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Michael Jackson’s Estate Challenges IRS in Tax Dispute
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marc_vivien
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The argument is that the estate could pay twice the same properties
SarahJ
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Me too.
redfrog
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And there is still Quincy and the three parasites.
Everyone wants to make sure it's them who gets MJ's money not his kids.
Disgusting.
If the IRS doesn't have to prove that it was worth hundreds of millions how can they prove
the Estate owns hundreds of millions based on that value?
Both numbers look ridiculous BTW. What was Branca smoking when he came up with $2,105?
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No it's not a jury trial. It's a single judge. Tax issues are too complex for general public.
It starts next week btw. There was a mention of asking for 2 month extension but it doesn't seem like they would ask for it.
marc_vivien
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| [h=2]Michael Jackson's Estate Faces Demand for Big Tax Payment[/h] |
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| 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/michaels-jacksons-estate-faces-demand-for-big-tax-payment-1486320354 |
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.
"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.
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.
HIStoric
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This will be a very interesting trial to follow. Admittedly at this stage I'm not entirely sided with Michael's Estate either (especially after that abysmal $2k estimate), but I'll see how it unfolds and let them have a fair trial in court.
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#MJforever57
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Wow i can't believe this is really happening,
barbee0715
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Glad to see they upped the 2K estimate to 3 million. Much more reasonable at DOD.
barbee0715
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^yes-prosecution goes first. Maybe estate went first since they brought the suit and didn't just pay up.
barbee0715
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Yes, so the IRS will be the defendants here.
MichaelD
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Yes, they are - at least from what I know. It's up to the estate to challenge IRS' estimation. If they wouldn't they'd automatically accept this estimation. The IRS estimation is a guess backed up with their measurements. While the estate's estimation was ridiculously low it doesn't mean the IRS one is correct.
In Germany for example tax authorities can guess taxes for a company based on past events which doesn't mean it's still true in the present or future. Then it's up to the company to prove the opposite. Which usually happens before things go to court since it's always better to find a mutual agreement. In this particular case it's obvious that the value of the brand Michael Jackson significantly increased due to his death but this doesn't automatically justify IRS' estimation.
This is just a vague reply since I'm not too much into this case and haven't read all the stuff out there, i.e. what exactly made the IRS guessing the number they did.
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Estate is the petitioner, meaning they are ones who is challenging the IRS. and normally IRS's calculations are accepted as true and Estate is required to prove them wrong. They filed a motion to shift the burden but the judge only took it under advisement until the end of the trial.
Michael Jackson was on verge of bankruptcy before death, banker testifies in court
Banker David Dunn said he was hired in 2007 to help pull Jackson back from the brink of bankruptcy after his 2005 child molestation trial prompted at least one lender, Bank of America, to bolt.
Michael Jackson’s finances were off-the-wall complicated and near collapse before his 2009 death, a banker testified Tuesday in a megabucks tax trial pitting the singer’s estate against the IRS.
“He was on the edge,” banker David Dunn testified in U.S. Tax Court in Los Angeles. “He was desperately trying to figure out what he could do to address his financial crisis.”
Experts said the long-awaited trial could lead to a whopping $1 billion tax bill for the King of Pop’s estate if the judge finds it undervalued assets, as alleged by Uncle Sam.
Dunn testified he was hired in 2007 to help pull Jackson back from the brink of bankruptcy after his 2005 child molestation trial prompted at least one lender, Bank of America, to bolt.
He described efforts to restructure Jackson’s towering debt – and how the Thriller singer often undermined him at the last minute by signing unfavorable side deals that lured him in with upfront cash.
Dunn said Jackson remained in a “very precarious situation” in early 2008 with more than $300 million in debt, out-of-control spending habits and his lavish Neverland Ranch near foreclosure.
“We talked about his sadness in knowing he was never going to live in Neverland again,” Dunn said. “It was the culmination of the molestation allegations, the culmination of recognizing the financial situation he was in.”
The banker said he spoke with Jackson at least once a month by phone.
“He talked about his young career and being at his peak. He was struggling with how to make a living and still be with his children, who were of paramount importance,” Dunn, who works at Shot Tower Capital, said.
The Baltimore banker recalled Jackson once interrupting “a fairly intense discussion of his personal finances” to retrieve his youngest child, who was feeling sick. He said Jackson plopped the boy on the table and comforted him with a bag of candy corn.
The Rev. Jesse Jackson even sat Jackson down for a “lecture” in Las Vegas at one point, Dunn said.
