The Tax Court has called off a March 2022 trial between the estate of pop superstar Prince and the IRS after the parties reached a settlement on the values of the singer’s assets.
The latest development in Estate of Prince R. Nelson v. Commissioner was revealed in a November 30 order from Tax Court Judge Mark V. Holmes, who noted that a trial had been scheduled to begin March 21, 2022, at the court’s St. Paul, Minnesota, trial session.
“On November 23, 2021 we spoke with the parties and learned that they have settled,” Holmes wrote. “Because the Estate remains under the supervision of a state probate court, the settlement has to be approved at the state level. Because one of the heirs has died, a representative for that heir has to be found and put in place. This will take some time and all agree that this case should be shunted to a status-report track.”
Holmes’s order removed the case from the trial calendar and directed the parties to file a status report by February 23 on their progress in closing the case.
The case began when executor Comerica Bank & Trust NA filed a Tax Court petition in August 2020 contesting an IRS deficiency notice asserting that Prince’s estate owes an additional $32.4 million in estate taxes and a section 6662(g) substantial estate tax valuation understatement penalty of $6.4 million.
The agency contended that the singer, who died in April 2016, left an estate with a taxable value of $163 million, not the $82 million his estate reported on Form 706, “United States Estate (and Generation-Skipping Transfer) Tax Return,” in July 2017.
Comerica argued that the IRS overstated the fair market values of Prince’s real estate interests in undeveloped land, an industrial building, and residential lots. The petition also criticized the IRS’s appraisals of Prince’s interests in Paisley Park Enterprises Inc. and NPG Records, as well as its FMV appraisal of Prince’s personal property, writer’s share of music compositions, and rights of publicity.
The parties told the court in June that they had resolved their differences over the real estate assets after they agreed on the values of 14 property interests owned directly or indirectly by Prince.
The petitioner in Estate of Prince R. Nelson v. Commissioner, Dkt. No. 11442-20, is represented by Mark W. Greiner, Karen Sandler Steinert, and Sue Ann Nelson of Fredrikson & Byron PA.