Recently, Scott Weingust, Managing Director in Stout’s Intellectual Property/Intangibles Valuation practice and Aaron Stumpf, Managing Director in Stout’s Trust & Estate practice spoke on Bloomberg’s TaxGirl podcast on the topic of valuing Michael Jackson’s intellectual property and estate after his death.

Michael Jackson passed away on June 29, 2009. While it is clear that he was worth millions at the time of his death, how much his estate was truly worth was unclear. Beginning in 1993, Jackson endured a wave of negative publicity stemming primarily from allegations associated with the sexual abuse of various children. While he was never found guilty, the allegations significantly affected his ability to earn sponsorship and merchandising income, even though his music continued to sell relatively well. While his estate claimed that Jackson’s likeliness and image were only worth approximately $2000, the IRS claimed it was actually worth upwards of $400 million. As a result, the Commissioner issued a notice of deficiency that adjusted the Estate’s reported values resulting in a conclusion that the Estate had underpaid Jackson’s estate tax by approximately $500 million and accruing penalties of nearly $200 million.

The issue ended up in the United States Tax Court (the Court) where seven years later, it was determined that Jackson was worth considerably less than what the IRS claimed.

How this happened and what this means for other estates became a hot topic for valuation experts and estate planning professionals. This podcast addresses the following topics regarding Jackson’s estate valuation, image, and likeliness:

• Why there was such a wide discrepancy between the estate and IRS
• Timing considerations between the date of his passing and when the case was taken to court, approximately 12 years later
• How to value a likeness using various valuation approaches and how often is it revisited
• How was the estate able to convince the Court of their valuation numbers