Michael Jackson’s Estate Challenges IRS in Tax Dispute

[soulmum]

The Battle Between the Estate of Michael Jackson and the IRS Continues


6/15/2016
by

Larry Brant

| Garvey Schubert Barer


In March 2014, I reported on the all-out battle that was ensuing in the U.S. Tax Court between the IRS and the Estate of Michael Jackson over the value of the late pop singer’s estate. It began in 2013, when the estate petitioned the court, alleging that the Service’s assessment, based upon the assertion that the estate underreported its estate tax obligation by more than $500 million, was incorrect. In addition, the estate challenged the IRS’s additional assessment of almost $200 million in penalties. Keep in mind that although these numbers are staggering, they do not include the estate’s potential state of California estate tax obligations.

If Michael Jackson could instruct his estate lawyers about case strategy, I am sure he would be recounting the lyrics from his 1982 smash hit Beat It:

Just beat it, beat it, beat it, beat it
No one wants to be defeated
Showin’ how funky and strong is your fight
It doesn’t matter who’s wrong or right
Just beat it, beat it
Unfortunately, the case is not going the way Michael Jackson would have wanted it to go. Rather, victory appears to be nowhere in sight for either the taxpayer or the government.
It is now well over two years after the battle started. It continues to rage. Neither the IRS nor the estate is taking the tack from the title of the late pop singer’s 1991 hit song, Give In to Me.
In July 2014, the IRS added a little more pain to the estate’s already existing misery. It took a deeper look at the value of the estate’s ownership rights to the Jackson Five master recordings and the accrued royalties. As a result, the IRS increased the assessment by almost $29 million. Ouch! I am confident Michael Jackson would have responded to the IRS, quoting from his smash hit Leave Me Alone that appeared on the 1987 album Bad:

Leave me alone, stop it!
The IRS either isn’t hip enough to remember the late pop singer’s hit, Leave Me Alone, or it simply isn’t listening! Last week, it asked the court to add another $53 million in value to the estate.
The battle continues roaring strong. The IRS, in its quest to collect more taxes and penalties, appears to be leaving no stone unturned. I apologize in advance to my readers, but I have to quote Michael Jackson one more time; this time from his hit song Scream that appears on the 1995 album HIStory: Past, Present and Future, Book I:

Tired of injustice
Tired of the schemes
The lies are disgusting
So what does it mean
Kicking me down
I got to get up
As jacked as it sounds
The whole system sucks
Trial in this case is currently scheduled for February 2017. It continues to be interesting. Stay tuned! I will follow up if the case resolves or takes another interesting turn.


http://www.jdsupra.com/legalnews/the...tate-of-77132/

[soulmum]

Looks like Michael is not the only artist that is in Tax Court with the IRS-I've read several articles already about how much the IRS and the State of Minnesota is expecting to get from Prince's estate.

Now it's Whitney:http://www.hollywoodreporter.com/thr...nges-11-897991



MAY 27, 2016 1:48pm PT by Eriq Gardner
Whitney Houston Estate Challenges $11 Million Tax Bill
The The IRS allegedly erred by increasing the value of the singer's publicity rights from $11.5 million to $11.7 million.

The heirs of late pop star Whitney Houston are now in Tax Court over what the Internal Revenue Service claims is owed in estate taxes.
In a May 23 petition, now sealed and first reported byBloomberg, the Whitney Houston estate objected to the determination that $22.6 million has been underreported, which the IRS claims means that more than $11 million is owed, including $3 million in penalties.
Some of the money is attributable to song and performance royalties, including a $9 million dispute over the worth of catalog albums, but it's another discrepancy that is particularly eye-opening.
The Whitney Houston estate said the IRS is in error by increasing the value of the singer's publicity rights from $11.5 million to $11.7 million. How the IRS came to its valuation is unclear, but this provides further evidence that the federal tax agency intends to pursue money from the name and image of dead stars.
With a trial scheduled for next February, the IRS is currently in court with the Michael Jackson estate over the value of the King of Pop's publicity rights. There, the IRS once asserted the value of these rights upon death was $434 million — it's recently backed off from this precise amount — while the Michael Jackson estate argued for just $2,105. Here's more background on the stakes and arguments.


eriq.gardner@thr.comeriqgardner

[soulmum]

Michael Jackson Estate Fights IRS Over Manager's Deposition

Law360, Washington (November 28, 2016, 4:50 PM EST) -- Michael Jackson's estate and the IRS have pushed back and forth over the agency’s attempt to depose the late singer's business manager, with the estate telling the U.S. Tax Court that the deposition would go beyond the bounds of the suit over alleged millions in additional value in the King of Pop's estate.

The agency and the estate have fought for months over documents and a deposition of Michael Kane, the accountant and former employee of Crowe Horwath LLP who was Michael Jackson’s business manager before the singer’s 2009 death and as an adviser of the estate afterward. Jackson’s estate objected to the latest request by the IRS to depose Kane, and the agency moved on Nov. 22 to compel the deposition.

The estate and the agency are still disputing the valuation of Jackson’s image and other aspects of the estate, and proceeding through discovery in advance of a trial in February in Los Angeles. The estate argued that the agency wants to depose Kane simply to ask questions without the benefit of cross-examination.

“It appears the only reason for the deposition is to have the opportunity to question Mr. Kane prior to trial, which is not a proper use of the deposition,” the objection said.

According to court records, the estate argues that the IRS could have sought the same documents — related to valuations of Jackson’s license and other work — without going through the extraordinary step of deposing a nonparty witness.

“Respondent has failed to establish that the testimony and documents sought from Mr. Kane cannot be obtained through informal consultation or communication,” the objection said.

Furthermore, the estate has argued that the agency can’t assert Kane’s relevance to the case by merely reciting his business relationship to Jackson and his estate.

“Respondent then asserts that ‘Mr. Kane’s testimony is relevant to the valuation and factual issues that remain in dispute in the case,’ without providing any reasons therefor,” the objection said.

The IRS responded that throughout discovery, the estate has engaged in a “pattern of delay” in both informal and formal discovery. The agency’s motion to compel the deposition said the estate has responded sporadically to informal discovery requests, and produced documents “albeit slowly” after being shown a motion to compel in formal discovery.

Depositions are not limited to discover evidence that might otherwise not be presentable at trial, the agency said, asserting that its explanation of the reasons for seeking the deposition were sufficient. In addition, the estate claimed that only a deposition would provide the answers needed for the coming trial.

“Interrogatories regarding Mr. Kane would not have been useful because they do not allow the ability to ask crucial follow up questions (not to mention the petitioner’s likely meaningless responses),” the motion said.

According to the original notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 in accuracy-related penalties.

Some of the most notable discrepancies between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105. Additionally, the IRS took umbrage at the estate’s claim it had no “tangible personal property, including vehicle” not reported elsewhere, adjusting that line item from zero to $47.5 million.

In July 2014, roughly a year after the petition was filed, the IRS swung back at the estate, increasing the asserted deficiencies and penalties in the original notice by $29 million to account for a new valuation of the right over the Jackson 5 master recordings and Jackson’s accrued royalties.

A February trial is set for the remaining issues in the case in Los Angeles. The period to make informal discovery requests closed in June.

Counsel for the estate could not be reached for comment. The IRS does not comment on pending cases.

-----------------------

and a june story mentioning what is settled and what is not

IRS Adds $54M To Michael Jackson Estate's Value


Law360, Washington (June 13, 2016, 3:27 PM EDT) -- The IRS piled another $53.6 million onto the valuation of the Michael Jackson estate’s interest in a trust fund Friday, the latest salvo in a protracted U.S. Tax Court battle over how much the world-famous pop star was worth at the time of his 2009 death.

At issue in Friday's IRS adjustment is the value of the estate’s interest in an asset called “New Horizon Trust III.” In its original notice of deficiency, the IRS had said that the interest was worth $60.7 million, balking at what the renowned musician’s estate originally claimed was only a $2.2 million stake. With the latest, $53.6 million adjustment, the agency has logged the asset’s total value at $112 million.

“Respondent has now determined that the notice of deficiency incorrectly reflected the fair market value of this asset,” the IRS wrote to the Tax Court to justify the adjustment Friday. Pursuant to a previous agreement, the IRS would not increase the size of the accuracy-related penalties levied against the estate, the agency explained.

Jackson’s estate had petitioned the Tax Court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 in accuracy-related penalties.

Some of the most notable discrepancies between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105. Additionally, the IRS took umbrage with the estate’s claim it had no “tangible personal property, including vehicle” not reported elsewhere, adjusting that line item from zero to $47.5 million.

In July 2014, roughly a year after the petition was filed, the IRS swung back at the estate, increasing the asserted deficiencies and penalties in the original notice by $29 million to account for a new valuation of the right over the Jackson 5 master recordings and Jackson’s accrued royalties.

That October, however, the parties began to settle on valuations for several issues, including the value of California property interests, Jackson’s “cancellation policy” issued by Lloyds of London, and eventually, the Jackson 5 recordings.

A February 2017 trial is set for the remaining issues in the case, in Los Angeles. The period to make informal discovery requests closed Monday, while the parties are expected next month to exchange information about which experts will be testifying at trial, court records show.

Counsel for the estate could not be reached for comment. The IRS does not comment on pending cases.

[soulmum]

Thanks to Ivy from mjjcommunity for the following.

A lot of new information at the latest court ruling about discovery

The parties have filed several motions that the Court needs to decide. Two -- a motion for extension of time for petitioner to respond to requests for admissions, and a motion to seal two documents that are exhibits to petitioner's answer to yet another motion -- are unopposed. The parties also filed a stipulationto slightly change some pretrial deadlines. The Court will grant all of these.

The contested motions are:

Deposition of John Branca

Branca is one ofthe two co-executors of Jackson's will and is actively involved in the estate's businesses and financial planning. Our Court allows depositions of parties, but still treats them as "an extraordinary method of discovery." Rule 74(c)(1)(B). What this division ofthe Court looks for is the general state of discovery, the stakes involved, and whether the depositions would materially aid the trial and possible settlement ofthe cases. The key fact here is that the stakes in this case exceed $1 billion. The Court acknowledges the parties' disagreements about how cooperative each has been in informal discovery, but in a case of this size there is bound to be toing-and-froing between two highly qualified teams of lawyers. It is reasonable to lock down the testimony of a central witness on the key underlying facts, which should shorten the trial and better focus it on what are likely to be quite complicated valuation issues. Respondent's motion is reasonable, and the marginal cost small in relation to the stakes. We will grant respondent's motion.

Deposition of John McClain

McClain is the other co-executor of Jackson's will. His involvement in the day-to-day management ofthe estate's affairs is very unclear from the motion papers. In the motion seeking Branca's deposition, McClain is described as a manager of Triumph Intemational, Inc. which holds and exploits the trademarks related to Jackson on behalf ofthe estate. He is also described as very seriously ill and subject to very poor reactions to stress -- descriptions buttressed by specifics from his doctors that the Court will seal out ofrespect for his privacy -- that would seem inconsistent with the ability to manage a complex enterprise in an industry not widely known for the placidity with which its commercial activity is carried out. Petitioner opposes this motion for essentially the same reasons it does that of Branca, but with the additional and understandable desire to protect McClain's health. McClain's testimony would overlap Branca's in part; but McClain's long friendship with Jackson and his almost equally long involvement in Jackson's music business means that this overlap is not perfect. We will deny this motion. But should respondent issue a trial subpoena for his testimony, and should petitioner or McClain object to it, the Court would expect to hold a brief hearing to determine if McClain's health has interfered with his ability to tend to the estate's day-to-day business.

Deposition of Karen Langford

Langford is an experienced paralegal who participated in the valuation of Jackson's image for the estate's return. She also is knowledgeable about some of the other assets ofthe estate -- for example, unreleased music -- that McClain was also knowledgeable about. His ill health makes her a more important witness. The stakes involved strongly suggest that the costs of formal discovery are reasonable. The Court is also convinced, after reviewing the paperwork, that the deposition of
this witness would materially aid trial of this case. We will grant this motion.

Deposition of Michael Kane

Kane is an accountant and Jackson's former business manager, and has worked on appraisals for the estate and the estate's tax return -- and has even been consulted by petitioners' experts for their work. Respondent also identifies him as a key witness on the penalty issues in the case. Petitioner objects on the grounds that other forms of discovery could be used. Much as with Langford, however, the stakes involved strongly suggest that the costs of formal discovery through themore flexible mechanism of depositions are reasonable. The Court is also convinced, after reviewing the paperwork, that the deposition ofthis witness would
also materially aid trial ofthis case.

Petitioner's Motion to Compel

The estate moved to compel answers to interrogatories, requests for document production, and compliance with a previous discovery order. 1. Interrogatories. Interrogatory 1 is a contention interrogatory aimed at finding out respondent's reason for determining a much higher value for Jackson's likeness. Respondent's answer -- relying on his expert -- is adequate.

Interrogatory 2 seeks the identification of witnesses with knowledge ofthat issue to which respondent replied that he had either named any such witnesses in theexpert report or would include them on his witness list. This is not adequate -- the identification of witnesses is a core object of discovery.

Interrogatories 4 and 5 (about the value ofthe estate's interest in Sony/ATV) and 7 and 8 (about the value ofthe estate's interest in Mijac) follow the same pattern: Look to my experts' reports, says respondent; but ifthe names you seek aren't there, wait for the witness list. Our ruling will likewise be the same.

Interrogatories 11 and 12 ask respondent to identify any people he has interviewed about any of the remaining issues in the case and any who submitted written statements to him. Respondent objects on work-product grounds but, as petitioner correctly notes, petitioner isn't seeking any information about respondent or his representatives but only third parties. With this minor clarification, we agree with petitioner that the information these interrogatories seek is discoverable.

Interrogatory 13 asks for information about the penalties that respondent determined apply to the valuation issues in the case that are still in dispute. On this one, respondent incorporated his answers to previous interrogatories. Our ruling here is consistent with those -- that respondent's answers to 13(a) and (b) are adequate, but he must answer 13(c).

2. Document Production. Petitioner asks us to compel production of two of its requests, numbers 7 and 8. These resemble some of the contested interrogatories in that they seek production of written statements and documents "provided to respondent by any person concerning any issue in this case." Respondent objects on the ground that they are vague, burdensome, and ambiguous. Maybe, if one squinted hard enough. But in context, petitioner is not seeking anything about issues that have already settled -- it's concerned with the three remaining valuation issues and associated penalties. We also don't construe this request to seek work product but only statements and documents from nonparties. With that possibly unnecessary qualification, we will grant this part of petitioner's motion.

3. Compliance with previous order. Petitioner also seeks any documents produced in response to the subpoena duces tecum served on Joseph Zimring. It is possible that respondent's answer to one ofthe interrogatories says there were such documents. If so, respondent must comply with our earlier order.

