Originally published on Forbes.com.
The Estate of Michael Jackson’s long slog through Tax Court has been providing entertainment for nearly five years. Michael Jackson died on June 25, 2009. The Tax Court petition was filed August 14, 2013, which is pretty quick work. The estate tax return, with a six month extension, was due in early 2011. Then there is the audit and a trip to appeals and finally the IRS and the estate agreeing to disagree and the IRS issuing a notice of deficiency, the Estate’s ticket to tax court which had to be cashed in ninety days. The trial was on February 6, 2017.
Due to the Tax Court’s lamentable lack of electronic transparency and my own thriftiness, I have to rely on new reports for the essence of the dispute. Hannah Karp summed it up in the Wall Street Journal .
The estate said it considered his name and likeness essentially worthless, valuing it at $2,105, as Mr. Jackson’s reputation was then tainted by child-abuse allegations and his strange public behavior.
She goes on
But the IRS argues that the pop star’s name and likeness should have been valued at $161 million; that would be down from 2013 when it valued those rights at $434 million.
“No celebrity’s name and likeness rights have sold for anywhere near that much—not Elvis, not Marilyn, not Ali. And Michael did not make that much from his name and likeness—as opposed to his music—in his lifetime,” said Mr. Weitzman, noting that he only earned about $50 million from those rights while he was alive. “They are trying to take what Michael’s estate created for his children after death and extract an unreasonable and excessive tax.”
Has There Ever Been Anything Like This?
The case that this reminds me of the most is the Estate of Virginia C Andrews. VC Andrews had this series of “children in peril” novels beginning with Flowers in The Attic in 1979, which was really creepy and enough of the series for me. After she died in 1986, Andrew Neiderman continued the series under the VC Andrews name. What was that name worth when VC Andrews died? The IRS has the benefit of hindsight and could see that the sequels made money for the estate, but it was hardly a sure thing when she died.
In Sergio Garcia, we find the IRS arguing out of the other side of its mouth, arguing that royalty income paid to the professional golfer then a Swiss resident was attributable to services rather than the intangible value of his image. In 1961, Helen Miller, the widow of Glenn Miller, tried and failed to argue that privacy rights that she released to Universal Pictures for production of The Glenn Miller Story were a capital asset.
The intensity of the coverage of the Tax Court proceedings in the Jackson case may be unprecedented. There are occasions when Tax Court decisions break out of the tax ghetto into the mainstream. A notable example was Anietra Hamper, a TV anchor who tried to deduct her undergarments. But the Jackson case. Wow. Richard Rubin has written an article about the writing style of Judge Mark Holmes who is handling the case.
Mark Holmes writes pithy tales of failed marriages and booming businesses, weaving in F. Scott Fitzgerald, historical digressions and groan-aloud puns.
Now he’s working on a much-anticipated thriller (get it?) about the late pop superstar Michael Jackson.
Mr. Holmes is no best-selling author. In fact, his work is free. Mr. Holmes is a federal judge known for the clear, colloquial writing style he brings to arcane rulings on the U.S. Tax Court.
Tax Court decisions as literary works is one of my obsessions. Something I picked up from Lew Taishoff, who covers the Tax Court with an incredible intensity is paying attention to which judge is writing the opinion. Mr. Taishoff gives the judges handles, David Gustafson is the “obliging jurist” and Albert Lauber is “Scholar Al”, for example. Judge Holmes is “The Judge Who Writes Like a Human Being”
At any rate, Mr. Rubin’s piece has me chomping at the bit to read the decision when it comes out and plotting to be the one who breaks the story, a feat I have not achieved in a celebrity case since pulling an all nighter in 2012 to post on the Tax Court decision in the case of the great F. Lee Bailey. I was sad that that decision did not break out of the tax ghetto. The best theory accounting for that is that Bailey’s celebrity is pretty much pre-internet. His last hurrah was the OJ trial in 1994.
But When Will It Be?
I’m grateful even for scraps and we got one this week – an order from Judge Holmes.
This case was tried at a special session beginning on February 6, 2017, and the posttrial briefing runs into early next year. On June 26 respondent moved to strike part of petitioner’s opening brief — an annotated copy of the operating agreement of Sony/ATV Music Publishing. It’s origins are obscure, but petitioner argues that it is a helpful compilation of the original operating agreement to show its numerous amendments, but is not evidence. It is, however, a sort of summary exhibit, which is a type of evidence. And the original operating agreement and all its amendments are in the record. This enables the Court to slog through the agreement as amended without the addendum’s help, and it is. (Emphasis added)
So that tips me off that the decision will not be coming out till 2019, But when in 2019? I asked Lew Taishoff, who had alerted me to the ruling.
Mr Reilly, if posttrial briefing runs past 12/31/18, I cannot imagine Judge Holmes issuing an opinion sooner than next Spring, and more likely even well beyond. He’s got expert testimony of dubious value from IRS, heavy-duty testimony from the co-ex’rs, and twenty-five (count ’em, twenty-five) volumes of trial testimony, plus stipulations, admissions and documents. I can’t see Judge Holmes “slogging through” all this good stuff in fewer than six months from when he gets the posttrial briefs. Even more so is this the case because he has a full docket of other cases.
Mr. Taishoff’s post discloses my strategy for getting the story early. He reads the Tax Court output before the ink is dry or I guess nowadays you would say while the electrons are still excited. So there it is. Look for a Michael Jackson decision next summer.
Correction And Further Comment
In an earlier version I included the remark “Joseph A. Insinga is “Fighting Joe”” as an example of Mr. Taishoff giving judges handles. Mr. Insinga was a litigant not a judge.
Mr. Taishoff also cautions me that a decision next summer might be optimistic.
Mr Reilly, I think we were both unduly optimistic as to the date of Judge Holmes’ decision in Jackson. I foresee the opinion, when issued, as a true mix-and-match between experts, with a return trip to the Sergio Garcia – Retief Goosens “Brand Ambassador” vs “Global Icon” back-and-fill. And we still have the IRS expert who lied under oath: see my blogpost “I’m Shocked…Shocked,” 4/28/17.
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