The estate tax is among the most discussed forms of taxation in the country. In addition to the estate tax assessed by the state of Minnesota, the federal government also taxes estates’ assets that are valued above the exemption. Over the last couple years, the amount set for the exemption has shifted, but estate tax liabilities are based on the law in effect at the time a person passes away.
Although Michael Jackson died in 2009, his estate is still being sorted out. The Internal Revenue Service claims that the Jackson estate didn’t pay enough in taxes after the star’s passing. The federal agency says that the valuation made by Jackson’s estate was too low, so they have issued a notice of deficiency. According to court documents, the IRS believes that the estate owes $700 million more than they paid.
Estate taxes are based on the difference between the assets a person holds at the time of his or her death and the amount of money owed to creditors. According to the Jackson filing, the musician’s taxable estate (assets minus debts, that is) was valued at $9 million. The crux of the dispute lies in the valuation.
Now that the Jackson estate has disputed the IRS valuation, the two parties will head to court. At this point, they will each present evidence to support their respective ideas about the estate’s value.
Of course, tax disputes can be incredibly complicated. Experienced attorneys can gather the necessary financial documents to support the accuracy of tax valuations. By taking thoughtful steps, estates and individuals can settle tax claims lodged by federal tax officials.
Source: Forbes, “IRS to Michael Jackson’s Estate: Who’s Bad?” Kelly Phillips Erb, Aug. 26, 2013