Respondent's motion to compel production of documents

Respondent seeks, in his own motion to compel, document production that he thinks was inadequate. All his requests seek discoverable information, but petitioner had other objections.
Request number 9 of respondent's second set of document requests seeks any cease-and-desist letters the estate sent to those it thought might be exploiting Jackson's likeness without authorization.
Request number 11 of this set seeks the minutes of Sony/ATV in connection with the estate's sale of its interest in this entity to Sony.
Request number 12 ofthis set asks for appraisals ofthat interest in connection with this sale. These requests are limited and seek discoverable information.
We will grant this part of the motion without further elaboration.

There is another whole category of requests at issue (numbers 13, 19, and 20 in respondent's first set of document requests; and 1-6 of his second set). These are potentially quite burdensome requests for correspondence or agreements between the estate and various businesses interested in using the estate's property,mostly Jackson's image or music. Petitioner did produce some documents in this category ofrequests but also made numerous objections, none ofwhich justify holding back any documents. Where it made a claim of privilege, the estate needed to produce a privilege log so as to enable in camera review or a "quick peek" order under FRE 502; where it took upon itself the burden ofredaction of information it thought "nonresponsive", it violated our Rule 72 because that is not producing them as they are kept in the ordinary course of business; and where it didn't produce them because they contained confidential business information, because they should be produced under seal.

Respondent makes an interesting argument about petitioner's responses to requests number 13 and 19: petitioner's failure to provide a word-tally list or search-term hit frequency. Using such tools can reduce what might otherwise be quite a burdensome exercise; moreover, such terms are themselves a way to cabin discovery. We do not think their use in this large a case would be overly burdensome and will order its use in compliance with this order.

Respondent's motion in limine to exclude the Volokh report

Professor Eugene Volokh of UCLA Law School is widely acknowledged as one ofthe country's leading scholars of First Amendment law, Second Amendment law, and torts. He is even a member ofthe American Heritage Dictionary's Usage Panel. For this case he has prepared an expert-witness report in which he offers his opinion ofthe scope of"legal rights that a prospective buyer would consider when deciding the value of Michael Jackson's name, voice, and likeness (as defined in Cal. Civ. Code § 3344.1)." He's been retained because any deals in this area "will be made in the shadow ofthe law, by parties who are legally sophisticated and well-
counseled." This must be true: A hypothetical rational buyer would not pay the same for narrower rights than he would for broader ones, or the same for uncertain rights than he would for established ones. So it also has to be true that the value of this most contested asset of the estate -- Jackson's posthumous right ofpublicity depends on its legal limits. Professor Volokh opines not on the value of this asset, but on those limits. This means that his report falls within a fairly well-hardened rule that expert testimony about domestic law is generally not admissible. Estate ofCarpenter v. Commissioner, 65 T.C.M. (CCH) 2119, 2120 (1993). This rule is usually accompanied by the line that "testimony about the law does not assist the court." Judges may pretend this is so, but in their hearts they know that many of the lawyers who appear before them know much more about the law than they do. So the rule would be a weak one ifit was helpfulness in reaching the correct result that we focused on. But the rule would be a strong one ifwe focused on the difference between findings of fact and conclusions of law. Courts mostly serve as human lie detectors in evaluating testimony -- they ask ifthe witness broke down on cross, engaged in self-contradiction, or told an incoherent story. Judges are not supposed to conduct private investigations outside the record into the facts of a case. But in reaching a legal conclusion, a judge is less constrained. He is able to consult his own resources and expertise, and looks to the advocates who appear before him for help in where to look. We expect lawyers to zealously advocate for their clients; we're suspicious of witnesses who do so. This is true even when issue before the Court is a mix of law and fact, as it is in the valuation questions in this case. Professor Volokh's proffered testimony would be helpful in drawing the bounds ofthe estate's rights in Jackson's image. But the rule excluding testimony about the content of domestic law is a strong one in this Court. His legal expertise can help the estate to prepare for examination before trial and in argument after the trial, but we find it inadmissible as testimony during the trial. We will grant respondent's motion.

To sum up, it is
ORDERED that petitioner's November 21, 2016 motion to extend the time it has to answer respondent's request for admissions is granted, and petitioner shall serve its answer as supplemented on or before December 5, 2016.

It is also ORDERED that petitioner's December 2, 2016 motion to seal documents is granted, and exhibits A and B to petitioner's opposition to motion to take deposition of John McClain shall be sealed.

It is also ORDERED that the Court will adopt the parties' November 21, 2016 stipulation of pretrial deadlines, and amends the pretrial order in this case asfollows:
a. The last day for filing discovery motions other than to depose expert witnesses shall be extended to November 30, 2016 nunc pro tunc;
b. The last day for filing motions under Rule 90 to contest the sufficiency of answers to requests for admission shall be extended to December 23, 2016;
c. The last day for filing any motions to depose expert witnesses shall be December 23, 2016;
d. Ifthe parties stipulate to taking expert-witness depositions, any notices of those depositions shall be served at least 15 days prior to the scheduled date of thedeposition; and
e. The parties may by stipulation filed with the Court change any other deadline in the pretrial order that falls before January 17, 2017.

It is also ORDERED that respondent's November 4, 2016 motion to depose John G. Branca pursuant to Rule 74(c)(3) is granted.

It is also ORDERED that respondent's November 4, 2016 motion to depose John McClain pursuant to Rule 74(c)(3) is denied.

It is also ORDERED that respondent's November 18, 2016 motion to compel the deposition of nonparty witness Karen Langford is granted.

It is also ORDERED that respondent's November 22, 2016 motion to compel the deposition of nonparty witness Michael Kane is granted.

It is also ORDERED that respondent shall file another motion to compel depositions on or before December 9, 2016, suggesting specific dates, times, and places for depositions, ifbefore then he is unable to reach agreement on these details with the witnesses or their counsel.

It is also ORDERED that petitioner's November 30, 2016 motion to compel answers to interrogatories and requests for production of documents and compliance with
the Court's order ofAugust 31, 2016 is granted only as to: (a) interrogatories 2, 5, 8, 11, 12, and 13(c); (b) document requests 7 and 8, but only to the extent any such statements or documents relate to the issues remaining in the case and are not respondent's own statements or documents; and (c) any documents received in response to respondent's subpoena duces tecum served on Joseph Zimring.

Respondent shall, on or before December 19, 2016, serve on counsel for petitioner complete responses to these interrogatories and complete production ofthese documents.

It is also ORDERED that respondent's November 30, 2016 motion to compel the production of documents is granted and petitioner shall produce to counsel for respondent those documents requested in respondent's requests 13, 19, and 20 of respondent's first request for the production of documents; and requests 1-6, 9, 11,and 12 of his second set. In producing documents described in requests 13 and 19, petitioner shall produce the word-tally list and other information pertaining to technology-assisted searches for documents potentially responsive to theserequests as described in respondent's October 12, 2016 letter to petitioner and attached as Exhibit W to his motion. Petitioner shall, on or before December 19,2016, serve on counsel for respondent complete production ofthese documents.

It is also ORDERED that respondent's November 7, 2016 motion in limine to exclude the expert-witness report of Eugene Volokh is granted.

[soulmum]

Michael Jackson's Executor, Manager Ordered to Testify in Billion-Dollar Tax Battle

The tax trial of the century -- one focused on the worth of late pop singer Michael Jackson when he died in 2009 -- is set to begin this February. With more than $1 billion at stake, the Internal Revenue Service and Michael Jackson's estate are scrambling in these final pre-trial days to discover everything they need to know before heading into battle.

This week, U.S. Tax Court Judge Mark Holmes granted a heavily contested motion by the IRS to depose John Branca, one of the two co-executors of Jackson's will; Michael Kane, the singer's former business manager; and Karen Langford, a paralegal said to have participated in the valuation of Jackson's image and knowledgeable about unreleased music.

But John McClain, the other co-executor of Jackson's will, won't be giving a deposition.

Although McClain currently manages an outfit that exploits Jackson trademarks, Holmes writes in his order that McClain is described in court papers as "very seriously ill and subject to very poor reactions to stress," commenting that this "would seem inconsistent with the ability to manage a complex enterprise in an industry not widely known for the placidity with with its commercial activity is carried out."

To protect his health, McClain won't have to testify just yet, but the judge isn't ruling out that he may have to do so at trial if the IRS insists and after potential briefing by the parties.

Judge Holmes has also ordered a variety of documents to be shared with the IRS including cease-and-desist letters the estate has sent to those it thought might be exploiting Jackson's likeness without authorization, the minutes of the estate's sale of its interest in Sony/ATV to Sony, and appraisals of that sale reported to be worth about $750 million.

The big ticket item at the current trial -- and the reason why the case is of special interest throughout the entertainment industry -- will be valuating Jackson's posthumous right to his likeness. The IRS has insisted it's worth more than $434 million and may point as evidence to the 2009 documentary This Is It, a Cirque du Soleil tribute show, and post-death albums, video games and other lucrative memorials. The estate's own valuation is just $2,105, arguing that what's important is the value when he died, when Jackson's commercial prospects were suffering from charges of child molestation and drug abuse, before executors worked their magic, and the King of Pop experienced a resurgence in popularity.

The coming valuation analysis and conclusions will be informed by what licensors theoretically would be willing to pay for rights. To this end, Jackson's estate commissioned UCLA Law School professor Eugene Volokh, one of the leading scholars of First Amendment law and torts, to prepare a report on the subject of how the value of a celebrity like Jackson depends on the legal limits of the posthumous right of publicity.

The IRS brought a motion to exclude Volokh's report as inadmissible since it's the judge deciding conclusions about the law. Experts only render opinions informed by facts.

"This is true even when issue before the Court is a mix of law and fact, as it is in the valuation questions in this case," writes Holmes in response to the IRS' motion. "Professor Volokh's proffered testimony would be helpful in drawing the bounds of the estate's rights in Jackson's image. But the rule excluding testimony about the content of domestic law is a strong one in this Court. His legal expertise can help the estate to prepare for examination before trial and in argument after the trial, but we find it inadmissible as testimony during the trial."
http://www.billboard.com/articles/ne...ion-dollar-tax

[soulmum]

https://www.bloomberg.com/news/featu...-a-piece-of-it

Michael Jackson Is Worth More Than Ever, and the IRS Wants a Piece of It

Jackson’s star lawyer made a mint for his heirs, so now the government has to be startin’ somethin’.



Seven years after Michael Jackson’s fatal overdose of propofol and lorazepam in 2009, the statute of limitations on gossiping about the deceased is, apparently, over. In one of her rare interviews in the midst of the presidential campaign, future First Lady Melania Trump told the luxury magazine DuJour how Jackson, a friend of Donald’s and onetime Trump Tower resident, mischievously suggested they kiss to make her husband jealous. Then Madonna, on CBS’s Late Late Show, revealed that she’d smooched amorously with him long ago. And the New York Post’s Page Six dropped a chunk from Tommy Hilfiger’s memoir, American Dreamer: My Life in Fashion and Business, about the designer’s visit in the 1990s at Neverland Ranch, the singer’s compound in Santa Barbara County, Calif. After encountering a giraffe and a string of baby elephants outside, Hilfiger found Jackson in his office, with a bandage on his nose, wearing sunglasses and sitting on “an enormous gold-and-burgundy throne.” His two oldest children, Prince and Paris, were there, dressed “like characters from a Broadway show or The Sound of Music—velveteen knickers, dirndl jumper, ruffled blouses, patent leather shoes, each in full makeup.”
Paris, in response to such banter and because she’s now 18, just gave her first full-length interview in a Rolling Stone cover story, setting the record straight: She’d had a wonderful childhood until her father’s death at age 50. After, she struggled with drugs and attempted suicide several times, but she’s now happy, clean, and, the magazine reports, “heir to a mammoth fortune—the Michael Jackson Trust is likely worth more than $1 billion, with disbursements to the kids in stages.”
That number could change if the IRS has anything to do with it. The agency’s lawyers are taking the executors to trial, set to begin sometime this month in U.S. Tax Court in Los Angeles. The IRS intends to prove that $702 million of that inheritance is owed in penalties and back taxes. The crux of the case is the disputed value of Jackson’s name and likeness, which is to say the right to use his visage on everything from coffee cups to baseball caps. An estate tax filing is supposed to be a snapshot of the person’s assets on the day of his expiration, and under California law that includes the value of a star’s name and likeness. The IRS claims Jackson’s should have been valued at $434 million. The estate claims that it was worth a mere $2,105, implying that his image had been rendered all but worthless by stories about skin bleaching, his obsession with plastic surgery, prescription drug abuse, odd parenting choices—such as covering his children’s faces in black veils or Spider-Man masks in public—and allegations that he molested young boys who visited Neverland.
Celebrity estate lawyers are watching closely. It felt like a record year for the deaths of icons in 2016, with the passing of Prince, David Bowie, Leonard Cohen, Merle Haggard, Muhammad Ali, and Debbie Reynolds and her daughter Carrie Fisher. Fisher’s December departure prompted reports that Walt Disney was rushing to make a deal to use her digital likeness in future Star Wars movies. (Disney denied this.) The Jackson case signals that tax examiners see enhanced value in a deceased star’s face and name as technology and social media open up novel paths to profit, such as the ability to conjure up appearances using computer-generated imagery and voice software.
The man largely responsible for the estate’s current fiscal health is not Michael Jackson, or not exactly. For the balance of the past 37 years, a 66-year-old Los Angeles entertainment attorney named John Branca, a partner at the firm Ziffren Brittenham, has handled the singer’s record deals and tried to shield him from his own worst impulses. After Jackson’s death, Branca and John McClain, a veteran music industry executive and former Jackson confidant who keeps a lower profile (and declined to be interviewed for this story), were appointed executors of the singer’s estate, which gave them responsibility for generating income for the beneficiaries named in his will—his children Prince, Paris, and Blanket, and his mother, Katherine Jackson, whom he designated as their guardian.
“Michael used to say to me, ‘You and I, Branca, we’re going to be examples for the business, we’re going to be the kings,’ ” Branca says. It’s early July, and he’s reclining in the opulently furnished living room of his home in a gated community high in Beverly Hills. He looks like an aging rock star himself, intent on defying the calendar. He’s slim, brown-haired, and dressed fashionably in a black polo shirt, black pants, and expensive-looking black leather sneakers. The twice-divorced Branca is engaged to Jenna Hurt, a 32-year-old model who makes a brief appearance and then withdraws to let her fiancé hold court. The walls are covered with signed portraits of clients extolling his expertise, including Berry Gordy, the former head of Motown Records, the Eagles’ Don Henley, Brian Wilson of the Beach Boys, and, of course, Jackson, who can be seen posing happily with Lisa Marie Presley, his first wife. Branca casually notes that he introduced them.
It all might be too self-congratulatory if Branca himself weren’t so convivial. He grew up in Mount Vernon, N.Y., the nephew of the late Ralph Branca, a three-time All-Star pitcher for the Brooklyn Dodgers. Branca liked sports—he became an avid baseball card collector—but he was more interested in music. His parents divorced, and he eventually moved to Los Angeles to live with his mother, a dancer. As a teenager, Branca was kicked out of the Chadwick School in Palos Verdes Peninsula, Calif., and played keyboards in a band that opened for the Doors on the Sunset Strip in the ’60s.
Branca enrolled in Los Angeles City College to study music, where he got A’s on his harmony papers but felt out of his league when it came to playing with some of his fellow students, among them pianist Les McCann, a future soul-jazz great. “I just looked around and said, ‘This is ridiculous. I don’t belong here,’ ” Branca recalls. So he got a law degree at UCLA in 1975 and found a job working for the late entertainment lawyer David Braun. Braun, whose clients included Bob Dylan, Neil Diamond, and former Beatle George Harrison, was established enough not to bother keeping up. One day the Beach Boys came into the office. “David didn’t even know who they were and didn’t care,” Branca says. “So he sent me to the meeting. I was 27 years old at the time, and all of a sudden, I became the Beach Boys’ lawyer.”
“I’ve got fun pictures of Bubbles with my ex-wife and people at the wedding”

