Michael Jackson: Kinda Screwed Either Way? - Idolator Comments

Michael Jackson: Kinda Screwed Either Way?

valarmorghulis — Thu, 28 Feb 2008 14:16:25 EST

@mike a: essentially the situation is that if they write off the debit, whatever they write off is a profit for him, and he owes taxes on it. if he sells the house at auction for the 24.5 million netting him a profit of 10 million, the gov't wants taxes from that too. so if those taxes on the 10 mil profit from the auction is about 5 mil, from the 24 he got for the house, he only has 19 mil to pay back the 24 mil he owes (or more likly all that money from the auction goes to the crediter and then the state comes to him and says, "we'd like the 5 mil you owe us in taxes from selling your house now"). essentially, for this all to work out at the auction stage, he needs to sell the ranch for enough money to pay off the debit, AND pay the state their taxes on the sale (which after my non-accountant/real estate agent calculations bring to being around 33 mil).

valarmorghulis

Michael Jackson: Kinda Screwed Either Way?

mike a — Thu, 28 Feb 2008 13:15:09 EST

So the $5 million debt is what remains after the sale? Perhaps I was misreading it to think that he takes 5 and the government takes 5.

(I hope to someday be in a position to need to understand the ramifications of selling a $24 million house.)

mike a

Michael Jackson: Kinda Screwed Either Way?

El Zilcho! — Thu, 28 Feb 2008 12:31:32 EST

@righteousmaelstrom: I believe he did take on a second mortgage a few years back.

El Zilcho!

Michael Jackson: Kinda Screwed Either Way?

El Zilcho! — Thu, 28 Feb 2008 12:30:51 EST

@mike a: Because if somebody swoops in and buys Neverland Ranch for $24.5 million, Michael needs to pay that money to the bank. The government will be taxing Jackson on the $10 million difference between what he paid and what he sold the property for. So he'll be $5 million in debt to the government.

El Zilcho!

Michael Jackson: Kinda Screwed Either Way?

righteousmaelstrom — Thu, 28 Feb 2008 12:28:31 EST

It's because it's money owed on the house. It's the same as if a collection agency or bank wrote off a debt you owed them. Under the tax laws, that is considered income to you and thus you owe the taxes on that written-off debt.

What I want to know is, if he initially purchased the property for $12M-$14M in 1988, how in the hell does he now owe $24M? Sounds like Jacko was taking out 2nd and 3rd mortgages on the ranch. Ouch.

righteousmaelstrom

Michael Jackson: Kinda Screwed Either Way?

mike a — Thu, 28 Feb 2008 12:17:55 EST

Admittedly I don't understand high-stakes real estate, but even with taxes, doesn't that mean that Michael Jackson still makes a $5 million profit on an approximately $13 million initial investment? And isn't that good?

mike a