“He just said, ‘Michael, this is you, you’ve got a bucket, and this tap here is your cash flow. …We’ve got to put a bottom on your bucket, you have to stop spending,’” Dunn recalled.
“(Jackson) borrowed a lot of money, he knew he had financial issues…but the last thing he wanted to do was tour. He was looking for other things to generate income to avoid doing what he wound up agreeing to do,” Dunn said.
Dunn said he resigned in May 2009 because it was hard to tell “which way was up, which way was down," and Jackson hadn't paid him in two years, despite owing him some $300,000.
Jackson had agreed to his “This Is It” comeback tour and was surrounding himself with some new people who made Dunn “uncomfortable.”
This included Arfak Hussain, a British fraudster who “made two bottles of $100,000 perfume and sold them both to Michael," Dunn testified
Jackson died June 25, 2009, in Los Angeles from an overdose of the surgery-strength anesthetic propofol, which he was using off-label as a sleep aid during preparation for "This Is It.”
After Jackson's death, interest in his music spiked, Dunn said. The new revenue allowed his estate to refinance his complex web of debt and generate new income with the “This Is It” concert movie and a lucrative Cirque du Soleil show in Las Vegas.
Jackson’s longtime attorney John Branca was in court for a second day Tuesday after taking the witness stand Monday.
The tax fight started in 2013 after the IRS claimed the estate undervalued assets including the worth of Jackson’s likeness and image when he died.
If the IRS wins, the estate could be on the hook for unpaid taxes, interest and penalties in the range of $700 million to $1 billion, experts said.
Jackson’s estate maintains the singer was so tarnished by his child molestation trial and media coverage of his eccentric personal life that his image was virtually worthless when he died.
The IRS insists it had a value topping $400 million.
“It is important to keep in mind that the value of Jackson’s right of publicity must be determined as it stood on the date of Jackson’s death and not at a later date,” estate expert Laura Zwicker, a partner at Greenberg Glusker in Los Angeles, told the Daily News on Tuesday.
“The IRS will try to use the earning potential shown following Jackson’s death as evidence of the intrinsic value on Jackson’s date of death and Jackson’s estate will try to argue that all of the earnings were a result of the efforts of Jackson’s representatives following his death and those earnings have no relevance to the value as of his date of death,” Zwicker said.
Banker David Dunn said he was hired in 2007 to help pull Jackson back from the brink of bankruptcy after his 2005 child molestation trial prompted at least one lender, Bank of America, to bolt.
Michael Jackson’s finances were off-the-wall complicated and near collapse before his 2009 death, a banker testified Tuesday in a megabucks tax trial pitting the singer’s estate against the IRS.
“He was on the edge,” banker David Dunn testified in U.S. Tax Court in Los Angeles. “He was desperately trying to figure out what he could do to address his financial crisis.”
Experts said the long-awaited trial could lead to a whopping $1 billion tax bill for the King of Pop’s estate if the judge finds it undervalued assets, as alleged by Uncle Sam.
Dunn testified he was hired in 2007 to help pull Jackson back from the brink of bankruptcy after his 2005 child molestation trial prompted at least one lender, Bank of America, to bolt.
He described efforts to restructure Jackson’s towering debt – and how the Thriller singer often undermined him at the last minute by signing unfavorable side deals that lured him in with upfront cash.
Dunn said Jackson remained in a “very precarious situation” in early 2008 with more than $300 million in debt, out-of-control spending habits and his lavish Neverland Ranch near foreclosure.
“We talked about his sadness in knowing he was never going to live in Neverland again,” Dunn said. “It was the culmination of the molestation allegations, the culmination of recognizing the financial situation he was in.”
The banker said he spoke with Jackson at least once a month by phone.
“He talked about his young career and being at his peak. He was struggling with how to make a living and still be with his children, who were of paramount importance,” Dunn, who works at Shot Tower Capital, said.
The Baltimore banker recalled Jackson once interrupting “a fairly intense discussion of his personal finances” to retrieve his youngest child, who was feeling sick. He said Jackson plopped the boy on the table and comforted him with a bag of candy corn.
The Rev. Jesse Jackson even sat Jackson down for a “lecture” in Las Vegas at one point, Dunn said.
“He just said, ‘Michael, this is you, you’ve got a bucket, and this tap here is your cash flow. …We’ve got to put a bottom on your bucket, you have to stop spending,’” Dunn recalled.