Fortuitously, the Beach Boys’ accountant also did Jackson’s taxes. In 1980 he introduced Braun and Branca to the ascendant pop star, who’d recently turned 21 and was in the process of distancing himself from his domineering father and primary manager, Joseph Jackson. Branca found Jackson pleasantly eccentric. “He had sunglasses on, and he pulled them down and he goes, ‘Do I know you?’ ” Branca recalls. “I go, ‘I don’t think we’ve met, but I look forward to getting to know you.’ And he goes, ‘Are you sure we don’t know each other?’ I said, ‘Michael, I would remember if we had met.’ ” The next day, Branca got a call from the accountant. Jackson was hiring him to be his attorney.
One of the first things Branca did was renegotiate what he describes as Jackson’s “absurd” contract with his label, Epic Records, winning him a royalty rate that only a few artists such as Dylan enjoyed at the time. When Jackson was ready to unveil Thriller, he wanted to spend $1.2 million on the video for the title track. Branca protested—this was a time when music videos typically cost $50,000—but Jackson curtly told him, “I don’t care. Just figure it out.” Branca persuaded Showtime and MTV to pay a total of $600,000 for a movie about the making of the Thriller video and got another company to spend $400,000 on the home video rights. The finished 13-minute film featured a troupe of corpses rising from a conveniently located graveyard to dance with a zombielike Jackson, their knees high and claws up. Jackson, then a Jehovah’s Witness, decided it was blasphemous and should be destroyed. Branca came up with another crafty fix. He told his client that Bela Lugosi, the star of the classic 1931 Dracula, was also religious and had had the movie’s producers include a disclaimer to the theatrical release saying it didn’t represent his personal views. “It was a complete fabrication,” Branca says, laughing. Jackson added the disclaimer, and the hugely popular video helped propel the album’s sales to 100 million copies worldwide. It’s still the best-selling record ever.
In 1984, Branca learned that the Australian corporate raider Robert Holmes à Court was shopping a company called ATV Music, which held the rights to more than 200 Beatles songs, including Yesterday, Revolution, The Long and Winding Road, and Hey Jude. An excited Jackson told Branca to spend whatever it took to acquire ATV. “It’s my catalogue!” he wrote in a note. But Jackson and Branca’s $47.5 million offer was beaten by Marty Bandier and Charles Koppelman, two New Yorkers who promised $50 million.
Bandier remembers flying to London on the Concorde with Koppelman to meet with Holmes à Court. “We thought it was a closing,” he says. He noticed Branca on the same plane but didn’t think anything of it. When they arrived, Holmes à Court said he’d accepted Jackson’s lower bid. Branca had offered to let the seller’s daughter, named Penny, keep the rights to the Beatles classic Penny Lane. He’d also agreed to have Jackson appear for an hour at an event in Perth put on by Holmes à Court’s favorite charity. “It was depressing,” Bandier recalls. Branca sold off the rights to the catalog’s cinematic background music for $6 million, which brought the effective price down to $41.5 million. In the end, Jackson, who borrowed $30 million to cover his costs, put only $11.5 million in cash on what would become his life raft when he was drowning. Jackson gave Branca a Rolls-Royce for his efforts.
Three years later, Branca helped Jackson buy Neverland, listed at $60 million, for $17.5 million. Jackson was so pleased that he rewarded his attorney with another Rolls-Royce. Around the same time, Jackson was best man at Branca’s wedding to his first wife. He brought along his beloved chimp, Bubbles, in a matching tuxedo. “I’ve got fun pictures of Bubbles with my ex-wife and people at the wedding,” Branca says nostalgically. Little Richard, it should be noted, performed the service.


Jackson was best man at Branca’s first wedding.
Source: John Branca


As things got rocky for Jackson, so did his relationship with Branca. Various people competed for the performer’s ear, and Branca was fired, then rehired in 1993 when the star was in the throes of the first molestation accusations, which were settled in a civil suit for what was widely reported to have been $20 million. Branca, now back in charge, thwarted other advisers who were pushing for Jackson to sell half of ATV to Sony for $75 million to cover his costs. By 1995 he’d negotiated a deal for Jackson to merge ATV with Sony’s music publishing company in exchange for $115 million and a yearly stipend that started at $10 million.
That year, Jackson prepared the first of his wills, naming Branca and McClain as his executors. It was updated twice, as he had children, but the document essentially stayed the same.
It was getting harder for Branca to protect Jackson, though. He was abusing prescription drugs and acting strangely. He spent $30 million, a record sum, to record Invincible, his splendid final studio album, released in 2001. Jackson blamed Sony when it sold a mere 8 million copies, a hit for any other artist. In July 2002, Jackson, looking pale and Kabuki-like, held a series of press conferences in New York in which he described himself as a victim of a racist music industry with a history of ripping off black artists like himself. He made headlines that year when he dangled infant Blanket over the railing of a hotel room in Germany so his fans could get a look.
Jackson overrode Branca’s attempts to control how British television producer Martin Bashir used interviews in the show Living With Michael Jackson, which aired in 2003. In it, Jackson admitted he sometimes shared his bedroom with the youngsters who visited Neverland, including a young cancer survivor who sat beside him on camera, and blithely insisted that it was nothing unusual. Soon after, the boy’s family accused Jackson of molesting him, which led to a criminal trial. In 2005 he was acquitted by a jury in Santa Maria, Calif. By then, Branca had been fired again, though he continued to get calls for help from Jackson’s advisers. Finally, the Jackson maelstrom became too much, and Branca walked away from his former best man.
Without Branca, Jackson floundered. He was no longer releasing records or touring, so the only way he could afford his lifestyle was by basically borrowing against his half of Sony/ATV. By 2008 his debt secured by the publishing company had swelled to $300 million. Fortress Investment, a New York hedge fund, purchased his mortgage on Neverland and threatened to foreclose if Jackson didn’t pay up.
Then Dr. Tohme R. Tohme appeared, a person often described as a mystery man because he declines to provide details about his history or the provenance of his degree. “I’m a self-employed guy,” Tohme says. “I advise many people, many top people in the world, about investments.”
Tohme first met Jackson, who was in a wheelchair wearing mismatched socks, in Las Vegas, through his brother Jermaine. Tohme connected Jackson with Colony Capital, a real estate buyout company founded by Jackson admirer (and now Trump confidant) Tom Barrack. Colony purchased the debt on Neverland to keep the property out of foreclosure. “It was 10 days from being sold in court,” Tohme says. After that, he became Jackson’s manager, persuading him to return to the stage so he could raise money to pay off his debts.
Jackson agreed in late 2008 to perform 50 concerts at the O2 arena in London the following summer. The concerts quickly sold out; Jackson expected to make $50 million on ticket sales alone. Tohme insists the pop star wanted nothing to do with Branca and spoke ill of him in his final months. Eight days before his death, however, Jackson summoned Branca to a meeting at the Forum in Inglewood, Calif., where he was rehearsing. They embraced, and the attorney says Jackson told him, “Branca, you’re back.”
At this point in the interview, Branca disappears into a closet and returns with a framed letter bearing Jackson’s signature. “Here’s the letter he signed at that meeting confirming I was his lawyer again for all the family members that doubt it,” Branca says.

Jackson looked sleepy at their meeting, Branca says, but he assumed his client was trying to conserve energy for his rehearsal. Eight days later, Jackson overdosed from the mix of sedatives administered by his personal doctor, Conrad Murray, who was later convicted of involuntary manslaughter. The outpouring of sympathy for Jackson was overwhelming. “His extraordinary talent and his music was matched with a big dose of tragedy and difficulty in his private life,” then-President Barack Obama told CNN. “I don’t think we can ignore that, but I think it’s important to affirm what was best about him.” Obama’s eventual successor provided a more self-referential tribute. “I knew Michael Jackson very well. He was a special guy. He was with me many times at Mar-a-Lago and Palm Beach.” (On the campaign trail last year, Trump offered some unexpected analysis about the nature of this tragedy at a GOP town hall: “He lost tremendous confidence because of, honestly, bad, bad, bad plastic surgery.” Jermaine Jackson, claiming it was external stress that broke his brother, tweeted back: “This fool Trump needs to sit down.”)
Shortly after Jackson’s death, Branca says, he read the singer’s final will, dated July 7, 2002, and signed in Los Angeles, to the family at Jermaine’s home. As he recalls, they applauded. But Joseph Jackson, the family patriarch, accused Branca and McClain of forging the document, insisting that Jackson had been in New York that day lambasting Sony. According to court documents, Joseph also revealed that his son had been paying him a monthly allowance of almost $60,000. He wasn’t likely to keep getting it if Los Angeles Superior Court Judge Mitchell Beckloff accepted the will, which he did. He also gave Branca and McClain the power to manage the estate.
Now that Branca was in charge, he discovered that concert promoter AEG had footage of rehearsals for the O2 shows that had been filmed at Jackson’s request. Several movie studios were eager to distribute a documentary stitched together from this material. Branca orchestrated a bidding war. Sony, the winner, agreed to pay the estate a $60 million guarantee and almost 90 percent of the profits. When it released This Is It in November 2009, the movie grossed $290 million globally, making it one of the most successful documentaries ever. With cash flowing in from the movie, the estate was able to refinance its debt. It pushed the rate on a $75 million loan secured by Jackson’s compositions from an onerous 17 percent to 6 percent and lowered the rate on the $300 million loan backed by Jackson’s share of Sony/ATV, from 5.8 percent to 2.9 percent, saving millions of dollars a month in payments.
This Is It addressed another one of Branca’s chief concerns: He wanted to restore Jackson’s tainted legacy. Jackson looks spectral in the film, but he banters about music with his band members and footwork with his choreographers. “I went to see it 11 or 12 times,” says Susan Fast, a professor of cultural studies at McMaster University in Hamilton, Ont., who wrote a well-regarded book examining Dangerous, Jackson’s eighth studio album. “They did an amazing job of humanizing him, showing him as being kind of vulnerable, and giving us a glimpse into his artistic process.” She did also think it was “exploitative” to have released the imagery of Jackson when he looked like he already had one foot in the grave.
The estate’s income grew further in 2010 when Branca negotiated a $250 million deal with Sony to release 10 albums featuring old and new Jackson material. He also enlisted Spike Lee to direct documentaries to accompany rereleases of favorites like Off the Wall and Bad. Lee and Branca were in agreement on the direction: “I just wanted to focus on the music, his musicianship, the great artist that he was,” Lee says. “All the other stuff? I wasn’t down with it.”
In the midst of this productive whirl, Branca got a call from Celine Dion’s manager asking him if he was interested in meeting with the top executives of Cirque du Soleil, the Canadian theatrical company that had produced the successful Las Vegas show called The Beatles LOVE, featuring the band’s music. He flew to Montreal to see Guy Laliberté, the company’s founder, who’d just returned from a voyage in a space capsule during which he hadn’t been allowed to enjoy a single cigarette. He was now chain-smoking to make up for it. “I said to Guy, ‘We want a show in Vegas that’s like The Beatles LOVE only better,’ ” Branca recalls. “He said, ‘I want a show that’s going to tour around the world.’ So we said, ‘OK. Why don’t we do both?’ ”

The Cirque traveling show, called Michael Jackson: The Immortal World Tour, featured many of Jackson’s band members, ran for three years, and, according to Billboard, became the eighth-top-grossing tour of all time, with $360 million in box-office revenue. Two years later, Michael Jackson: One, the company’s Las Vegas show, complete with a hologram of its star, premiered at the Mandalay Bay Resort and Casino. “I think it will run forever, because Michael’s music will be popular forever,” says Daniel Lamarre, Cirque’s chief executive officer. Branca also negotiated a video game deal; the rerelease of Moonwalk, Jackson’s 1988 memoir edited by the late Jacqueline Kennedy Onassis; and an agreement with Pepsi to put Jackson’s face on a billion soda cans. By 2012 the estate had paid off Jackson’s debt except for the Sony/ATV hunk. Jackson was proving to be more popular in death than he’d been when he had a pulse.
The following year, 60 Minutes, in a highly flattering segment, called Branca and McClain’s management of their ghostly client “the most remarkable financial and image resurrection in pop music.” Correspondent Lara Logan asked Branca, “His image was so battered and tarnished by the time of his death. Have his fans just forgotten about all that?”
“We don’t really pay attention to the tabloids,” Branca replied. “We look at the Michael that we knew, the real Michael, the artistic genius, the visionary.”
“The real Michael Jackson also told Ed Bradley on 60 Minutes that he let young boys sleep in his bed,” Logan persisted. “You can’t run away from that, right?”
“Well, I don’t recall that interview,” Branca replied. “The Michael Jackson that I knew was somebody I considered a very honorable person.”
The IRS took notice of the estate’s prosperity, too. In 2013 the agency informed Branca and McClain that they’d insufficiently appraised the Jackson estate. The IRS said it was worth $1.1 billion. The estate, however, claimed he was worth $7 million at the time of his death. To hear Branca and McClain tell it, Jackson was on the verge of bankruptcy in July 2009. The star owed $500 million. He hadn’t filed personal income taxes in three years. He’d neglected to make the mortgage payments on his mother’s home, which he owned, in Encino, Calif. IndyMac, the subprime mortgage lender, was preparing to foreclose. Meanwhile, more than 60 creditors claimed that Jackson owed them money. They included Ola Ray, the actress who played his easily frightened love interest in the Thriller video, and a woman who said she was the real Billie Jean.




