks.
But he also had debts close to half a billion dollars, meaning his net worth was under one billion dollars and less than the $702 million tax assessed today.
Reports also indicate that most of the estimated tax by the IRS comes from valuing Michael Jackson’s name and reputation at $434 million, while the foundation has stated that figure as $2,105. Although the latter number is very low, the $434 million figure was also extremely high at the time of Michael’s death. Based on the idea that after 1993 (following the accusations), he had not signed any advertising contract with any company, and in 2008—one year before his death—he was not listed among Forbes’ highest-earning musicians. That year, the band Police, with income of $115 million, took first place.
The value of every item related to Michael Jackson has skyrocketed after his death. His name and image have once again become more powerful in the world of advertising, from Pepsi soda cans to powerful and strong gaming devices. Two Cirque du Soleil shows based on Michael Jackson’s music are currently being held—one in Las Vegas and the other around the world—and his music remains as popular as ever.
However, the deceased person’s tax is calculated based on the value of his assets at the time of death, not at the time the tax bill is issued. In other words, the tax taken from the Michael Jackson Foundation should be based on what Michael Jackson had in 2009, not in 2013. For this reason, Forbes writes that it is unlikely the $702 million tax case will be approved by the court.
Forbes also notes that if Michael had died one year later, in 2010, he would not have owed any tax, because due to certain legal changes, in that year the tax on the deceased person would not have been collected.
Source: eMJey.com / Forbes & Bloomberg