“(Jackson) borrowed a lot of money, he knew he had financial issues…but the last thing he wanted to do was tour. He was looking for other things to generate income to avoid doing what he wound up agreeing to do,” Dunn said.
Dunn said he resigned in May 2009 because it was hard to tell “which way was up, which way was down," and Jackson hadn't paid him in two years, despite owing him some $300,000.
Jackson had agreed to his “This Is It” comeback tour and was surrounding himself with some new people who made Dunn “uncomfortable.”
This included Arfak Hussain, a British fraudster who “made two bottles of $100,000 perfume and sold them both to Michael," Dunn testified
Jackson died June 25, 2009, in Los Angeles from an overdose of the surgery-strength anesthetic propofol, which he was using off-label as a sleep aid during preparation for "This Is It.”
After Jackson's death, interest in his music spiked, Dunn said. The new revenue allowed his estate to refinance his complex web of debt and generate new income with the “This Is It” concert movie and a lucrative Cirque du Soleil show in Las Vegas.
Jackson’s longtime attorney John Branca was in court for a second day Tuesday after taking the witness stand Monday.
The tax fight started in 2013 after the IRS claimed the estate undervalued assets including the worth of Jackson’s likeness and image when he died.
If the IRS wins, the estate could be on the hook for unpaid taxes, interest and penalties in the range of $700 million to $1 billion, experts said.
Jackson’s estate maintains the singer was so tarnished by his child molestation trial and media coverage of his eccentric personal life that his image was virtually worthless when he died.
The IRS insists it had a value topping $400 million.
“It is important to keep in mind that the value of Jackson’s right of publicity must be determined as it stood on the date of Jackson’s death and not at a later date,” estate expert Laura Zwicker, a partner at Greenberg Glusker in Los Angeles, told the Daily News on Tuesday.
“The IRS will try to use the earning potential shown following Jackson’s death as evidence of the intrinsic value on Jackson’s date of death and Jackson’s estate will try to argue that all of the earnings were a result of the efforts of Jackson’s representatives following his death and those earnings have no relevance to the value as of his date of death,” Zwicker said.
Abuse Claim Dulled King Of Pop's Image, Tax Judge Hears
Law360, Los Angeles (February 7, 2017, 10:47 PM EST) -- Michael Jackson’s former merchandising rights expert testified that the child molestation accusations against the music icon sent sponsors running for the hills as she took the stand Tuesday in a Los Angeles trial to determine what the King of Pop’s estate — including his name and likeness — were worth when he died.
Paralegal Karen Langford was called by the estate, which is petitioning the Internal Revenue Service over a notice that it might owe up to $700 million for underreporting the value of Jackson’s assets and rights, during the second day of the trial before U.S. Tax Judge Mark Holmes.
A sometimes teary Langford testified that over decades working for Jackson’s one-time attorney John Branca, who is now the estate’s co-executor, she came to be the point person for helping Jackson determine which merchandising and sponsorship deals were allowed to use his name and likeness. The value of those rights at Jackson’s death in 2009 has been hotly contested by the Internal Revenue Service, which contends they were worth $161 million and not the $3 million claimed by the estate.
Under direct examination by the estate’s attorney, Howard Weitzman of Kinsella Weitz Iser Kump & Aldisert LLP, Langford described the childlike enjoyment that Jackson would show when he came to the offices of her employer, entertainment law firm Ziffren & Brittenham, and looked at all the prototype toys, posters and other merchandise she had been sent by aspiring licensees of his name and likeness.
“It was playful. It was an opportunity to sit and play like a kid with all this stuff laid out in front of you ... He loved coming and doing that,” she said.
Langford also testified about deals she had been a part of in her work for Branca, such as Pepsi’s sponsorship of Jackson's tours supporting the “Bad” and “Thriller” albums, Jackson’s short film for the “Thriller” single, and tour merchandise deals — a plethora of corporate favor that began to vanish in 1993, when Jackson was accused of child molestation in a civil suit. Langford said that when Jackson went on the road behind his 1995 album “HIStory,” no national sponsor backed the tour, and the singer even had to pay back several million dollars to a company that had agreed to handle tour merchandise because of lackluster sales.
“Unfortunately Michael, who had had this image, had built an image, of effectively innocence and childlikeness, best behavior ... He wasn’t like Keith Richards or Mick Jagger who had the bad boy image,” she said. “Those allegations happened, as unfair as it was, the idea of his name attached to their brands was something companies weren’t interested in.”