A holographic image of Michael Jackson performs onstage during the Billboard Music Awards, at the MGM Grand Garden Arena, on May 18, 2014, in Las Vegas.
Photographer: Kevin Winter/Billboard Awards 2014/Getty Images for DCP

If it weren’t for the executors’ smart plays, Branca’s position goes, everything might have been sold off in a fire sale and there’d have been little for the beneficiaries. Branca declines to discuss the IRS case, but in a 2015 deposition in a civil suit filed against the estate by another of Jackson’s former managers, he said the molestation investigations “would have negatively affected his commercial value” and that Jackson had received “minimal income from pure name and likeness rights.” This offers some explanation for why the estate valued his name and likeness at only $2,105. Still, it seems a puzzlingly low number. “Well, let me put it this way,” says Jeffrey Eisen, an estate attorney in Los Angeles. “If somebody had come to you in July of 2009 and said, ‘I will sell you all of the rights to Michael Jackson’s name and likeness for $2,106,’ one more dollar than the estate tax, would you have bought it? You bet! I would have. So the real number has to be higher.”
The IRS is also skeptical. The agency has subpoenaed Tohme, who scoffs at the estate’s valuing of Jackson’s image. He argues that he resuscitated Jackson, rather than Branca, with the AEG deal—which, Tohme says, led to a flurry of endorsement offers from Louis Vuitton, Nike, and others. “Most of the money the estate has collected is because of me,” Tohme says. “I did all the work.” He and the estate are battling in court over his claim that he’s owed millions in unpaid fees; the estate argues that Tohme abused his position and sought to enrich himself by persuading Jackson to sign overly generous contracts.
The IRS also disputes the claim that Jackson’s interest in Sony/ATV was worth nothing at the time of his death. But documents from the estate value Jackson’s piece of the company at $242 million, less than the $300 million loan against it at the time. The estate didn’t pay all the debt off until last year when Branca, in another negotiating coup, sold the singer’s share to Sony for $750 million. Meanwhile, the dispute puts Jackson’s personal effects in limbo, which, according to Paris Jackson’s lawyer Craig Peters, is hard on the children. “The kids would like to have some of their dad’s stuff that he wanted them to have,” he says, describing clothes Jackson wore and pictures that hung around the house. “Mostly because of the IRS, it is still tied up in a warehouse. It’s not the shimmering glove. It’s personal stuff that means something to them.”
The government’s attorneys write repeatedly in their court filings that all of the estate’s deals were “foreseeable.” In other words, all he had to do was stop breathing, and the money would come flowing. “It’s like what they said about Elvis Presley when he died,” says Michael Morris, a former IRS trial lawyer now in private practice. “Good career move.” But this suggests that anybody would have turned Jackson into a thriving multimillion-dollar business.
Brancalytes would disagree. “What John did for Michael while he was living, he did probably 10 times more after he had died. He really protected a man who was no longer here,” says Motown’s Gordy, who once called Branca the “Smokey Robinson of dealmakers.” Bee Gee Barry Gibb, another client, calls his lawyer’s insight priceless: “I always listen. He’s taught me a lot.”
The estate’s feud with the IRS isn’t likely to tarnish Branca’s image. Even if he has to give in, the Jackson estate, which has been paying income taxes all along, will survive and refill the children’s coffers. Branca says he’s been trying to slow down now that he’s reaching retirement age, but his practice continues to grow in one area. Because of his success with the Jackson estate, he’s attracted many clients who are no longer with us. He’s been hired as a consultant by the estates of Kurt Cobain, Janis Joplin, Otis Redding, and Muddy Waters.
Much as he’d like to take them all, Branca has to set limits. “I got a call from Sammy Davis Jr.’s heirs,” Branca says. “I always try to help them, because he and Michael were friends. I said, ‘I can’t represent you. You guys are all fighting.’ The late Rat Packer’s heirs worked out their differences and tried once again to hire him. “I told them, ‘I can’t,’ ” Branca recalls. “ ‘You guys don’t have enough assets.’ ”

A holographic image of Michael Jackson performs onstage during the Billboard Music Awards, at the MGM Grand Garden Arena, on May 18, 2014, in Las Vegas.
Photographer: Kevin Winter/Billboard Awards 2014/Getty Images for DCP

[soulmum]

The motions seek to bar the admission ofthe testimony and expert report ofWeston Anson as to the value of Michael Jackson's name and likeness, and thevalue ofNew Horizon Trust III (whose major asset is publishing rights to many ofJackson's songs).

In their motion in limine to exclude Anson's report and testimony,petitioners argue that it is based on flawed assumptions -- so flawed as to render itirrelevant and unreliable under FRE 702. Part of this is because Anson included inhis estimation of value what petitioners consider to be possible values forextremely speculative and unlikely ventures -- for example, a Michael Jacksontheme park. This objection is based on quite literally a difference of opinion about what a hypothetical buyer would include in his estimation ofthe value of Jackson'sname and likeness. It is not something the Court will reach a conclusion on beforetrial.

A second objection is to what petitioners call Anson's "consideration ofthespecial characteristics of the Estate." Petitioners see some ofAnson's valuation asan effort to incorporate into the value of Jackson's name and likeness, and hiscatalog of publishing rights, the value of other assets that Jackson owned at thetime of his death -- his trademarks, copyrights in his music, his own right toreceive royalties as a performer. They argue that such mashups of different rightsin computing the value of one item in the Estate violate 26 C.F.R. § 20.2031-1(b)'srequirement that every item of property includable in the decedent's gross estate bevalued separately.

This is an especially interesting legal question. In a world withouttransaction costs, it wouldn't matter ifpublishing rights, performance royalties,trademarks, etc were valued separately because a rational buyer would value themas ifthey could be put together in the most profitable way even ifthey were boughtseparately. But it is entirely possible that trial will show that these separate rightswould be more valuable ifused together. If so, and ifthe Estate owned theseseparate rights, it might well be the case that they are worth more together thanthey would be if summed separately.

This is a legal question that the Court has not ruled on. But it means that itwould be relevant to ask if such synergies had an effect on the properties' valuesand, if so, what that effect would be. Petitioners argue this uncertainty makesAnson's testimony and report "patently unreliable." The Court disagrees -- it mayturn out to be unreliable, but at most latently unreliable.

Petitioners' second motion is to strike portions of one ofAnson's reports.The portions that they seek to strike are those that include in his estimate of thevalue ofNew Horizon Trust III's assets some rights whose value the parties havealready agreed on. In petitioners' view, Anson is giving an opinion inconsistentwith those settlements, specifically the settlements ofthe value of Jackson's masterrecordings and joint venture income.

One possibility is that this is simply a mistake -- one that will be sure to behighlighted in cross-examination and lead to a recalculation by Anson or thereallocation to the value of another asset ofthe Estate or its simple subtractionfrom Anson's bottom line. But another is that Anson is including in his estimate of value the value to the Estate of owning separate rights whose aggregate value isincreased by being owned in common. See, e.g., Ahmanson Found. v. UnitedStates, 674 F.2d 761, 770 (9th Cir. 1981). This is plausible at this point andAnson's testimony would be helpful to the Court ifthis legal argument turns out tobe persuasive.

https://www.ustaxcourt.gov/UstcDockI...ndexID=7039585

[soulmum]

Michael Jackson's Estate Faces Demand for Big Tax Payment
By Hannah Karp When pop star Michael Jackson died in 2009, weeks before a planned comeback tour, how much was the man in the mirror worth? The answer is far from black and white.
After coming to agreements on the value of some of the King of Pop's more concrete assets in a legal fight that began four years ago, the estate's executors are facing off with the Internal Revenue Service in U.S. Tax Court on Monday, primarily over the valuation of the singer's name and likeness rights at the time of his death.
Depending on the outcome of the case, the estate could be on the hook for more than $500 million in taxes and $200 million in penalties, according to the IRS's notice to the estate of its deficiency.
The estate put the value of his name and image at $2,105, at a time when Mr. Jackson's reputation was sullied by child-abuse allegations and his strange public behavior. After releasing his last studio album in 2001, he was accused in 2003 -- and later acquitted -- of molesting children at his Neverland ranch in Southern California. Numerous other incidents, including dangling his baby son from a hotel room window in 2002, also hurt his public image.
Even after Mr. Jackson had sold out the 50 shows at London's O2 arena that he had planned for the "This Is It" tour in the summer of 2009, he was unable to find a tour sponsor, said Howard Weitzman, the attorney representing the estate in the trial.
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."
The IRS didn't respond to a request for comment.
The gaping discrepancy highlights the difficulty of putting a price on a music star's name and image, as distinct from what his or her music is worth. Doing so requires guessing what the celebrity would have earned in licensing deals. Future licensing opportunities can also be hard to predict as technology evolves, with holograms and virtual reality now presenting new revenue opportunities for dead stars, for example.
Running the estate since Mr. Jackson's death have been entertainment attorney John Branca -- who started representing Mr. Jackson in the 80s -- and veteran music executive John McClain.
Since 2009, the two executors have helped the estate net about $1 billion, thanks to endeavors including music sales, a Cirque du Soleil tribute show and the posthumous release of the documentary "This Is It," which followed Mr. Jackson as he prepared for his comeback tour.
The biggest payout came last year when they sold the estate's approximately 50% stake in the world's biggest music publishing company, Sony/ATV Music Publishing, to Sony Corp., netting about $750 million. As a result, the $500 million in debt Mr. Jackson died with has been transformed into about the same amount in cash for the performer's mother and children.
The executors first brought the fight to U.S. Tax Court in 2013 when they filed a petition challenging a notice from IRS that had adjusted the estate's total value to more than $1.3 billion, from $7 million. The right to Mr. Jackson's image and likeness was among the IRS's biggest adjustments.
A trial slated for 2014 was postponed as the two camps began reaching settlements on the values of some interests such as the star's recordings and California property.
Los Angeles entertainment attorney Mitra Ahouraian said that if the IRS prevails, it is likely to pursue other celebrity estates for additional taxes on their name and likeness rights.
Write to Hannah Karp at hannah.karp@wsj.com


https://www.wsj.com/articles/michael...ent-1486320354

[soulmum]

John Branca Takes the Stand in Michael Jackson Tax Trial

"When I tell these stories, I actually tell them with affection,” says Branca of the late King of Pop.

Prominent music attorney John Branca took the stand Monday on the first day of trial in a potentially billion-dollar tax fight between Michael Jackson's estate and the IRS.

Branca, who represented the King of Pop off and on for nearly three decades, took the stand after lunch, and spent nearly four hours being examined by Jackson estate attorney Howard Weitzman.

Trial is expected to last three weeks, as attorneys for the estate and the government each work to convince a judge that their value of Jackson's likeness at the time of his death is the correct one. Jackson is widely considered one of the greatest musical talents who ever lived — but the court will have to decide if accusations of child molestation, rumors of drug use and a lack of tours and album releases in the last few years of his life were enough to lower the value of his brand.

The mood in the courtroom was starkly different than that of others in the same downtown L.A. federal courthouse. U.S. Tax Court Judge Mark Holmes, the attorneys and the witness, Branca, routinely cracked jokes amid a very serious conversation about Jackson's financial woes.

Branca told the court Jackson was about $400 million in debt when he died, leaving estate attorneys scrambling to avoid foreclosures on his properties and music assets. (The parties also disagree about how much Jackson's beneficial interest in the Sony-ATV and MIJAC music catalogs were worth.)

The more relaxed atmosphere gave Branca license to be more expositional with his answers to Weitzman's questions, which would have likely been cut off by a judge in a standard civil law courtroom.

“I’m going to tear up," Branca said. "Michael was a genius. He was a great guy. When I tell these stories, I actually tell them with affection.”

Among countless deals for the singer, Branca helped renegotiate Jackson's recording deal to reflect his status as a solo artists and inked a sponsorship deal with Pepsi for his family's 1984 Victory tour. “Michael made me write into the contract that he would never be seen holding a Pepsi can and he would never be onscreen for more than three seconds,” said Branca.

A decade later, the work wasn't so easy. By the time Jackson was preparing for his international HIStory tour in the late '90s the first sexual molestation allegations against him had surfaced and no sponsors were interested.

"Were there any offers for the use of Michaels name and likeness during that period?" asked Weitzman. "Nothing credible that I recall," said Branca.

Proving Jackson's reputation had been tarnished by allegations against him and tabloid fodder is key in the estate's efforts to support their valuation of his likeness rights at the time he died.

After several years of not working together, Branca met with Jackson just more than a week before the singer's death and brought with him a list of potential ideas. That list included a "Thriller" film, play and haunted house attraction, as well as album and DVD re-releases — but none of his ideas involved licensing Jackson's name or likeness.

Weitzman asks if musicians make a lot of money in general merchandising, which he described as licensing an artist's name and image for mugs, T-shirts and other tchotchkes. "No," said Branca. "That income for most musicians is dwarfed compared to the money they make from recordings, their songs and especially the tours. Putting out a record is not a name and likeness right."

That's also important — because since Jackson's death, the estate has used unreleased rehearsal footage to make This is It, which is one of the biggest grossing concert films ever, and launched a lucrative Las Vegas show in partnership with Cirque du Soleil. Branca said neither of those qualify as likeness deals.

After two failed clothing line licensing attempts during the course of his living career, the one likeness deal that shows potential after his death is with a teen clothing company called Supreme. Branca explained to Holmes that kids are "crazy" for the company's shirts and the deal is an effort to rebrand Jackson's image with a younger audience.

"We make no money from it, but maybe someday we’ll get new fans," he said.

The IRS' attorneys declined to cross-examine Branca, in favor of calling him back to testify when they present their case.

Before letting Branca leave the stand, the judge took the opportunity to ask him to explain one of Jackson's lyrics. "You’re familiar with 'Thriller,'" said Holmes. "What exactly does 'the funk of 40,000 years' mean?"

"Karma," answered Branca.




Michael Jackson’s $700M Last Dance With IRS Kicks Off In LA


Law360, Los Angeles (February 6, 2017, 11:46 PM EST) -- Michael Jackson's estate delivered opening statements Monday in its battle with the Internal Revenue Service over a tax bill that could reach $700 million, rejecting claims that Jackson’s image and music rights were worth over $800 million when he died and arguing they were instead rendered worthless by debts and scandal.

During the first day of a trial in Los Angeles that's expected to run for several weeks, attorneys for the estate and the IRS laid out their respective cases to U.S. Tax Judge Mark Holmes, who is visiting from the tax court's home base in Washington, D.C., to decide whether the estate underreported its value by hundreds of millions of dollars at the time of the King of Pop's death.

Avram Salkin of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, said that at the time of Jackson's death, his estate was burdened with over $400 million in debt, and that the key assets at issue in the trial were all worth vastly less than what the IRS has proposed. Those assets include Jackson's music catalog — called Mijac — as well as his half-share of the music publishing company Sony/ATV, and Jackson's name and likeness rights.

