Michael Jackson Estate Locked in Tax Dispute with IRS, State of California as Trust Payments Suspended, Report Reveals

Michael Jackson estate tax dispute
  • Save

Michael Jackson estate tax dispute
  • Save
Photo Credit: Michael Jackson Dangerous World Tour 1993 / CC by 4.0

A legal filing reveals the trusts of Michael Jackson’s mother and three children cannot be funded until an ongoing dispute between the estate and the IRS is resolved.

In a filing dated May 28 and obtained by People, executors of the Michael Jackson Estate reveal that as long as ongoing legal disputes with the IRS and the State of California, the trusts of his beneficiaries — his mother Katherine, and three children Paris, Prince, and Bigi — cannot be funded. That said, the distributions do not affect the money they are allocated.

The three children are beneficiaries of the estate and receive a considerable amount of money, while Katherine is a life beneficiary of a portion of the trust. According to a source close to the estate, Jackson’s mother has received over $55 million since the singer’s death in 2009. According to People, Jackson’s estate said the family members still receive payments through an allowance.

“In annual reports provided to the probate court, which are publicly available, anyone can see that the Estate provides Michael’s mother and children with very substantial amounts of money to support them,” reads a statement from the estate. “The Estate has a very cooperative relationship with Michael’s children and whenever they need anything, the Estate works with them to ensure they are very well taken care of, just as Michael would have wanted.”

The tax dispute began when the IRS audited the estate’s federal tax return and “issued a note of deficiency,” claiming the estate undervalued its assets and owed “an additional $700 million in taxes and penalties.” The estate disputed those assessments in 2021, winning after a trial in tax court.

But since then, the estate has filed a motion for reconsideration regarding the court’s value of Jackson’s music catalog owned by Sony Music, Mijac, which remains pending. As a result, the value of the estate for tax purposes is not yet determined; once it is, the IRS and the estate will need to agree on the value of deduction before a final judgement can be ruled.

While that result is pending, the California Franchise Tax Board requested a portion of the estate “remain subject to administration” in order to distribute funds to the Michael Jackson family trust. The executors of the estate under Jackson’s will, John Branca and John McClain, rejected the request on the grounds they cannot “possibly determine what amount could be safely distributed at this time.”

Moreover, the trust required “20 percent of the estate ‘as valued for federal estate tax purposes’ be distributed to charity before the remaining assets of the estate can be distributed to sub-trusts,” write the executors, stressing that a resolution of the tax dispute is necessary to determine the charitable contribution.

In the meantime, the executors assure that the estate continues to provide for Jackson’s children and his mother via “the family allowance.”