The Michael Jackson Estate faces a $700m bill from the US taxman after allegedly failing to disclose the correct value of the late pop icon's assets.
According to legal documents obtained by the LA Times, Jackson's executors valued his net worth at around $7m. The IRS now claims that they were deliberately misinformed and that the star's net worth was actually in the region of $1.125bn, meaning that the Estate avoided tax payments of $505m.
TMZ reports that the IRS have doubled the tax penalty from 20% to 40%, with the result that Jackson's estate now owes the taxman $702m.
The documents go into detail about the discrepancies, stating that the Estate valued Jackson's likeness at $2,105. The IRS says the value is actually more than $434m.
The Estate allegedly valued the star's interest in a trust that owns songs penned by him and the Beatles back catatlogue at zero. The IRS claims its actual value is nearer $469m.
A second trust in the pop icon's name was said to be valued at $2.2m by the Estate. However, the IRS says it's worth $60.6m.
And while the Estate is believed to have valued the Jackson Five's master recordings at $11.2m,the IRS says they are worth $45.5m.
Jackson's Estate has been at the centre of controversy ever since his death in 2009, with members of his family disputing the authenticity of the will after the singer failed to leave anything to them.
Jackson's 1995 will named John Branca, Bert Mitchell and Marshall Gelfand as co-executors. Like all subsequent versions of the will, it specified that the King of Pop's interests be placed in an entity known as the Michael Jackson Family Trust, further stipulating that 20% of the monies be donated to charity, and the remainder split between a lifetime trust for Michael's mother, Katherine Jackson, and a trust for any children Michael might have. Upon Katherine's death, any remaining funds would revert to the children.
The second will, dated 10 December 1997, also names Branca and Mitchell as co-executors of the Estate, but replaces Marshall Gelfand with banker Jane Heller. The distribution under the trust remained the same.
The singer's first child Prince Michael Joseph Jackson, Jr., who was born in February, is mentioned by name, but the will still stipulates that half of what's left after distributions to charities and for Katherine Jackson be split between all children he might have.
The third, signed in March 2002, after the birth of Michael's second and third children Paris Michael Katherine Jackson and Prince Michael Joseph Jackson, II identifies only the first two children by name, but still indicates that the trust would benefit all his children equally. A fourth will that names all three children was filed the following July.
Three years after the pop star's death the Estate had reportedly generated roughly $500m as a result of a series of lucrative deals, including a $60m advance for the film This Is It, a new recording contract worth up to $250m and the Michael Jackson Immortal World Tour, a joint venture with Cirque du Soleil, that grossed over $75m in the first half of 2012.
Michael Jackson earned more in the past three years than any single living artist.
While the $700m dollar tax bill will come as a blow to the Estate, Jackson's earning potential, even in death, continues to soar.
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