Mijac was actually worth $71 million, not $183 million, Salkin said. He added that although the IRS correctly predicted Jackson's record sales would spike after his death, it shouldn't have expected sales to stay at that level.

The estate's debts included a $300 million loan with 9 percent interest from Sony, secured by Jackson's interest in Sony/ATV, which the estate sold to Sony for $750 million last year — a sale that couldn't have been assumed or foreseen at the time of the estate's tax evaluation, Salkin said. The attorney said that because of that debt, any prospective buyer of the estate's share of Sony/ATV would have to clear that $300 million balance before even being able to make an offer, and that onerous conditions imposed by Sony after it issued the loan limited the upside for potential buyers.

Salkin argued that this meant the value of Jackson's share in Sony/ATV was actually nothing at the time of the singer's death.

As for Jackson's publicity rights, Salkin said that they were only worth $3 million when Jackson died, not the $161 million asserted by the IRS, noting that Jackson's image was tainted by the tabloid scandals that followed accusations of child molestation and accompanying civil and criminal suits, and wasn't worth much without the singer's music rights, which are held separately.

“Who would pay over $100 million just to be able to license Michael Jackson's picture on T-shirts and guitars or to appear on television endorsement … especially given some of the problems with his image at the time of his death,” he said.

Jackson’s estate had petitioned the Tax Court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

In the run-up to the trial, the IRS continued adjusting its proposed value of the estate, increasing the assessed value of the Mijac music catalog by tens of millions of dollars, but revising its proposed value of Jackson's name and likeness upon his death to $161 million.

On Monday, IRS attorney Donna Herbert told Judge Holmes during her opening statement that the estate was asking the court to believe that Michael Jackson was a “pariah” or a “freak” who was so damaged in the public eye that his name and likeness were worth nearly nothing. A position that is clearly contrary to the reality, pushed by the estate itself in its other ventures, that Jackson was “an international icon.”

Herbert noted that the estate and made hundreds of millions of dollars off of Cirque du Soleil shows that featured Jackson's likeness and music, and said that this value couldn't be attributed entirely to the songs.

“They want the court to believe this is all about T-shirts and mugs; they are wrong,” she said.

After opening statements, the estate called its first witness — prominent music industry attorney John Branca, who has served as the estate's co-executor, along with Jackson's childhood friend and music industry veteran John McClain.

Under questioning by his attorney Howard Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP, Branca testified for hours in a casual back-and-forth about the nearly three decades he spent representing or working with Jackson. When not getting laughs from the assembled audience and Judge Holmes from his anecdotes of his time with Jackson and entertainment industry figures, Branca testified about the struggles that faced the estate when he took charge of it in 2009, saying that it wasn't generating enough income to pay its bills, thanks to the interest payments on the debts it carried.

Branca also testified at length about the care and creativity the estate took in exploiting its rights, noting that the estate had partnered with Cirque du Soleil without putting up any capital of its own, and had hired director Spike Lee and other carefully chosen individuals to create the documentaries, films and live shows that had pulled the estate back into profitability — in pointed contrast, he said, to the government's assertion that it was Jackson's name and likeness rights alone that drove that value.

“If you took Michael's name and likeness and put it on a movie screen with nothing else, how many people would go see that movie?” he said. “If you took Michael’s name and likeness and put it up in the Staples Center, how many people would go to that show? None.”

The IRS declined to cross-examine Branca, with IRS attorney Sebastian Voth telling Judge Holmes that the agency intended to recall the witness to testify during its case-in-chief.

Judge Holmes said this was fine, but granted Weitzman's request that Branca not be recalled until next week, so that he can handle the business of “Grammy's week,” which Branca said includes the filming of a tribute to his clients The Bee Gees and his receiving an award for the record sales of Jackson's albums' “Thriller” and “Bad.”

Trial continues Tuesday morning with testimony from Karen Langford, a paralegal that handles marketing and related issues for the estate.

[soulmum]

Greenberg Atty Explains Michael Jackson Estate’s IP Moves

Law360, Los Angeles (February 8, 2017, 11:12 PM EST) -- Michael Jackson’s estate Wednesday called Greenberg Traurig LLP’s entertainment practice co-chair to testify about the estate's efforts to protect and expand Jackson's intellectual property rights after his death, in the trial to determine if the estate owes the IRS hundreds of millions of dollars for undervaluing its assets.

During the third day of the three-week trial before U.S. Tax Judge Mark Holmes in Los Angeles, the estate called to the stand Vincent Chieffo, the co-chair of Greenberg’s national media and entertainment practice, to testify about the work he had done helping the estate protect its trademarks, copyrights and publicity rights. The value of those publicity rights, also known as name and likeness rights, have been hotly contested in the estate’s dispute with the Internal Revenue Service, with the two sides being nearly $160 million apart in their respective valuations of the rights at the time of Jackson’s death in 2009.

Under direct examination by Robert Horwitz of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, Chieffo testified about how he was brought in as part of the legal team assembled in the days after Jackson's death, and that after attorney John Branca and Jackson's childhood friend John McClain were named co-executors, Chieffo and his colleagues began a multipronged effort to protect and expand the estate's intellectual property rights.

Chieffo said that when Jackson died, he had only two active registered trademarks in the U.S., having let other marks lapse or abandoning them, and so the estate not only had to begin sending cease-and-desist letters and filing lawsuits against entities that were now selling rip-off merchandise or claiming a right to use Jackson's name and likeness, but also had to file dozens of new trademarks to actually be able to capitalize on the King of Pop's image.

“[The estate's legal team was] growing and expanding the business of the estate from what it was when Michael died, so as to create what’s called secondary meaning… and create more value in the estate than was there when Michael died,” he said.

Things got heated shortly before the conclusion of Chieffo’s direct testimony, however, when Chieffo was testifying about a cease-and-desist letter he had sent to an attorney, Laurence Nimmer, who had made and was selling an unauthorized Michael Jackson documentary comprised of footage he obtained while working for criminal defense attorneys that represented Jackson in a 2005 trial on child molestation charges.

IRS attorney Donna Herbert objected to the estate introducing into evidence an email sent by Nimmer, purportedly in response to Chieffo’s cease-and-desist letter, to attorney Paul Gordon Hoffman — who is representing the estate in the tax trial — and to Nimmer’s brother, noted copyright expert David Nimmer.

“Mr. Nimmer isn’t in the courtroom,” she said. “‘We could call Mr. Hoffman but then he’d have to recuse himself.”

The estate’s attorney Steven Toscher of Hochman Salkin Rettig Toscher & Perez asked Herbert if she meant from the instant proceeding, and when she responded in the affirmative, he leaped to his feet in protest.

“And we could call Ms. Herbert and she could be excluded; let’s get on with it,” he said. “This is ridiculous.”

Judge Holmes ruled that the email would not be admitted into evidence, and the direct examination was concluded.

Jackson’s estate had petitioned the tax court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

In the run-up to the trial, the IRS continued adjusting its proposed value of the estate, increasing the assessed value of Jackson's Mijac music catalog — which held the singer's own songwriting copyrights — by tens of millions of dollars, but revising its proposed value of Jackson's name and likeness upon his death to $161 million.

During Monday's opening statements, Avram Salkin of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, said that at the time of Jackson's death, his estate was burdened with over $400 million in debt and that the name and likeness rights were only worth $3 million. Salkin also said that the IRS had overvalued the Mijac catalog by roughly $90 million and Jackson's half-share of music publishing company Sony/ATV by $200 million. Jackson's estate sold that share to Sony for $750 million last year.

On Wednesday, before calling Chieffo, the estate called to the stand Matt Forger, a sound engineer who worked with Jackson during his life, and then had helped the estate go through unreleased material after the singer’s death to determine what songs might be viable for later commercial release.

The IRS has contended in the trial that the estate undervalued significantly the value of the unreleased material, while the estate has countered that these songs were unreleased for a reason, and could not have been expected to be smash hits.

Forger testified that IRS expert Wes Anson’s assessement that the estate had eight to 10 albums worth of unreleased material at its disposal at the time of Jackson’s death was predicated on assuming all of the unreleased masters were in shape to be released, when many were “recordings of fragments of songs.”

IRS attorney Jordan Musen cross-examined Forger, asking him to confirm that the estate was in possession of songs that Jackson had completed before his death, and that simply hadn't been included on the albums they were originally recorded for.

“They were not included because Michael did not feel they were of the quality of the ones that were included,” Forger responded.

[soulmum]

This fan is in the courtroom every day and tweeting live about the testimonies.
https://twitter.com/TeamMichael777


She confronted Modabber after he left the courthouse, Modabber
was not happy about it:
https://twitter.com/TeamMichael777/s...21583411093504

[soulmum]

Michael Jackson’s Image Was In ‘Nuclear Winter’: Expert

By Daniel Siegal

Law360, Los Angeles (February 15, 2017, 10:42 PM EST) -- Michael Jackson’s estate on Wednesday called a business appraisal expert to testify at the Los Angeles tax trial over the estate's value at Jackson’s death, with the expert testifying that child molestation allegations had plunged the singer's publicity rights into “nuclear winter,” reducing their value to just $3 million.

During the second week of the trial before visiting U.S. Tax Judge Mark Holmes, the estate called to the stand business appraisal expert Jay Fishman, the managing director of Financial Research Associates, to explain how he had settled on the $3.078 million number for Jackson’s publicity rights. The value of those publicity rights, also known as name and likeness rights, has been hotly contested in the estate’s dispute with the Internal Revenue Service, with the estate saying the IRS has claimed they were worth $161 million at the time of Jackson’s death in 2009.

Under examination by Steven Toscher of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, Fishman first went through his background, and how he went from being a small business value appraiser to something of a specialist in celebrity name and likeness appraisals. Fishman has been called on to value the publicity rights of Nicole Kidman, Tom Cruise, Rudy Giulani and Bryant Gumbel as part of those celebrities’ respective divorce proceedings’, he said, and was retained by businesses to value both Muhammad Ali’s and Marilyn Monroe’s publicity rights.

Fishman said that while Ali was able to sell 80 percent of his publicity rights for $52 million in 2008, he hadn’t used that as a comparison when valuing Jackson’s rights — noting that the business that purchased Ali’s rights eventually wrote down the purchase and sold the asset for only $12 million, and adding that this occurred even with Ali, who has a clean personal reputation and is viewed as a “hero.”

Jackson, while an entertainment icon, was unfortunately not viewed the same way by the public at the time of his death, as child molestation accusations in 1993 and 2003 — culminating in a 2005 criminal trial in which Jackson was acquitted on all counts — had irreparably damaged his reputation, Fishman said. Fishman added that even compared to other scandal-tainted celebrities, Jackson’s alleged crimes were so heinous as to render him untouchable for name and likeness deals at the time of his death.

“I’ll only say it once, there are taints and then there are taints, there are Kobe Bryant type of taints, or I had Kate Moss, and then there are things with children ... those things are nearly impossible to overcome,” he said. “I call it like being in a nuclear winter.”

Jackson’s estate had petitioned the tax court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

In the run-up to the trial, the IRS continued adjusting its proposed value of the estate, increasing the assessed value of Jackson's Mijac music catalog — which held the singer's own songwriting copyrights — by tens of millions of dollars, but revising its proposed value of Jackson's name and likeness upon his death to $161 million.

During last week’s opening statements, Avram Salkin of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, said that at the time of Jackson's death, his estate was burdened with over $400 million in debt and that the name and likeness rights were only worth $3 million. Salkin also said that the IRS had overvalued the Mijac catalog by roughly $90 million and Jackson's half-share of music publishing company Sony/ATV by $200 million. Jackson's estate sold that share to Sony for $750 million last year.


https://www.law360.com/articles/892763/ ... ter-expert

[soulmum]

King Of Pop's Ex-Manager Says Brands Lined Up Before Death


Law360, Los Angeles (February 16, 2017, 8:15 PM EST) -- Michael Jackson’s former manager Tohme Tohme took the stand at the IRS’ behest Thursday in the Los Angeles trial over the value of the late entertainer’s estate at the time of his death, testifying that Nike, Sony and others had licensing deals in the works when Jackson died.

During the second week of the trial before visiting Judge Mark Holmes of the U.S. Tax Court, the Internal Revenue Service began its case in chief, arguing that the estate underreported its value, including Jackson’s name and likeness rights, by hundreds of millions of dollars at the time of the King of Pop's death in June 2009. So far in the trial, the estate has put on percipient and expert witnesses to testify that child abuse allegations against Jackson rendered his image poisonous for brands and that he had no name and likeness licensing deals in place when he died.

On Thursday, the IRS called to the stand onetime Jackson manager Tohme, who has previously been sued by the estate for allegedly tricking the entertainer into entering extortionate management agreements. Tohme testified about his time managing the entertainer from mid-2008 until Jackson’s death in June 2009.

Under examination by IRS attorney Sebastian Voth, Tohme testified that there were numerous deals in the works before Jackson’s death, including a plan with Nike to create “Moonwalk” sneakers named for Jackson’s famous dance move, a plan with James Nederlander of The Nederlander Organization to create a Broadway show based on the music video for Jackson’s song “Thriller,” a plan with animation producer Andy Heyward to create a “Thriller” TV show, a plan with Sony to create a Jackson-themed video game, and the beginnings of plans with Cirque du Soleil to create a Jackson-themed show.

While no deals were actually signed for the Nike shoes or the Sony video game, Tohme testified that the companies had given the go-ahead for the projects, and that they only fell by the wayside because of Jackson’s death.

The present case has its origins in a petition Jackson’s estate sent to the Tax Court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

The most notable discrepancy between the competing valuations as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

In the runup to the trial, the IRS continued adjusting its proposed value of the estate, increasing the assessed value of Jackson's Mijac music catalog — which held the singer's own songwriting copyrights — by tens of millions of dollars, but revising its proposed value of Jackson's name and likeness upon his death to $161 million.

During last week’s opening statements, Avram Salkin of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, said that at the time of Jackson's death, his estate was burdened with over $400 million in debt and that the name and likeness rights were worth only $3 million. Salkin also said that the IRS had overvalued the Mijac catalog by roughly $90 million and Jackson's half-share of music publishing company Sony/ATV by $200 million. Jackson's estate sold that share to Sony for $750 million last year.

On Thursday afternoon, the estate’s attorney Howard Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP cross-examined Tohme, asking him to name any actual licensing deals he knew Jackson had at the time of his death, with Tohme admitting only Jackson’s musical licensing deals with Sony and Warner/Chappell were in place.

On the claimed Cirque du Soleil plans, Weitzman also got Tohme to admit that he spoke only to a man named Jack Wishna, who claimed to know Cirque's interests, before Jackson’s death, but never actually spoke to a confirmed Cirque du Soleil representative nor signed any deal for the performing troupe to use Jackson’s name, likeness or music.

After Jackson’s death, the estate did end up working with Cirque du Soleil to create two Jackson-themed shows that grossed hundreds of millions of dollars for the estate, according to testimony earlier in the trial by Jackson’s former attorney John Branca, who is the estate’s co-executor.

