- Wednesday, 10 January 2018 20:44
The estate of Whitney Houston settled its dispute with the IRS over outstanding estate taxes. The IRS had contended that the valuation of Houston’s back catalog and image and likeness was undervalued by $22 million resulting in $11 million of additional taxes. The settlement was for $2 million. Oddly, or perhaps not given the state of journalism in 2018, the focus of most articles was on the value of her image and likeness but the IRS and the estate differed on that valuation by only $200K.
A few small points:
1. Since the death of Michael Jackson, the IRS has been taxing the image and likeness of dead celebrities with the value based on expected licensing revenues in the future.
2. Cool fact – Robin Williams said that his likeness cannot be used for 40 years after his death rendering its value worthless.
3. In the age of streaming music, the longer the estate held out the less valuable the back catalog of albums became.
4. This was purely a principled, but unemotional, victory for the estate. Houston’s daughter died nearly 3 years ago and Houston was divorced. Any estate tax savings will benefit her mother and her brothers.
- Wednesday, 03 August 2016 21:38
Stepping away from celebrities for a minute and focusing on estate laws, yesterday the IRS issued proposed regulations to minimize valuation discounts in estate planning. In a nutshell, the regulations prohibit taxpayers from dividing property between family members and then claiming their proportionate shares are not worth the exact proportion because that small proportion does not have control of the property. Wonky? Yes.
Three small points:
1. These regulations have been bandied about for 25 years.
2. From a practice viewpoint, I have never completely bought into the idea of valuation discounts for marketable securities transferred to an LLC or partnership solely for the purpose of obtaining a reduced value for estate tax purposes.
3. Nonetheless, this issue seems to be one for Congress to address through legislation rather than one more edict from a lame duck (re: imperial) administration to issue in its waning days.
- Friday, 31 October 2014 10:28
The IRS announced that the estate tax exemption for 2015 will increase from $5.34 million to $5.43 million. This is the amount that can be left estate tax free to heirs. Those taxpayers suffering from dyslexia will see little difference.
- Wednesday, 05 December 2012 16:30
Now for something complicated and fun (at least within the parameters of estate planning). An art collector died owning an art work which contained a stuffed eagle. The art was on display at the MoMA under an agreement after the federal wildlife service tried to confiscate it in the 80s.
Because the sale of dead eagles is prohibited by federal law, the estate appraisers valued the art at $0 because there is no market for it. The IRS said it was worth $15 million. When the estate rejected that valuation, the IRS played hardball and said it was worth $60 million and levied penalties for undervaluing it plus interest. The estate tax alone on this art would have been $27 million. The estate and IRS finally settled the matter when the estate donated the piece to MoMA and the IRS dropped the estate tax issue.
Couple of points:
1. The family had not benefited from this art for 20 years due to the previous agreement to keep it on display.
2. I do not agree with the assessment that art with no market is worth $15 million. Assets are worth what a willing buyer and willing seller agree upon. If there are no buyers, there is no value.
3. The collector’s estate had paid $470 million in estate taxes already and had sold $600 million of art to do so.
4. The author is wrong about the charitable deduction. The estate did receive a charitable deduction for the value of the art work which is why ultimately there was no tax on it.
5. Never pick up an eagle feather. It is illegal to do so and subject to a $25,000 fine. Unless you are a Native American or a member of the Screaming Eagle division of the US Army.