The US Inland Revenue Service (IRS) has served notice that the estate of Michael Jackson severely understated its worth and income, and is demanding about $US700 million (about $A784 million) in back taxes and penalties.
Documents have been filed with the US Tax Court in Washington that allege the executors for Jackson stated his net worth at the time of his death was $US7 million. However, the IRS assesses the amount at $US1.125 billion.
The estate's estimate has been deemed a gross misstatement, which means the IRS can assess a penalty of 40 per cent instead of the standard 20 per cent.
The IRS has reportedly told Jackson's executors to pay $US505 million in taxes, plus $US197 million in penalties.
A good portion of the difference in valuations was attributed to the worth of Jackson's likeness, which the estate valued at $US2105 and the IRS says was worth $US434.264 million.
In addition, the estate said that Jackson's portion of the ownership of both his songs and those of the Beatles was worth nothing.
The IRS says the value was more like $US469 million.
To be clear, the estate said that Jackson had borrowed against his portion of the catalogue, but at a valuation lower than the IRS's.
The IRS says the state understated the value of many other Jackson assets.
It is assumed that the case will end up in court.
