IRS Says Executors Undervalued Prince’s Estate By 50 Percent, Worth $163.2 Million and $32.4 Million In Taxes Still Owed
Prince’s estate was extremely undervalued by executors and still owes millions in taxes, according to the Internal Revenue Service (IRS).
Recent calculations done by the agency assert Prince’s estate is actually worth $163.2 million, 50 percent more than the $82.3 million valuation the estate’s administrator Comerica Bank & Trust submitted.
Documents show the items that have discrepancies are music publishing and recording interests held by the late musical genius. The IRS and Comerica also disagree on values for real estate Prince owned, his ownership of NPG Music Publishing and the record company by the same name, tax-deductible gifts the musician gave to people, etc.
As a result, the IRS has doubled the taxes the estate owes to $32.4 million and issued an “accuracy-related penalty” of $6.4 million, The Associated Press (AP) reported.
“This is a large discrepancy, both in terms of the dollars involved and the fact that the IRS thinks the estate is worth twice as much,” Michael Smith – an estate planning attorney at Larkin Hoffman in Minneapolis who’s not involved in the case – told the Star Tribune.
“It is not surprising that the estate and IRS have such differing views in light of the difficulties involved in the valuation of music rights,” Smith added. “Music is subjective, and the rights can be structured in different ways.”
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However, Comerica said it did value the estate properly and filed a lawsuit against the IRS in the summer in U.S. Tax Court. Represented by attorneys at Fredrikson & Byron, Comerica said the IRS’ calculations are laced with errors.
“What we have here is a classic battle of the experts, the estate’s experts and the IRS’ experts,” Dennis Patrick – an estate planning attorney at DeWitt LLP in Minneapolis who is not involved in the case – told the Star Tribune.
He added that estate valuation, particularly one as large as Prince’s, “is way more of an art than a science.”
In the meantime, the value of Prince’s estate is continually decreasing as legal battles drag on. Prince left behind six sibling heirs when he died without a will in 2016. Since the estate is paying legal costs, their inheritance is dwindling.
Prince’s sister, Sharon Nelson, said she and her siblings have their own “transition plan,” which was sent to Carver County Probate Court, the Star Tribune reported.
“It’s a real good plan if we can get the judge on our side,” Nelson said. “He’s not on our side right now.”