On February 3, 2021, Alex Weingarten was quoted in Law360 on litigation between the Internal Revenue Service (IRS) and the estate of Prince, and the difficulties in valuing the assets of celebrity performers.
According to the article, U.S. Tax Court documents show a substantial dispute between the IRS and the executor of Prince's estate over its value, with the agency pricing it at about $163.2 million and the executor pegging its value at about $82.3 million. The agency has asserted that the estate owes about $32.4 million in additional taxes for the 2016 tax year and an accuracy-related penalty of about $6.4 million.
Prince's estate includes real property, cars, and cash, along with the NPG record label, the writer's share of his music catalog, and his possible posthumously released work, according to the IRS notice of deficiency. Valuing assets such as an entertainer's name, image, and music catalogs is particularly challenging, and appraisers working in good faith for the government and estates can disagree. "It's as clear as mud," Weingarten said about valuing the name, image, and likeness of popular entertainers. "It is really a very fact-specific situation."
If the litigation involving Prince's estate eventually results in an IRS loss, that will likely embolden accountants, lawyers, and business managers of celebrities to become more aggressive in asset valuations, Weingarten said. Conversely, he said, an IRS win would likely make them more cautious in those valuations. Furthermore, if the case were litigated to completion, any guidance the court could provide on items like music catalog, name, image, and likeness valuations may hold precedential value, he said. However, Weingarten said he expected the case would ultimately be settled.
"The fact that this is now in Tax Court means that this is already fairly far along in the dispute process," he said. "Obviously the government wants to generate as much tax as possible and the estate wants to generate as little tax as possible. And usually there's … a happy medium."