Purchase price equals value of business caught up in divorce

BVWireIssue #235-1
April 6, 2022

marital dissolution/divorce
goodwill, fair market value (FMV), motion for reconsideration, purchase price, gift

In Wisconsin, the valuation opinions of two experts were deemed not credible for a business caught up in a marital dissolution. In this case, the husband was the out-spouse arguing for a high value of the wife’s business (Dr. Paul’s brand of herbal products for treating livestock).

Both experts rejected: The wife had bought the business from her parents one year prior to the divorce filing (no gift involved). The purchase price was $500,000 (100% financed by a note from the parents), and she also borrowed $57,920 from them shortly after for working capital. The circuit court rejected the valuation opinions of the experts on both sides and found that the best measure of value was the purchase price/loan plus the working capital loan less any remaining principal at the time of trial, for a net value of $45,230.

One of the husband’s arguments was that the purchase price was not fair market value because it was not at arm’s length. While the court agreed the transaction was not arm’s length, it was the best indicator of value especially since neither expert’s valuation of the business made “logical sense.” The husband appealed, but the appellate court upheld the circuit court’s decision.

The case is Dettloff-Meyer v. Meyer, 2022 Wisc. App. LEXIS 205, and a case analysis and full opinion are available on the BVLaw platform.

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