Getting contacted by the Internal Revenue Service (IRS) is one thing that can put everyone on equal footing. It does not matter if you are a regular Joe the Plumber or the King of Pop, a phone call or mailing from the IRS will likely increase your heart rate and cause you to break into a cold sweat.
Unfortunately, attempts by the IRS can occur even posthumously. This is currently being highlighted with an attempt to hold the estate of the late Michael Jackson liable for allegedly evading tax obligations.
What are the accusations? A recent piece in The Wall Street Journal discusses the issue, noting the IRS contends that the King of Pop's estate undervalued Michael Jackson's name and likeness rights.
As such, the estate is accused of owing the federal government taxes and penalties.
How much is a name worth? This is where it gets complicated. At the time of his death, Mr. Jackson's image was arguably tainted by allegations of child abuse. Although these allegations were mostly dismissed, the social damage to his reputation along with rather strange public behavior was thought to have a negative impact on the value of his name. As a result, those heading his estate valued his likeness at a couple thousand dollars.
The IRS took issue with this valuation. In 2013 the federal agency contended that the value was closer to $434 million. It has since lowered its estimate to $161 million. Those representing the estate take issue with the estimation, noting no other entertainment figure, including Marilyn Monroe and Elvis, have been valued so high.
What kind of penalties could the estate face in this case? If successful, the estate could be required to pay over $500 million in taxes along with an additional $200 million in penalties.
What can others learn from Michael Jackson's estate? As noted above, the level of fame does not matter when the IRS comes knocking at your door. It is wise for those who are contacted by the IRS to seek legal counsel. An experienced tax attorney can review your situation and deal with the IRS on your behalf, better ensuring your legal rights are protected.