IRS says executors undervalued Prince's estate by 50%

FILE - In this Oct. 14, 2010 file photo, musician Prince holds a news conference at The Apollo Theater announcing his "Welcome 2 America" tour in New York. The ongoing controversy over the money left behind by Prince when he died without a will is heating up again after Internal Revenue Service calculations showed that executors of the rock star's estate undervalued it by 50%, or about $80 million. (AP Photo/Peter Kramer, File) (Peter Kramer, Copyright 2021 The Associated Press. All rights reserved.)

MINNEAPOLIS ā€“ The ongoing controversy over the money left behind by Prince when he died without a will is heating up again after Internal Revenue Service calculations showed that executors of the rock star's estate undervalued it by 50%, or about $80 million.

The IRS determined that Princeā€™s estate is worth $163.2 million, overshadowing the $82.3 million valuation submitted by Comerica Bank & Trust, the estateā€™s administrator. The discrepancy primarily involves Princeā€™s music publishing and recording interests, according to court documents.

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Documents show the IRS believes that Prince's estate owes another $32.4 million in federal taxes, roughly doubling the tax bill based on Comericaā€™s valuation, the Star Tribune reported.

The IRS also has ordered a $6.4 million ā€œaccuracy-related penaltyā€ on Princeā€™s estate, citing a ā€œsubstantialā€ undervaluation of assets, documents show.

Princeā€™s death of a fentanyl overdose on April 21, 2016, created one of the largest and most complicated probate court proceedings in Minnesota history. Estimates of his net worth have varied widely, from $100 million to $300 million.

With Princeā€™s probate case dragging on, his six sibling heirs have grown increasingly unhappy, particularly as the estate has doled out tens of millions of dollars to lawyers and consultants.

Comerica and its lawyers at Fredrikson & Byron in Minneapolis maintain their estate valuations are solid. Comerica sued the IRS this summer in U.S. Tax Court in Washington, D.C., saying the agencyā€™s calculations are riddled with errors.

ā€œWhat we have here is a classic battle of the experts ā€” the estateā€™s experts and the IRSā€™ experts,ā€ said Dennis Patrick, an estate planning attorney at DeWitt LLP in Minneapolis who is not involved in the case. Valuing a large estate, Patrick added, ā€œis way more of an art than a science.ā€

Comerica, a Dallas-based financial services giant, has asked the tax court to hold a trial in St. Paul. A trial could dramatically lengthen the settlement of Princeā€™s estate and generate more legal fees at the expense of Princeā€™s heirs, Patrick said.