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King-size estate-tax dispute, part 1: IRS vs. Jackson's executors

When many of us think of taxes, we think of the annual tax-filing ritual with the IRS that builds to a climax on or around April 15.

There are, however, many other types of taxes. Consumers pay sales taxes, homeowners pay property taxes and so on.

In this two-part post, let's look at a high profile case raising issues about estate taxes.

The case features the entertainer Michael Jackson, one of the most widely followed singers in U.S. history. The man known as the King of Pop died in 2009 after receiving a powerful anesthetic drug from his doctor as he embarked on a comeback tour.

The untimely death produced a torrent of litigation, including criminal charges against Jackson’s doctor and challenges to Jackson’s will.

More than four years after Jackson’s death, all of the litigation is not yet concluded. The IRS and Jackson’s estate are engaged in tax litigation over what the IRS says are unpaid estate taxes.

There is a lot of money involved. The IRS is seeking more than $700 million from the estate. That amount includes $197 million in tax penalties.

The dispute turns on the value of Jackson’s estate at the time of his death. The IRS and Jackson’s executors are poles apart on the value to be placed on Jackson’s estate.

The IRS has pegged the value of the estate at $1.125 billion. Jackson’s executors put it at only a little more than $7 million.

In other words, the numbers are so far apart they seem to be barely from the same planet.

The IRS, however, has dug in its heels. The agency contends that the estate tax return submitted by Jackson’s executors for his estate contained a grossly misstated valuation.

Source: Los Angeles Times, "Michael Jackson estate embroiled in tax fight with IRS," Jeff Gottlieb, Feb. 7, 2014

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