Estate Tax Valuation
Generally, tax liability depends on the value of the property included in the gross estate. Under the I.R.C. §2031(a), all rights transferable to the beneficiaries of a decedent’s estate should be valued and taxed. Under this broad definition, the right of publicity is intangible, personal property that when descendible, is transferable and part of a decedent’s gross estate- thereby making it a prime target of the federal estate tax.
Due to the lack of precedential case law and complexities inherently associated with valuing a decedent’s right of publicity, Celebrity Valuations is increasingly called upon by estate planning practitioners, litigators, government agencies, and celebrities themselves to help navigate through these valuation intricacies. Specifically, our services in this arena are primarily two-fold:
- We are called upon as brand managers to consult on creative ways celebrities, through proper estate planning, can effectively control their right of publicity value during and after their lifetimes to ease the ensuing tax implications/burdens on their successors; and
- We are called upon to determine, confirm, or challenge the purported fair market value of a respective decedent taxpayer’s right of publicity at the time of death. We’ve developed a centralized methodology that integrates our marketing, business, and legal expertise with other proprietary data to produce consistent, accurate results in each matter.
Income Tax Matters
Celebrity Valuations is often called upon to render the split between monies received in exchange for personal services, and monies received for a personality’s name, image and likeness. In Garcia v. Commissioner of Internal Revenue, there was a dispute over professional golfer, Sergio Garcia’s taxable income. As a professional golfer, Garcia had a lucrative $7M annual endorsement contract with TaylorMade Golf. This contract also required Garcia to render certain services in order to qualify for a host of bonuses. When paying taxes, Garcia allocated 85% of this endorsement revenue to the right of publicity, meaning only the remaining 15% allocated to personal services would be subject to US tax. The Tax Court cited Mark Roesler’s recognition of the necessity to separate one’s “personal service” revenue as distinguished by “image rights” (right of publicity) revenue. Relying on this proposition, the Court allocated a higher percentage of Garcia’s personal service rights at 35%, not 15%.