Prince estate and IRS settle valuation dispute

BVWireIssue #232-2
January 19, 2022

federal taxation
copyright, estate and gift tax, estate valuation, expert testimony, intangible assets, real estate, infringement

The IRS and Comerica Bank and Trust, the administrator of the estate of rock star Prince, have agreed to settle their dispute and agree on an estate value of $156.4 million, according to settlement documents submitted in the case. The agreed upon valuation is almost double the estate’s valuation ($82.3 million) and close to the amount the IRS had determined ($163.2 million). Also, the IRS dropped a $6.4 million accuracy-related penalty it had levied on the estate. The matter had been set for trial but that has been cancelled. 

Assets in dispute: The estate consists of real estate, music rights, Prince's name and likeness, and other assets. The IRS and Comerica settled on the real estate values last year, so the trial was to focus on the valuations of the other assets. Notable assets with disputed valuations included two entities: NPG Records, Inc. (Estate: $19.5 million; IRS: $46.5 million) and NPG Music Publishing LLC (Estate: $21 million; IRS: $36.9 million). The value of Prince’s name and likeness was also in dispute, with the estate putting the value at $3.1 million versus the IRS expert’s valuation of double that amount ($6.2 million). The settlement documents do not indicate the agreed upon valuations by asset type.  

After receiving a notice of deficiency from the IRS (for $32.4 million plus penalties and interest) in 2020, the estate administrator filed a petition in Tax Court and the case was scheduled for this March. According to the settlement documents, the heirs to the estate indicated that minimizing the amount of estate taxes was “not their primary interest” and they expressed a “strong desire” to settle the matter and close the estate.

The case is: Estate of Prince R. Nelson, Deceased, Comerica Bank & Trust, N.A., Executor v. Commissioner of Internal Revenue, Tax Court, Docket 11442-20.


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