An article posted by the Ettinger Law Firm discusses a recently popular topic of dispute between estate holders and the IRS, that is, intangibles. The authors note,

Most recently, the estate of former singer Whitney Houston has been fighting off an inexplicable valuation of Ms. Houston’s publicity rights, according to The Hollywood Reporter. Ms. Houston’s estate is just one of many in recent years, most notably, Michael Jackson, who are embroiled in heated tax claims over the valuation of certain assets, most contentiously the valuation of the celebrity’s public image. How exactly does the IRS come to the conclusion of the worth of the decedent’s image, and why are valuations of this intangible so hard to get right?

The Valuation Process

There is no step by step process that the IRS uses to determine the value of a decedent’s image. The valuation process is governed by Section 4.48.5.1 of the Internal Revenue Manual. While there may be directions and rules for the valuator of intangible property like a decedent’s publicity rights and image, the entire process may be summed up as a sort of ‘totality of the circumstances’ when putting an actual dollar amount of value on an intangible. A valuator must consider all relevant information and material facts when assigning a value to an intangible, including but not limited to:

  •         The value of the net economic benefit to be received over the life of the asset
  •         Valuations of similar intangibles
  •         The risk associated with future income of the intangible
  •         Historical income generation of the intangible

Find the entire post here: What’s In a Name? Publicity Rights of Deceased Celebrities

Posted by Allison Trupp, Associate Editor, Wealth Strategies Journal