IRS and Whitney Houston estate tangle over IP values

Whitney Houston's estate says the royalties, residuals, and the value of the late performer's image are worth much less than the IRS says, according to BNA’s Daily Tax Report. The IRS claims the estate underreported the value of intellectual property rights by $22.6 million, resulting in a tax deficiency of $7.92 million and $3.17 million in penalties. The case is Estate of Houston v. Commissioner, T.C. No. 12098-16.

Laundry list: Intellectual property the IRS claims to be undervalued include royalties from albums, digital performance rights, movie and TV residuals, publicity rights, name and likeness, and merchandising royalties. The estate says the valuations are accurate, and it used appraisers with “substantial expertise valuing such assets for the entertainment industry.” Greenberg Traurig LLP represents the estate.

The IRS is looking for even higher amounts in the case of Michael Jackson, in which the IRS valued Jackson’s estate at $1.32 billion, while the estate asserted that the value was only around $7 million. The big discrepancy is in the value of his image and likeness: The IRS valued those rights at $434 million, but the estate says they’re only worth $2,105. The Jackson case is scheduled for trial in February 2017.    

Extra: Listen to BVR's webinar featuring experts Wes Anson and Jeff Anderson (both CONSOR) for more on the evolution of valuing intellectual property. The webinar is Using Alternative Valuation Approaches in Intellectual Property.