Langford added that when she got involved with the management of the estate, she saw that there were no name and likeness deals in place at the time of Jackson’s death “to her knowledge.”
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 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 Mijac 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.
The trial continues on Wednesday morning with the IRS' cross-examination of Langford.
Law360, Los Angeles (February 7, 2017, 10:47 PM EST) -- Michael Jackson’s former merchandising rights expert testified that the child molestation accusations against the music icon sent sponsors running for the hills as she took the stand Tuesday in a Los Angeles trial to determine what the King of Pop’s estate — including his name and likeness — were worth when he died.
Paralegal Karen Langford was called by the estate, which is petitioning the Internal Revenue Service over a notice that it might owe up to $700 million for underreporting the value of Jackson’s assets and rights, during the second day of the trial before U.S. Tax Judge Mark Holmes.
A sometimes teary Langford testified that over decades working for Jackson’s one-time attorney John Branca, who is now the estate’s co-executor, she came to be the point person for helping Jackson determine which merchandising and sponsorship deals were allowed to use his name and likeness. The value of those rights at Jackson’s death in 2009 has been hotly contested by the Internal Revenue Service, which contends they were worth $161 million and not the $3 million claimed by the estate.
Under direct examination by the estate’s attorney, Howard Weitzman of Kinsella Weitz Iser Kump & Aldisert LLP, Langford described the childlike enjoyment that Jackson would show when he came to the offices of her employer, entertainment law firm Ziffren & Brittenham, and looked at all the prototype toys, posters and other merchandise she had been sent by aspiring licensees of his name and likeness.
“It was playful. It was an opportunity to sit and play like a kid with all this stuff laid out in front of you ... He loved coming and doing that,” she said.
Langford also testified about deals she had been a part of in her work for Branca, such as Pepsi’s sponsorship of Jackson's tours supporting the “Bad” and “Thriller” albums, Jackson’s short film for the “Thriller” single, and tour merchandise deals — a plethora of corporate favor that began to vanish in 1993, when Jackson was accused of child molestation in a civil suit. Langford said that when Jackson went on the road behind his 1995 album “HIStory,” no national sponsor backed the tour, and the singer even had to pay back several million dollars to a company that had agreed to handle tour merchandise because of lackluster sales.
“Unfortunately Michael, who had had this image, had built an image, of effectively innocence and childlikeness, best behavior ... He wasn’t like Keith Richards or Mick Jagger who had the bad boy image,” she said. “Those allegations happened, as unfair as it was, the idea of his name attached to their brands was something companies weren’t interested in.”
Langford added that when she got involved with the management of the estate, she saw that there were no name and likeness deals in place at the time of Jackson’s death “to her knowledge.”
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 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 Mijac 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.
The trial continues on Wednesday morning with the IRS' cross-examination of Langford.
marc_vivien
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so the IRS changed the Sony/ATV's numbers at $200 million ($469 million in 2013)
Goddess4Real
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Thank you so much for the updates.....This quote got my attention "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.”
If that was the case or if I am reading this wrong, but how on earth did MJ sell out 50 shows in London in less than an hour if he was so untouchable?????? IMO Branca and co have undervalued MJ, while IRS have overvalued it.....I think the real value is somewhere in the middle.
If that was the case or if I am reading this wrong, but how on earth did MJ sell out 50 shows in London in less than an hour if he was so untouchable?????? IMO Branca and co have undervalued MJ, while IRS have overvalued it.....I think the real value is somewhere in the middle.
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Annita
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Goddess4Real;4183292 said:
I think you read it wrong. Off course Michael sold out 50 Shows but he comes in person with his music and dance. It was a tour or reharsal-footage which Branca said is not a image and likness-deal, he also said it for other projects like the cirque-Show.
What he is saying is imagine a screen that shows a photo of Michael, would you buy a ticket to watch that, just that?
In TII concert people bought tickets to see him perform, hear his music, see him dance, enjoy a show. They didn't buy tickets to see a picture of him.
That being said, the real value is somewhere in the middle, yes I agree.
Goddess4Real
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OK I see everyone's point.....at the moment I'm on the fence, because I think both sides are shady and will throw MJ under the bus in order to win...it always seems to me that MJ is always being put on trial. I think I feel this way because of all the past and future court cases eg. Robson etc And one can't help to think that the estate is using the child abuse angle to lowball MJ's worth, while at the same time I think IRS want to make MJ into some kind of negative example. This case just reeks :no:
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