Many people in California know firsthand how difficult it is to deal with the Internal Revenue Service. Especially at the time of a loved one's death -- when taxes are the last thing you want to think about -- the IRS has a way of finding ways to get the most out of the estate. One way this can happen is if the IRS disagrees with your valuation of the estate. Today, this issue has been made abundantly clear in a tax dispute involving Michael Jackson's estate.
After the pop star died in 2009, his family filed a federal estate tax return showing that $9 million of Jackson's estate could be taxed after exemptions. The IRS, however, came up with a wildly different number and is ordering the Jacksons to pay up.
The IRS, it seems has valued Jackson's estate at close to $1.25 billion, because they sent the estate a bill for almost $700 million. They believe the family low-balled the estate's value to avoid a large tax bill.
In a situation like this, if the executor of an estate disagrees with the IRS's findings, he or she can file a petition to contest the order -- which is exactly what the executors of Jackson's estate have done. If they don't settle first, this means the IRS and Jackson's estate will be heading to federal court.
Situations like this are difficult to navigate. With such a huge gap in asset valuation, however, it is important to go into a trial or confrontation with the IRS prepared to defend your findings. By working with an attorney, you can make sure you have everything in order to show that you took proper steps to appraise an estate's property and pay the appropriate amount of taxes.
Source: Forbes, "IRS To Michael Jackson's Estate: Who's Bad?" Kelly Phillips Erb, Aug. 26, 2013