[soulmum]

Michael Jackson's Ex-Manager Takes the Stand in Tax Trial
Tohme Tohme's testimony could foreshadow an ugly trial ahead in his own legal fight with Jackson's estate.
Tohme Tohme's testimony could foreshadow an ugly trial ahead in his own legal fight with Jackson's estate.
Describing the relationship between Michael Jackson's estate and his ex-manager Tohme Tohme as adversarial is putting it mildly, and that tension was on full display Thursday as he took the stand in a trial over the King of Pop's taxes.

Tohme, a former Colony Capital consultant, began working with Jackson in 2008 when he coordinated the buyout of a loan on Neverland Ranch. He says Jackson brought him on because of his relationship with Colony CEO Tom Barrack and, as a finder's fee of sorts, he was to receive 10 percent of the total value of the loan. At the time, he says he was receiving $20,000 a month in consulting fees from Colony — plus a share of the deals in which he was involved.

The $23 million loan buyout allowed Jackson avoid foreclosure on the ranch and sealed Tohme's position as the entertainer's manager. Since 2012 he's been involved in a contentious legal battle with Jackson's estate over his pay. (More on that later.)

He was called as a witness by the IRS, presumably, to show that Jackson had business suitors in the time leading up to his death despite allegations of child molestation — which the estate claims hurt his brand and diminished the value of licensing his name and image. Tohme specifically mentioned prospects of a "Moonwalker" shoe deal with Nike and a Broadway musical based on Jackson's songs.

Jackson estate attorney Howard Weitzman pulled no punches during his cross-examination of Tohme, making it quite clear his goal was to impeach him as a witness.

After going through the potential list of deals Tohme had mentioned and pointing out that none had come to fruition, Weitzman turned his attention to a series of documents that suggest Tohme was terminated in the spring of 2009. Tohme claims he worked with Jackson up until his death, but the estate has held that he was fired several months before that.
Jackson's ex-manager has been known to go by "Dr. Tohme," which led Weitzman to ask him about his résumé. Did he attend medical school? No. Did he have a Ph.D. in economics? No.

Weitzman then asked why Tohme had said during a deposition in a previous case, in which he was a witness, that he held those degrees.

"You tortured me in the media," Tohme said, claiming that the estate hired a private investigator to dig up dirt on him and that the P.I. visited a woman he was briefly married to decades ago. "The reasons for these answers is I don't want you to know. I'm a very highly educated person. I speak many languages. I don't know what else to tell you."

The transcripts of that deposition were admitted to the record following an objection from the IRS, but only for the purposes of impeachment. The topic came up so often during Tohme's questioning that during a recess he asked someone in the hall what "impeachment" meant and why Weitzman kept saying it.

Tohme got a brief break while noted theater producer James L. Nederlander took the stand to discuss the never-launched Thriller play. But when Weitzman called Tohme back for round two he turned up the heat, asking him about his replacement by Frank DiLeo. Tohme's exasperation was clear as he angrily asked, "Who’s on trial here, me or the estate?"

Eventually, Weitzman brought up the estate's pending litigation with Tohme. "Did you ultimately file a lawsuit against the estate?" he asked. "Yes," said Tohme. He then noted to Weitzman that he's been seeing him in court for several years and added coyly, "I like your company." U.S. Tax Court Judge Mark Holmes took full advantage of the lighter moment to quip, "You’re under oath."

Chuckles echoed through the courtroom, as they would a few minutes later when Holmes had another burst of wit after Weitzman's final question.

Weitzman: Why do they call you Doctor?
Tohme: Why do they call me a doctor? You have to ask whoever calls me a doctor.
Weitzman: Is it in the same vein as Dr. J (Julius Erving) or Doc Holliday?
Holmes: Doc Holliday was a real doctor.
Weitzman: You don't have to answer.

Tohme decided to leave the matter "for another time" — which could likely be mere months from now during his own trial against the estate.

After Wietzman finished, IRS attorney Sebastian Voth pointedly asked Tohme about their relationship. “Is it fair to say that you and the estate have a very contentious relationship?" asked Voth. "Yes," answered Tohme.

The legal fight between Tohme and the estate dates back to 2012, when a pair of dueling lawsuits were filed. At the center of the dispute is whether Tohme's work near the end of Jackson's life was for the superstar's benefit or his own. They also dispute whether he is entitled to the $2.3 million from the Neverland Ranch loan and a share of the revenue that has been earned since Jackson's death.

Trial is currently set for October and, if Tohme's time on the stand Thursday is any indication, there will likely be fireworks in the courtroom.

[soulmum]

Abuse Claims 'Overblown' In Jackson Tax Trial: IRS' Expert

Law360, Los Angeles (February 23, 2017, 10:52 PM EST) -- An intellectual property expert testified for the IRS on Thursday that the damage child molestation allegations did to Michael Jackson's name and likeness rights has been “overblown” in the Los Angeles trial to determine if Jackson's estate owes the IRS hundreds of millions of dollars for undervaluing its assets.

During the third and final week of the trial before visiting U.S. Tax Judge Mark Holmes, the IRS called to the stand intellectual property expert Weston Anson, chairman of Consor Intellectual Asset Management, to explain some of the details behind his report concluding Jackson's publicity rights were worth $161 million at the time of his death. The value of those publicity rights, also known as name and likeness rights, has been hotly contested in the estate’s dispute with the IRS, with the estate's own expert Jay Fishman saying the rights were worth only $3 million at the time of Jackson’s death in 2009.

Under examination by IRS attorney Sebastian Voth, Anson discussed a wide range of potential licensing opportunities he had considered available to Jackson's estate when assembling his expert opinion, including video games, slot machines, a potential themed hotel or casino, and posthumous appearances — similar to the use of a “hologram” of deceased rapper Tupac Shakur at the music festival Coachella in 2012.

Anson then addressed what has been a key topic for the various name and likeness experts opining in the case: the allegations, first in 1993, and then in 2003, that Jackson had molested young boys, and the ultimate impact those allegations would have had on the value of Jackson's name and likeness at the time of his death. The estate's expert, Fishman, testified last week that the allegations put Jackson's image in “nuclear winter,” saying that allegations involving harming children are anathema for the brands that might otherwise pay to use a celebrity's image.

Anson, however, testified that while he wouldn't have taken his son to a Michael Jackson-themed hotel in 1995, by 2009 the situation had changed, after Jackson was acquitted on all counts in a 2005 trial on the latter allegations, and said that testimony in the tax trial had shown that apparel and entertainment licensing opportunities were available for Jackson before his death. Anson added that the value of the rights would only have grown for the estate, noting that he was once told that “the greatest client in the world is a dead celebrity.”

“I think the child molestation issue is just frankly overblown,” he said. “In a way, Michael Jackson will forever be a young man with a great talent whose talent never degraded, and for that reason will always have a marketable name and likeness.”

Jackson’s estate had petitioned the tax court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

In the run-up to the trial, the IRS continued adjusting its proposed value of the estate, increasing the assessed value of Jackson's Mijac music catalog — which held the singer's own songwriting copyrights — by tens of millions of dollars, but revising its proposed value of Jackson's name and likeness upon his death to $161 million.

During opening statements on Feb. 6, Avram Salkin of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, said that at the time of Jackson's death, his estate was burdened with over $400 million in debt and that the name and likeness rights were only worth $3 million. Salkin also said that the IRS had overvalued the Mijac catalog by roughly $90 million and Jackson's half-share of music publishing company Sony/ATV by $200 million. Jackson's estate sold that share to Sony for $750 million last year.

Jackson's estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, Robert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC; Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker APC; and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented by its attorneys Donna F. Herbert, Malone Camp, Sebastian Voth, Jordan Musen and Denise Larson.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.

[soulmum]

Lawyers Eye King of Pop’s Case for Estate Valuation Answers

An opinion in the Jackson estate case isn’t likely for at least a year.

https://www.bna.com/lawyers-eye-king-n57982084590/

[soulmum]

MJ's Estate Accuses Gov't IP Expert Of Perjury In Tax Trial

By Jimmy Hoover
Law360, Washington (April 14, 2017, 3:11 PM EDT) -- The estate of Michael Jackson has accused the IRS's intellectual property expert of lying under oath during a high-profile tax trial in Los Angeles with hundreds of millions of dollars at stake, urging the U.S. Tax Court to turn down the agency’s bid to scrub parts of his testimony from the public record.
In an opposition filed April 5, the estate unloaded on the IRS’s motion to strike portions of testimony from Weston Anson, chairman of Consor Intellectual Asset Management, during the trial. The IRS had asked the court to seal parts of Anson’s testimony that dealt with a separate case involving the estate of Whitney Houston, but Jackson’s estate called the request a “red herring” designed to “strip from the record the evidence that Anson lied under oath and any suggestion that he lied.”

A trial transcript excerpted by the estate shows Anson testifying that he had “not begun any work” on the Whitney Houston case, despite later admitting that his firm was retained by the IRS in that matter as well and had prepared an expert report.

“If granted, the motion would leave Anson’s lies unchallenged when, in fact, his integrity was destroyed and he was revealed to be a perjurer with a clear bias toward the IRS,” the estate wrote. “Striking portions of Anson’s testimony where he was caught lying and admitted perjury would work to the substantial prejudice of the estate.”

Reached for comment Friday on the accusations, Anson told Law360: “My only comment is, is that the best they can do? Character assassination seems to me a mighty weak response to my full week of testimony, which seems to have destroyed their case pretty thoroughly. I’ve never seen character assassination filed as a legal document before. ... It seems silly and juvenile in the extreme.”

Jackson’s estate argued that the IRS’s rationale behind the motion — that the testimony violates Internal Revenue Code 6103’s prohibition against the disclosure of third-party return information — is flawed because the Houston estate case is a matter of public record and, further, counsel for Houston’s estate “will not seek either a sealing order or the striking of Anson’s testimony.”

“Given the public status of the Houston estate case, the IRS’s assertion of a 6103 violation is disingenuous — to be kind,” Jackson’s estate wrote. “None of the questions asked for or elicited testimony that was return information not already a matter of public record or that could otherwise be considered ‘return information’" under IRC 6103.

In a filing, Jackson’s estate asked the court late last month to strike all of Anson’s testimony in the case, following up on an oral motion that was made at trial.

Anson was called to the stand during the third and final week of the trial before visiting U.S. Tax Judge Mark Holmes to explain some of the details behind his report concluding that Jackson's publicity rights were worth $161 million at the time of his death. The value of those publicity rights, also known as name and likeness rights, has been hotly contested in the estate’s dispute with the IRS, with the estate's own expert, Jay Fishman, saying the rights were worth only $3 million at the time of Jackson’s death in 2009.

Under examination by IRS attorney Sebastian Voth, Anson discussed a wide range of potential licensing opportunities he had considered available to Jackson's estate when assembling his expert opinion, including video games, slot machines, a potential themed hotel or casino and posthumous appearances — similar to the use of a “hologram” of deceased rapper Tupac Shakur at the Coachella music festival in 2012.

Anson also addressed what had been a key topic for the various name and likeness experts opining in the case: the allegations, first in 1993 and then in 2003, that Jackson had molested young boys, and the ultimate impact those allegations would have had on the value of Jackson's name and likeness at the time of his death.

Relevant to the estate’s April 5 opposition, Anson was cross-examined by Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP. During the cross-examination, Anson testified that he had not yet performed any work in connection with the Houston case.

“I thought you were working on it?” Weitzman asked, according to a transcript provided by the estate.

“We’ve not begun any work on the case,” Anson replied.

“Sir, haven’t you been asked to work on the Whitney Houston case?”

“Yes, we have been asked,” Anson said.

“So why wouldn’t you tell me that?”

“Because we haven’t been asked to do any actual work yet,” the expert responded.

Weitzman followed up on the questioning later in the transcript.

“So you’re testifying under oath that you or your firm — the firm which you know about — did not prepare any valuation in the Whitney Houston matter,” he asked.

“That’s correct,” Anson responded.

Anson later recanted, saying he gave that answer “on the direction of counsel,” who he said had informed him that revealing information about the case “could result in a felony.”

“Is it your testimony that you were told it was OK to commit perjury because otherwise you’d be charged with a felony?” Weitzman responded.

Jackson’s estate had petitioned the tax court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS had adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

Counsel for the IRS does not comment on pending litigation.

Jackson's estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, Robert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC; Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker APC; and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented in-house by Donna F. Herbert, Malone Camp, Sebastian Voth, Jordan Musen and Denise Larson.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.

--Additional reporting by Daniel Siegal. Editing by Sara Ziegler.

Update: This article has been updated to include comments from Weston Anson.
https://www.law360.com/tax/articles/...y-in-tax-trial




Michael Jackson Estate Says IRS Expert Committed Perjury About Whitney Houston Work
Is the tax trial of the century tainted?
Illustration By Sam Island

Is the tax trial of the century tainted?
As tens of millions of American citizens file last-second returns on "Tax Day," the Internal Revenue Service is dealing with an explosive development that has the potential of rocking the billion dollar case focused on pop superstar Michael Jackson.

In February, the Michael Jackson Estate and the IRS concluded a groundbreaking trial. The proceeding featured testimony from experts and witnesses close to Jackson over whether money is owed in estate taxes from the singer's death in 2009. Although part of the dispute deals with the value of Jackson's interest in the Sony-ATV and MIJAC music catalogs, the issue that has captured attention through the entertainment industry pertains to the value of Jackson's name and image upon death. If the IRS is successful in convincing U.S. Tax Court Judge Mark Holmes that administrators of Jackson's estate undervalued his publicity rights by hundreds of millions of dollars, it will reshape how stars plan for their death.

With this in context, the Michael Jackson Estate is now looking to exclude the complete testimony of the IRS' primary valuation expert, Weston Anson, asserting that perjury has tainted "his credibility, reliability, neutrality and objectivity."

Specifically, the IRS' reliance on Anson to establish the worth of Jackson's name and image at time of death at $161 million — instead of just $2,105, as the other side contends — is now in danger thanks to the expert's testimony about Whitney Houston.

During the trial, Anson was cross-examined by attorney, Howard Weitzman, and asked whether he had ever worked for the IRS before.

Anson responded, "I've never worked for the Internal Revenue Service before."

Weitzman would soon ask Anson about working for the IRS on the Whitney Houston case — the one where the tax agency claims Houston's Estate undervalued her own publicity rights by $11.5 million.

"We've not yet begun any work on the case," Anson testified.

Later, Weitzman would ask Anson if he had written an IP valuation of Whitney Houston.

Anson: "Absolutely not."

The Michael Jackson Estate is now seizing upon these words because Anson and CONSOR Intellectual Asset Management had in fact prepared and submitted a report dated June 8, 2015, titled, "Analysis of the Fair Market Value of the Intangible Property Rights Held by the Estate of Whitney E. Houston as of February 11, 2012 for Estate Tax Purposes."

