US tax court hands win to Michael Jackson heirs

The Jackson estate's executors said it was a huge and unambiguous victory for Jackson's children.

A US tax court has handed a major victory to the estate of Michael Jackson in a years-long battle, finding that the Internal Revenue Service (IRS) wildly inflated the value of the singer’s assets and image at the time of his death.

The IRS had put the value of three disputed aspects of Jackson’s worth at the time of his 2009 death at about 482 million dollars (£347.4 million).

In his decision issued on Monday, Judge Mark Holmes put that figure at 111 million dollars (£79.9 million), far closer to the estate’s own estimates.

The estate’s executors said it was a huge and unambiguous victory for Jackson’s children.

“We’re pleased,” co-executor John Branca told The Associated Press.

“We always try to do the right thing. We tried from the beginning to follow the IRS rules and regulations, and relied on the best experts possible. It’s unfortunate that we were forced to litigate to protect ourselves.”

The judge most disagreed with the IRS over the value of Jackson’s image and likeness. While the IRS put it at 161 million dollars (£115.9 million), Mr Holmes ruled it was just 4.15 million dollars (£2.99 million).

He noted that despite Jackson’s acquittal on all counts at his 2005 trial for child molestation, the allegations continued to dog him, and while Jackson was selling out dates for a planned world tour when he died, he could not find a sponsor or merchandise partner.

Mr Holmes wrote in his decision: “The fact that he earned not a penny from his image and likeness in 2006, 2007, or 2008 shows the effect those allegations had, and continued to have, until his death.”

The tax fight had led to a bill of about 700 million dollars (£504 million) after an audit of the 2013 taxes on the estate, whose heirs are Jackson’s mother and three children, about 200 million dollars (£144 million) of it a penalty for underpaying.

A new tax bill will now be calculated using Mr Holmes’s figures, and it will include no penalties.

Also in dispute were Jackson’s 50% stake in Sony/ATV Music Publishing, a catalogue that includes 175 Beatles songs; and his interest in another catalogue that includes the songs he wrote.

Michael Jackson dress rehearsal
Michael Jackson seen soon before his death in 2009 (AEG Live/PA)

The IRS expert had put those assets at a combined total of about 320 million dollars (£230.4 million). The judge found that with Jackson’s debts, both combined were worth only 107 million dollars (£77.4 million) at the time of his death.

The ruling, awaited for years, resolves one of the few disputes that still hovered over Jackson’s estate nearly a dozen years after his unexpected death on June 25, 2009, after a lethal dose of the anaesthetic propofol.

Another was resolved a week earlier when a judge dismissed a lawsuit brought by choreographer Wade Robson, one of two men featured in the 2019 documentary Leaving Neverland, who alleged Jackson sexually abused him as a child.

The similar lawsuit of James Safechuck, the other man featured in the documentary, was dismissed in October. The men’s attorney called the decisions a dangerous precedent for protecting children, and said they plan to appeal.

With years of disputes cleared and a pandemic-forced delay on projects lifting, the estate’s leaders feel like they are in an excellent spot to again start promoting Jackson’s legacy.

“We’re at an absolute turning point,” Mr Branca said.

“I think people have come to realise that Michael was innocent of any charges and unable to protect himself. We’ve got a wonderful Broadway play coming, we’ll be reopening our Cirque du Soleil show soon and we’ve got some surprises coming.”

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