After years, court hands tax win to Michael Jackson heirs

FILE - In this May 25, 2005, file photo, Michael Jackson arrives at the Santa Barbara County Courthouse for his trial in Santa Maria, Calif. On Monday, May 3, 2021, a U.S. tax court handed a major victory to Jackson's estate in a years-long battle, finding that the IRS inflated the value of Jacksons assets and image at the time of his 2009 death. (Aaron Lambert/Santa Maria Times via AP, Pool, File)
FILE - In this May 25, 2005, file photo, Michael Jackson arrives at the Santa Barbara County Courthouse for his trial in Santa Maria, Calif. On Monday, May 3, 2021, a U.S. tax court handed a major victory to Jackson's estate in a years-long battle, finding that the IRS inflated the value of Jacksons assets and image at the time of his 2009 death. (Aaron Lambert/Santa Maria Times via AP, Pool, File)

LOS ANGELES – A U.S. tax court has handed a major victory to the estate of Michael Jackson in a years-long battle, finding that the IRS wildly inflated the value at the time of his death of Jackson’s assets and image, leading to an estate tax bill for his heirs that was far too high.

The IRS had put the value of three disputed aspects of Jackson's worth at the time of his 2009 death at about $482 million. In his decision issued Monday, Judge Mark Holmes put that figure at $111 million, far closer to the estate's own estimates.

The estate’s executors said it was a huge and unambiguous victory for Jackson’s children.

“We’re pleased,” co-executor John Branca told The Associated Press on Tuesday. “We always try to do the right thing. We tried from the beginning to follow the IRS rules and regulations, and relied on the best experts possible. It’s unfortunate that we were forced to litigate to protect ourselves.”

The judge most disagreed with the IRS over the value of Jackson’s image and likeness. While the IRS put it at $161 million, Holmes ruled it was just $4.15 million. He noted that despite Jackson's acquittal on all counts at his 2005 trial for child molestation, the allegations continued to dog him, and while Jackson was selling out dates for a planned world tour when he died, he could not find a sponsor or merchandise partner.

“The fact that he earned not a penny from his image and likeness in 2006, 2007, or 2008 shows the effect those allegations had, and continued to have, until his death,” Holmes wrote in the sprawling 271-page decision that tracks Jackson's fame and finances through most of his life.

The tax fight had led to a bill of about $700 million after an audit of the 2013 taxes on the estate, whose heirs are Jackson’s mother and three children, about $200 million of it a penalty for underpaying.

A new tax bill will now be calculated using Holmes’ figures, and it will include no penalties.