In addition, court papers say that CONSOR had a 2009 contract for $169,168 for services as an expert on the valuation of intangibles and that his firm has been awarded $2.64 million in funds since 2014. Despite this, Anson also testified that he had "no idea" whether there would be impact on him if the IRS prevailed in the Michael Jackson tax case.

"The context in which the lies began reveals Mr. Anson's true intent in lying under oath was to disguise his bias in favor of the IRS and to hide the fact he had been awarded multiple contracts from the IRS for substantial sums of money," writes the Michael Jackson's Estate in a motion to strike his testimony.

The IRS, in turn, is seeking to limit the damage by arguing that Weitzman improperly asked questions pertaining to a taxpayer other than Michael Jackson and that Anson's answers contained "confidential" information. The tax agency would prefer to strike the disputed sections of the trial transcript for that reason.

Besides responding that such an objection is untimely, and that the Houston case is a matter of public record, the Michael Jackson Estate writes to the judge that it "would be prejudiced if the [IRS] motion were granted and the Court would be unduly limited in its fact finding by not being able to consider that Anson repeatedly lied in open court in response to questions that went to the issue of bias."

Judge Holmes will soon rule on this issue. His ultimate determination of tax liability won't likely come for months.

http://www.hollywoodreporter.com/thr...on-work-995263




Michael Jackson’s lawyers claim IRS’ witness perjured himself in tax trial

In a new court filing obtained by the Daily News, Michael Jackson’s estate lawyers claim the IRS’ star witness in its ongoing bid to collect hundreds of millions of dollars from the "Thriller" singer's heirs admittedly perjured himself on the witness stand during a trial last February.
BY
NANCY DILLON
NEW YORK DAILY NEWS
Tuesday, April 18, 2017, 9:52 PM
It’s been called the billion-dollar tax trial of the century – and it’s getting rocked by new revelations from Michael Jackson’s estate involving Whitney Houston.

In a new court filing obtained by the Daily News, Jackson estate lawyers claim the IRS’ star witness in its ongoing bid to collect hundreds of millions of dollars from the "Thriller" singer's heirs admittedly perjured himself on the witness stand during a trial last February.

They argue financial expert Weston Anson lied about his lucrative government gig valuing Houston’s estate and that his alleged perjury not only torpedoed his personal credibility, but the government’s entire case.

“The IRS' case depends upon Mr. Anson,” the filing obtained by The News said.

“Mr. Anson is the IRS's sole expert witness in this case, who has testified regarding his purported opinion of the fair market value of” the King of Pop’s posthumous prospects, the newly filed petition said.

The estate argues there’s no objective evidence to support the IRS’ valuations – such as its claim Jackson’s name and likeness were worth $161 million when he died in June 2009 – other than “the testimony of an admitted perjurer.”

In its own valuations, the estate estimates Jackson’s name and likeness were worth about $3 million when he died from an overdose of the surgery strength anesthetic propofol.

Using snippets of courtroom transcripts, estate lawyers argue in their petition that Anson himself admitted he lied when asked point-blank on the witness stand whether he already had a contract with the IRS involving Houston.

“Mr. Anson, you were asked if you were retained by the Internal Revenue Service for the Whitney Houston matter, and you said no. That wasn't a correct and honest response, was it?” estate lawyer Howard Weitzman asked under cross examination, according to the transcript.

“The answer is that's correct. It was not an honest response,” Anson replied.

Anson testified he was told by his lawyer “to reveal nothing about IRS tax affairs” because it might “result in a felony.”

He was referring to a law that prohibits IRS employees from disclosing confidential tax return information to third parties.

In their petition asking to have Anson’s testimony tossed, Jackson’s estate lawyers say Anson simply should have refused to answer pointed questions about Houston’s estate rather than make unequivocal – and false – statements that he “never” worked for the IRS and “absolutely” had no connection to Houston’s estate.

Elsewhere in their filing, estate lawyers claim Anson made misleading public statements about his valuation of Jackson’s estate.

They claim he suggested during a “webinar” that the estate was worth an estimated $1 billion and that an email sent from his company also used the eye-popping figure.

In his testimony, Anson called the $1 billion assessment “outrageous” and said he didn’t authorize the email. He claimed he prefaced his webinar reference to the “billion dollar case” with the statement, “what is known as.”

Attempts to reach Anson were not immediately successful Tuesday.

For its part, the IRS has asked that the court seal the portions of Anson’s testimony related to Houston’s valuation.

“Recognizing that the effective operation of our tax system hinges on the willingness of taxpayers to voluntarily provide the government with highly confidential information, Congress has taken steps to ensure that confidentiality,” the IRS said in its March 24 filing asking for the protective order.

The judge has yet to rule on the latest requests and could take more than a year to make his final decision in the case, experts said.

[soulmum]

How Much Financial Info About Michael Jackson Should Be Public?

How should courts handle the revelation of certain details about celebrity estates?

Michael Jackson’s estate is the gift that keeps on giving for celebrity estate watchers.

A recent motion decided in his case offers some insight into how the courts handle the often messy intersection of the general presumption that all evidence should be open to the public, and the potential damage that could be caused by the revelation of certain financial and business details of high-profile estates. It’s important to note that the ruling in this particular motion by Tax Court Judge Mark V. Holmes does not create precedent, but it offers a look at the court’s thought process that may be valuable to planners with high profile clients (or those of us who just like to watch the fallout).

Read the full decision

Jackson’s attorney wanted to seal certain portions of expert testimony offered on Jackson’s behalf by Mark Roesler, an attorney and agent with the firm CMG, which deals primarily in high-profile estates and publicity right disputes (such issues popping up more often with the popularity of holograms and the ability to digitally insert actors into films — Carrie Fisher being a recent example). The court denied the motion (though it did allow for certain redactions).

Though Jackson’s team maintained that four portions of Roesler’s testimony should be sealed, two hold the greatest interest for estate planners: The historical incomes of several dead celebrities whom Roesler represents — going back as far as Marilyn Monroe and Princess Diana, and details on the terms of deals that Jackson made with third parties and Roesler's process of disaggregating the right of publicity portion of the income from those deals.

Putting aside the issues surrounding rights of publicity, which are beyond the scope of this article, what Holmes decided in this motion was where it was going to draw the privacy line in this case when it came to the career earnings and business dealings of deceased celebrities.

The general presumption is that all evidence received by the court should be open to the public, however there is an exception for “trade secrets or other confidential information.” Though these terms can mean many things, the court decided that the issue hinged on whether the disclosure of this information would cause economic harm to either Roesler or the estate. The sorts of information usually found by courts to be economically harmful include patents, trade secrets and details of confidential business dealings.

“Asserting annoyance isn't enough. There must be some demonstration of harm that disclosure will cause," Holmes wrote. "Our focus on harm means that the presumption of public access trumps any private interest in nondisclosure when otherwise confidential business information is stale.”

For the celebrity earnings section, the court noted that most of the information offered was many years old, and that which was more up to date didn’t reveal any “trade secrets” because individual deals weren’t noted, but were instead aggregated into a single income number. Further, since there is no mention of living heirs, who exactly ended up with the money is also kept confidential. Ultimately, Holmes decided that “no serious injury or competitive damage that will result from making this portion of Roesler's report public.”

As for Jackson’s business deals, the court also deemed this information stale, as all deals mentioned were between seven and 37 years old. Thus, the estate couldn’t demonstrate that their revelation would materially effect any similar deals currently in progress. Additionally, the court believed that the potential insight offered into the effects of Jackson’s bad publicity in the last 15 years of his life would have a significant impact on the value of his estate.

Though the decision on this motion is nonprecedential and highly fact specific, it’s nonetheless interesting because of the insight it offers into how courts attempt to reconcile their preference for open proceedings and records when it comes to the business dealing of high-profile estates.

http://www.wealthmanagement.com/high...ould-be-public

[soulmum]

Tax Court Won't Seal False Testimony In Michael Jackson Case

By Chuck Stanley
Law360, New York (May 1, 2017, 6:16 PM EDT) -- A federal tax judge on Friday refused to strike or seal testimony by an expert government witness accused of lying on the stand in the estate of Michael Jackson’s tax trial, rejecting the Internal Revenue Service’s claim the testimony contains protected information about the estate of Whitney Houston.
U.S. Tax Court Judge Mark V. Holmes rejected the IRS’ claim that testimony in which Weston Anson, chairman of Consor Intellectual Asset Management, admitted that his firm had been retained by the IRS in a tax dispute with the Houston estate constituted protected information about the deceased singer’s estate, saying it had already become public knowledge that it is involved in a tax dispute with the IRS.

The Jackson estate had accused the IRS of trying to conceal evidence that Anson lied under oath when he previously said he had “not begun any work” on the Houston case.

“The problem for the commissioner here is that it is a matter of public record that the Houston estate is also in Tax Court to challenge the commissioner's determination of a deficiency, and that part of that challenge includes a dispute about the value of Ms. Houston's intellectual-property rights at the time of her death,” the opinion states. “This means that the fact that the Houston estate is being audited is no longer information protected by I.R.C. [Section] 6103.”

While the IRS had sought to have only portions of Anson’s testimony related to his involvement in the Houston estate case sealed or stricken, the Jackson estate has moved to strike the entirety of Anson’s statements, saying the entire testimony is tainted by perjury.

Hochman Salkin Rettig Toscher & Perez PC attorney Avram Salkin, who represents the Jackson estate, told Law360 he expects a decision on that motion sometime this summer.

The IRS claimed that information from Anson’s report regarding the Houston estate constituted protected tax return information. The argument, said Judge Holmes, was plausible, but the court’s decision to allow only the first and last page of that report had been sufficient to establish whether Anson was indeed working on the Houston case without releasing any confidential information.

The IRS also could not argue that disclosure of Anson’s role as an assessor of the value of intellectual property rights of the Houston estate resulted in improper disclosure of the fact that the Houston estate was being audited, since the case is now being heard in the Tax Court and is therefore public record.

Jackson’s estate petitioned the tax court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS had adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

Anson was called to the stand in the final week of the trial to explain his report, which concluded Jackson’s publicity rights were worth $161 million at the time of his death, compared with the estate’s claim they were worth just $3 million.

During the cross-examination, Anson testified that he had not yet performed any work in connection with the Houston case. But Anson later recanted, saying he gave that answer “on the direction of counsel,” who he said had informed him that revealing information about the case “could result in a felony.”

Anson did not immediately respond to requests for comment.

The IRS does not comment on pending litigation.


https://www.law360.com/ip/articles/9...l-jackson-case

[soulmum]

Ivy‏ @Ivy_4MJ

Michael Jackson Estate's request to strike all of IRS experts testimony has been denied. However the judge ruled IRS expert has lied under oath and the court will "discount the credibility and weight they give to his opinions" https://twitter.com/Ivy_4MJ/status/9...831808/photo/1

[soulmum]

IRS Valuation Expert for Michael Jackson Estate Case Almost Thrown Out!

On September 29, 2017, Judge Mark Holmes of the United States Tax Court (Tax Court) issued an order in the estate tax valuation case brought by the Estate of Michael Jackson (the Estate). In the case, the Estate moved to strike the testimony of the Internal Revenue Service’s (IRS) valuation expert witness on the grounds that he lied. The IRS acknowledged that its expert “did not tell the truth when he testified that he did not work on or write a valuation report for the IRS Examination Division in the third-party taxpayer audit.” Apparently, the expert had worked on the valuation of Whitney Houston’s Estate on behalf of the IRS, and failed to list the engagement in his report. He also omitted one publication that he wrote and one case in which he provided expert-witness testimony at a deposition.

The question for the Court was the proper remedy for the omissions, with sanctions ranging from striking all of the expert’s testimony (and thereby depriving the IRS of the only evidence in its favor on the key issues in the case) to discounting the expert’s testimony and weight to be given to his opinions. The Court decided to take the latter route.

The Court explained that striking expert testimony pursuant to Tax Court Practice and Procedure Rule 143(g) (governing expert witness reports) occurs when a putative expert omits information from the report without good cause for the omission. In this case, the Court explained that the IRS’s expert failed to disclose his valuation work on his long list of expert-testimony engagements attached to his resume, but ruled that the omission was merely a “clerical error.” However, the expert did provide false testimony at trial when he testified he did not work on or write a valuation report in the matter involving Whitney Houston’s Estate. The Court determined that there had to be some negative consequences for the expert’s false testimony, and settled on discounting his credibility and opinions.

Practice Point: The order in Estate of Michael Jackson, as well as the Tax Court’s prior opinion in Tucker v. Commissioner, TC Memo. 2017-183, highlight a very important aspect of preparing an expert report for submission in Tax Court: it must be complete and accurate at the time of its submission. It is good practice to run a litigation database search (e.g., Lexis or Westlaw) on your expert’s testimony experience as a check on what the expert has listed in his report.

https://www.lexology.com/library/det...4-887ed1300e16

[soulmum]

Ivy @Ivy_4MJ
Michael Jackson Estate May Avoid Penalties in IRS Dispute - https://www.bloomberg.com/news/articles ... rs-dispute …

06:02 - 29. Dez. 2017
Michael Jackson Estate May Avoid Penalties in IRS Dispute

The estate of Michael Jackson looks to have escaped a possibly hefty penalty for allegedly undervaluing the late singer’s assets.

bloomberg.com

https://www.bloomberg.com/news/artic...in-irs-dispute

The estate of Michael Jackson looks to have escaped a possibly hefty penalty for allegedly undervaluing the late singer’s assets.

A U.S. Tax Court judge denied the Internal Revenue Service’s bid to provide additional evidence in a case that was tried in Los Angeles in February. Because the agency didn’t show that it complied with certain procedural requirements, it’s barred from seeking as much as 40 percent of the allegedly understated tax in penalties.

“What happens if a party with the burden of production on an issue fails to introduce sufficient evidence at trial to meet that burden?” Judge Mark Holmes said in his Dec. 20 order. “Well, he loses.”

The executors of Jackson’s estate, lawyer John Branca and former music industry executive John McClain, have been busy monetizing the legacy of the singer, who died in 2009, for the benefit of his children.

“This Is It,” a documentary about Jackson’s preparations for his ill-fated 2009 tour, went on to be the highest-grossing concert movie of all time, with $261.2 million in worldwide sales, according to researcher BoxOfficeMojo.com. Last year, the estate sold Jackson’s half of the Sony/ATVmusic publishing business to Sony for $750 million.

In 2013, the IRS went after the estate with a “notice of deficiency,” claiming it had undervalued assets including real estate, a Bentley automobile and the late singer’s “image and likeness.”

