NEW YORK — Creditors and heirs of Michael Jackson hoping for a cut of his musical empire will have to line up with the Internal Revenue Service, which could lay claim to $80 million or more in federal estate taxes.
To settle his tax bill, the executors might have to sell or borrow against hard-to-value assets or ask the IRS for an extension. That could allow the estate to pay the tab over time with earnings from Jackson’s share in rights to songs by the Beatles and his own music.
“The government is not going to take a Beatles record as payment. They want to be paid in cash,” said Roy Kozupsky, a veteran estate lawyer in New York who has worked on behalf of several wealthy clients.
Given the convoluted nature of Jackson’s finances, coming up with that cash won’t be easy. Technically, the tax bill is due nine months after the date of death. In some cases, estates can spread out the payments for a period of up to 14 years.
Once paid, the tax bill could dramatically shrink the inheritance passed on to the pop star’s heirs — his 79-year-old mother and three children.
The estate’s tax dilemma highlights the cost and complexity of dying wealthy in America. Established in the early 1900s, the inheritance tax assesses up to a 45 percent tax on individual estates worth more than $3.5 million.
As in a bankruptcy case, Jackson’s creditors will jockey for first crack at his fortune. But the estate’s initial obligation will be to pay the late star’s taxes, said Beth Kaufman, a Washington tax attorney.