The court ruling didn’t quantify how much the assets were allegedly undervalued, but Bloomberg Businessweek reported in February that the IRS claimed Jackson’s name and image should have been valued at $434 million. The estate claimed that it was worth a mere $2,105, implying that his image had been rendered all but worthless by stories about skin bleaching, his obsession with plastic surgery, prescription drug abuse, and allegations that he molested young boys who visited Neverland Ranch.

“The court’s order denying the IRS’s request to reopen the trial record was well reasoned and could prevent the government from seeking penalty assessments on their claim against the Estate of Michael Jackson," said Howard Weitzman, a lawyer for the estate.

A representative for the IRS said the agency can’t comment on ongoing lawsuits.

The case is Estate of Michael J. Jackson v. IRS, 17152-13, U.S. Tax Court (Washington).

[soulmum]

What does the IRS’ Michael Jackson dispute mean for celebrity estate planning?

February 16 2018
When Michael Jackson died in 2009, he left behind a convoluted legacy that has presented issues for fans and tax collectors alike, and the legal repercussions are ongoing.

At the time of his death, Jackson’s reputation had suffered from allegations of child abuse, drug use and erratic behavior. The circumstances of his death, however, heightened fans’ sympathy for the tragic “King of Pop.” Because of this, Jackson’s estate is embroiled in a legal dispute with the IRS over the value of Jackson’s name and likeness.

In valuing Jackson’s estate for estate tax purposes, executors John Branca and John McClain valued Jackson’s name and likeness at only $2,105, citing his tarnished reputation. Not surprisingly, the IRS has taken issue with this low value, arguing that Jackson’s name and likeness should be valued at a whopping $434 million and assessing more than $700 million in taxes and penalties against the estate.

Further complicating the valuation of Jackson’s name and likeness is the post-mortem influx of revenue to the Jackson estate. As a result of the shrewd business decisions of Jackson’s executors, Jackson’s estate has flourished. The “This Is It” documentary of footage from the rehearsals for Jackson’s last scheduled tour grossed $290 million globally; Sony agreed to a $250 million deal to release 10 albums; two Cirque du Soleil tribute shows have gained over $360 million in box-office revenue; and the Sony Corp.’s acquisition of Jackson’s stake in Sony/ATV Music Publishing earned Jackson’s estate $750 million. These revenue streams have grown Jackson’s estate to record-breaking size.

The value of assets for estate tax purposes should be determined as of the date of death. The success of Jackson’s estate, however, calls into question the estate’s low valuation of Jackson’s name and likeness at that time. The IRS claims that each of the estate’s deals was foreseeable and should have been taken into account. Conversely, the estate argues that its success was a result of the business acumen of the executors, resuscitating the Jackson image despite Jackson’s estimated $400 million of debt and tarnished reputation.

The trial to determine whether Jackson’s estate owes estate taxes and the resulting penalties concluded in February 2017. In December 2017, the Tax Court determined that the IRS was barred from seeking the full amount of penalties initially sought because of failure to comply with certain procedural requirements. It remains to be seen how the Tax Court will value the estate and penalties, though the conclusion of this trial could have significant repercussions for how celebrities plan their estates.

https://www.lexology.com/library/det...1-a77adf3390cd

[soulmum]

Michael Jackson Estate, IRS Still $500M Apart, Post-Trial
By David Hansen
https://www.law360.com/articles/1039789
Law360 (May 2, 2018, 5:11 PM EDT) -- More than a year after trial, the estate of Michael Jackson and the Internal Revenue Service are down to disputing the value of three assets — the singer’s post-mortem publicity and two trusts — with more than $500 million at issue, according to a post-trial brief filed by the estate Tuesday.

The IRS values Jackson’s right of publicity at $161.3 million. Its expert witness, Weston Anson, based the valuation on five “opportunities” a hypothetical purchaser might use to exploit Jackson’s image: a film; Broadway musical; branded merchandise; themed attractions, such as video games; and a Cirque du Soleil-themed production.

The value “defies credulity,” the estate's brief argued. A film, musical and Cirque show would be exempted from post-mortem rights under California law, it said. Projected revenues for themed attractions were calculated without analyzing if a market existed when Jackson died in 2009 or if California law exempts video games.

Anson’s projected value of branded merchandise was flawed because he compared it to contracts for merchandise of live celebrities, none of whom had “tainted reputations,” it argued.

Jackson’s image suffered greatly from his 1993 child abuse allegations, lowering the value of his after-death publicity, the estate said. It presented an expert witness at the February 2017 trial in U.S. Tax Court who valued Jackson’s post-mortem publicity at just over $3 million.

The IRS valued Jackson’s New Horizon Trust II at $206.3 million. It encompasses Jackson’s business interest in the Sony/ATV music publishing company. The brief said, however, the valuation overstated cash flow and didn’t account for Jackson’s lack of control over the trust, which would lower its value to an investor purchasing his rights. The valuation also did not account for more than $300 million that Jackson borrowed against it during his lifetime and had yet to repay, bringing its value to zero, the brief said.

Jackson’s New Horizon Trust III owns Mijac Music, a music publishing catalog owning interest in copyrights to songs Jackson wrote or co-wrote, and songs by other writers. The IRS inflated its value to $182.9 million, the estate said, saying the trust’s fair market value was much lower — $70.9 million — as determined by the estate’s expert witness. Adding cash balances and subtracting liabilities reduced the value to $2.27 million, the estate said.

Jackson’s estate had petitioned the tax court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS had adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

Legal representatives for the estate and the IRS could not be immediately reached for comment.

Jackson's estate is represented by Avram Salkin, Steven Richard Toscher, Robert S. Horwitz and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC, Jeryll S. Cohen of Freeman Freeman & Smiley LLP, and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented in-house by William M. Paul, Donna F. Herbert, Bruce K. Meneely, Sherri Spradley Wilder and Jordan Musen.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.

--Additional reporting by Bryan Koenig, Chuck Stanley and Jimmy Hoover. Editing by Robert Rudinger.

[soulmum]

Taxman in the Mirror: Judge Gets His Moment in Michael Jackson Case
How much was the pop legend worth when he died? A jurist known for his quirky writings will be there

https://www.wsj.com/articles/just-me...ing-1527869605

WASHINGTON— 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.
He’s handling the final phases of the hugely complicated court case stemming from Mr. Jackson’s estate-tax return. An unusual combination of music fans and tax nerds is anticipating the end of the five-year court battle, and Mr. Holmes is poised to apply his distinctive voice to one of the most recognizable voices of the 20th century.

“The Jackson opinion could be his magnum opus,” says Randy Herndon, a former clerk.

To close watchers of the Tax Court, a Holmes opinion is instantly recognizable, opening not with a recitation of relevant statutes and precedents but with a simple story.

“The tax law is so complex that anyone who tries to make it accessible should be lauded,” said Andy Grewal, a University of Iowa law professor.

Here’s how Judge Holmes began a 2016 opinion in a case revolving around the dwindling fortune of a man in his dotage:

“ Arthur Marsh worked hard and lived simply for decades, but when he became old and infirm he met Angelina Alhadi. In the two last years of his life, she somehow came to receive more than a million dollars from him.”

Because Americans can challenge the Internal Revenue Service in Tax Court without paying taxes first, the docket is filled with ordinary, down-on-their-luck Americans pressing small claims against the bureaucracy. It’s also packed with aggressive deals pitched by shady advisers to successful business owners and messy multiyear disputes between large corporations and the government.

That diversity of subjects gives Judge Holmes his raw material and it occasionally yields extraordinary cases such as Mr. Jackson’s.

The IRS and Mr. Jackson’s estate have settled some differences, but they’re still about $400 million apart on the value of what he left behind, according to a recent filing. They are disputing the worth of song rights Mr. Jackson owned—his own writings and his interest in pieces like “Runaround Sue.” They’re also fighting over the extent of his posthumous right to publicity, or his estate’s ability to profit from his image.

The IRS argues that Mr. Jackson was, in fact, wealthy, despite his myriad financial problems. Mr. Jackson’s lawyers say the post-death rehabilitation of his image was no sure thing. Their point is that the estate’s marketing successes, including a movie and a Cirque du Soleil show, weren’t obvious and inevitable when Mr. Jackson died in June 2009, and that his net worth at the moment of death is what counts.

They’re arguing before a judge with a greater depth of non-tax experience than most.

udge Holmes, a 57-year-old native of Buffalo, N.Y., learned legal writing as a clerk for 9th Circuit Judge Alex Kozinski, then worked as a private litigator and a staff member at the International Trade Commission before turning to tax law in the late 1990s.

“Mark’s approach is probably less formulaic than many,” says Eileen O’Connor, his boss at the Department of Justice Tax Division in the early 2000s. “Many tax lawyers, I think, are too limited in their overall experience, and have difficulty explaining tax concepts to other people because they don’t have a non-tax concept to use to explain.”

Judge Holmes has plenty of non-tax concepts—and jokes.

Give him a case about a scuba-diving business, and he’ll note how the owner dove in. Give him a riverboat-casino case, and he’ll describe the IRS trying to sink the taxpayer’s shelter.

In the case of a used-car businessman who had trouble supporting his claims with paper, he wrote: “Tax records are the ancient Egyptians of the modern age--plagued not by boils, frogs, flies, and lice but by fire, flood, mold, and theft.”

Faced with an apartment-building owner seeking depreciation deductions, he wrote: “We are tempted to say this is why AmeriSouth throws in everything but the kitchen sink to support its argument—except it actually throws in a few hundred kitchen sinks, urging us to classify them as ‘special plumbing,’ depreciable over a much shorter period than apartment buildings.”


When a chiropractor tried to claim dubious deductions, Judge Holmes responded:

“The Commissioner thought this was a stretch and urges us to support his adjustment,” he wrote. “We particularly disbelieve his claim that the Xbox, Wii, big-screen TVs, and other electronics in his basement were used exclusively for chiropractic purposes since this claim conflicts with his much more plausible admission to the IRS examiner during audit that his daughter and his girlfriend’s son would play these video games while he was on the phone.”

Judge Holmes, nominated by George W. Bush in 2003, is up for a second 15-year term on the court. He declined an interview, saying only that he was grateful for President Donald Trump’s nomination and looking forward to working with the Senate as it considers his confirmation.

Judge Holmes plays most freely in his writing when the stakes are lowest, in relatively narrow cases that aren’t setting precedents or dividing the court.

One of his earliest opinions, from 2004, involved a playwright’s business expenses, some of which the judge allowed and some which he denied, requiring him to invoke the court’s rule for computing the final outcome:

“Dramatists used to finish with some rhymes,

Mostly iambs with a pinch of dactyly,

But in these more prosaic times

Works usually end more matter-of-factily.

In our Court, though, the oldest ways seem somehow to survive—

A decision will be entered under Rule 155.”

There’s also a biting side to his work. This year, in a dissent, he compared his colleagues on the Tax Court to the tyrannical Roman emperor Caligula and his practice of posting tax laws “in fine print and so high that Romans could not read them.”

“It is our custom to reconsider an issue when a circuit court reverses us. And today we have to choose either a well-reasoned opinion by a highly respected judge in America’s heartland, or Caligula,” Judge Holmes wrote. “We pick Caligula. I gingerly dissent.”

Judge Holmes then added a footnote, noting that “Caligula didn’t care if dissents were respectful” and mentioning a historical punishment of “burning author alive for using double entendre.”

For Judge Holmes, the legal and factual decisions in the Jackson case may be tough.

He has to determine what Mr. Jackson was worth at the moment of his death in June 2009, using a detailed factual analysis about the music business and potentially considering the legal woes and abuse accusations that put the star on the brink of ruin in his final years.

The writing and the song references, however, will be as easy as 1-2-3.

[soulmum]

https://www.forbes.com/sites/peterjreil ... 90e3647f94


We May Have To Wait A Year For Decision In Michael Jackson Estate Tax Case


Peter J Reilly

Peter J Reilly

Jul 27, 2018, 10:27am

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.

[soulmum]

Himura Kenshin
@HimuraBattou28

Very interesting!
So the Estate is litigating with the IRS 505,100,000 millions? I thought was more
@andjustice4some


CTGOCleirigh
@CTGOCleirigh

The Estate owes the IRS $505,100,000. In December 2017, the Tax Court ruled that the IRS is barred from seeking $196,900,000 of penalties due to the failure of the IRS to comply with certain procedural requirements.


andjustice4some
@andjustice4some

I would have to look at the case. But I hope everyone does realize that the Estate took the IRS to court for this, not the other way around. Originally, the IRS charged the Estate for FUTURE earnings, which was what the Estate fought at the time.




Himura Kenshin
@HimuraBattou28

I know the Estate sued them but I was aware the amount the IRS claimed the Estate owes then was around 700 millions. The guy from the original tweet said are 500 millions.
So the Estate won the issue of the earnings or is on going?



andjustice4some
@andjustice4some

Replying to
@HimuraBattou28
Further, I do not agree with the original valuation of $2105 at that point for likeness/image. TII sales prove otherwise. However, to say that the accusations did tarnish and devalue MJ's image through corporate sponsorship, is imo true.

[soulmum]

[soulmum]

Leaving Neverland Facts
@NeverlandFacts

The late singer’s name and likeness was worth $4 million at his death, not $161 million the Internal Revenue Service estimated, the U.S. tax court ruled https://wsj.com/articles/michael-jackso ... re_twitter via
@WSJ

[soulmum]

https://abcnews.go.com/Business/wireSto ... s-77495826

After years, court hands tax win to Michael Jackson heirs
A U.S. tax court has handed a major victory to the estate of Michael Jackson in a years-long battle

By ANDREW DALTON AP Entertainment Writer
5 May 2021

LOS ANGELES -- A U.S. tax court has handed a major victory to the estate of Michael Jackson in a years-long battle, finding that the IRS wildly inflated the value at the time of his death of Jackson's assets and image, leading to an estate tax bill for his heirs that was far too high.

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. In his decision issued Monday, Judge Mark Holmes put that figure at $111 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 on Tuesday. “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, Holmes ruled it was just $4.15 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.

“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,” Holmes wrote in the sprawling 271-page decision that tracks Jackson's fame and finances through most of his life.

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

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

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

The IRS expert had put those assets at a combined total of about $320 million. The judge found that with Jackson's debts, both combined were worth only $107 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 anesthetic 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,” Branca said. “I think people have come to realize 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.”

The judge noted the huge success that the estate has seen since Jackson's death through such shows, a hit concert film, and several strategic decisions to sell assets.

However, he said, the IRS appeared to be factoring those successes into its decisions rather than considering only the circumstances at the moment of Jackson's death, when things were considerably more grim after several years of waning popularity, poor management and reckless spending from Jackson.

The judge mocked the estate’s initial valuing of Jackson’s image and likeness at only $2,000, however, saying it was putting “one of the best known celebrities in the world — the King of Pop — at the price of a heavily used 20-year-old Honda Civic.”