Divorcing business owner kept PPP loan a secret
In an Ohio case, the couple began negotiating terms of their divorce in October 2020 and decided to use Dec. 31, 2020, as the valuation date for marital assets.
Beach v. Beach
A vestige of the COVID-19 era, a PPP loan, was the central issue in the Ohio appeals court’s reversal of the trial court’s judgment. The trial court vacated the parties’ Oct. 21, 2021, decree of dissolution of marriage. The husband had applied for a PPP loan of $9.4 million and did not notify the wife or either of the parties’ experts. The reversal by the appeals court was based on the date of valuation, agreed to by both parties, predating the PPP loan. As shown in a number of cases in different jurisdictions, the date of valuation became a critical issue in determining the value of a marital estate.
Ohio Court of Appeals Reverses and Does Not Allow Consideration of PPP Loan After Valuation Date
A vestige of the COVID-19 era, a PPP loan, was the central issue in the Ohio appeals court’s reversal of the trial court’s judgment. The trial court vacated the parties’ Oct. 21, 2021, decree of dissolution of marriage. The husband had applied for a PPP loan of $9.4 million and did not notify the wife or either of the parties’ experts. The reversal by the appeals court was based on the date of valuation, agreed to by both parties, predating the PPP loan. As shown in a number of cases in different jurisdictions, the date of valuation became a critical issue in determining the value of a marital estate.
Wohlt v. Wohlt
In the first instance, this was another case where cryptocurrencies played an important role. While the existence of the cryptocurrencies was forgotten when dividing the marital assets and thus remained with the husband, the trial court, affirmed by the appellate court, had awarded the wife half the value of the cryptocurrencies. Additionally, the trial court determined the value of the cryptocurrencies as of a May 2020 hearing and not as of the date of the mediation. This resulted in a large difference in value being awarded to the wife. The supreme court (Indiana) reversed and allowed the full value of the cryptocurrencies to remain with the husband. The case was, in effect, a contract case, and it was necessary to follow the contract terms, which the supreme court found to be unambiguous.
Supreme Court of Indiana Rules That Forgotten Cryptocurrencies Remain With Husband
In the first instance, this was another case where cryptocurrencies played an important role. While the existence of the cryptocurrencies was forgotten when dividing the marital assets and thus remained with the husband, the trial court, affirmed by the appellate court, had awarded the wife half the value of the cryptocurrencies. Additionally, the trial court determined the value of the cryptocurrencies as of a May 2020 hearing and not as of the date of the mediation. This resulted in a large difference in value being awarded to the wife. The supreme court (Indiana) reversed and allowed the full value of the cryptocurrencies to remain with the husband. The case was, in effect, a contract case, and it was necessary to follow the contract terms, which the supreme court found to be unambiguous.
Donahue v. Donahue
This case is important because it held that the covenant not to compete value was not determinative of the value of personal goodwill. Florida had a law go into effect on July 1, 2024, regarding personal goodwill in divorce. It codified that personal goodwill was not a marital asset. Also, previously, when a business sale required a noncompete or restrictive covenant, its value was generally treated as personal goodwill and, therefore, not part of the marital equitable distribution. Today, however, courts may consider a portion of the restrictive covenant as enterprise goodwill, thereby increasing the value of the marital estate. It was up to the courts to make that distinction and determine whether such instruments should be considered martial assets.
Business’s Goodwill Determined to Be Enterprise Only; Covenant Not to Compete Does Not Change the Nature of the Goodwill
This case is important because it held that the covenant not to compete value was not determinative of the value of personal goodwill. Florida had a law go into effect on July 1, 2024, regarding personal goodwill in divorce. It codified that personal goodwill was not a marital asset. Also, previously, when a business sale required a noncompete or restrictive covenant, its value was generally treated as personal goodwill and, therefore, not part of the marital equitable distribution. Today, however, courts may consider a portion of the restrictive covenant as enterprise goodwill, thereby increasing the value of the marital estate. It was up to the courts to make that distinction and determine whether such instruments should be considered martial assets.
Valuation Considerations for Gift & Estate Tax
The transfer of estate assets from one generation to another can be complex depending on the business and personal holdings of the estate. The valuation of such is essential to the determination of the taxable portion of the estate and calculating the applicable estate tax exemption. Our valuation team will demystify the valuation process by discussing the aspects that go into the appraisal of the material assets of an estate, including any/all intangible assets, machinery ...
State’s high court reverses appellate court on personal goodwill
In South Carolina divorce matters, enterprise goodwill is marital property subject to equitable division, but personal goodwill is not.
Cammenga v. Cammenga
In this Michigan divorce action, the court of appeals remanded for a second time for the trial court to measure the husband’s tax loss carryforward in an appropriate manner, including an option to value the loss carryforward annually.
Appellate Court (Michigan) Orders a Second Remand to Value a Tax Loss Carryforward Correctly
In this Michigan divorce action, the court of appeals remanded for a second time for the trial court to measure the husband’s tax loss carryforward in an appropriate manner, including an option to value the loss carryforward annually.
Trethewey v. Trethewey
The husband’s $5 million “transitional bonus” when he changed jobs as a financial advisor to Wells Fargo Advisors was included both as income and as an asset in determining alimony and assigning all of the liability on a Wells Fargo note to him.
Massachusetts Appellate Court Finds Double and Maybe Triple Dipping and Reverses and Remands
The husband’s $5 million “transitional bonus” when he changed jobs as a financial advisor to Wells Fargo Advisors was included both as income and as an asset in determining alimony and assigning all of the liability on a Wells Fargo note to him.
Basic assumption drives valuers way apart
In an Illinois divorce case, different fundamental assumptions about the husband’s picture frame business yielded greatly disparate values from the two experts.
Neutral valuer does what he can with limited info
In a California divorce case, a court-appointed valuation expert was caught in the middle of a squabbling couple who didn’t provide enough information to value all the marital assets, including business interests.
In re Rozdolsky
In this complex Illinois divorce case, the appellate court affirmed the valuation of the husband’s business. The trial court had already reduced the wife’s expert’s valuation by 30%. Overall, the husband raised nine issues on appeal, including having to contribute to the wife’s attorney’s and expert fees, resulting from the husband’s lack of cooperation in discovery.
Illinois Appellate Court Affirms Valuation of Marital Business
In this complex Illinois divorce case, the appellate court affirmed the valuation of the husband’s business. The trial court had already reduced the wife’s expert’s valuation by 30%. Overall, the husband raised nine issues on appeal, including having to contribute to the wife’s attorney’s and expert fees, resulting from the husband’s lack of cooperation in discovery.
Cronan v. Cronan
This case concerned an appeal of a family court magistrate’s decision as to the value of marital assets and the distribution thereof and denial of alimony to the wife. The plaintiff, the husband, is a physician shareholder in a medical imaging practice. The practice had a shareholder agreement that provided for the price to buy into and sell out of the practice. The wife’s expert determined the value of the husband’s shares under the fair market value standard but the trial court and supreme court went with the agreement value.
Rhode Island Supreme Court Affirms Value of Interest in Medical Practice Per Shareholder Agreement and Equitable Distribution of Assets
This case concerned an appeal of a family court magistrate’s decision as to the value of marital assets and the distribution thereof and denial of alimony to the wife. The plaintiff, the husband, is a physician shareholder in a medical imaging practice. The practice had a shareholder agreement that provided for the price to buy into and sell out of the practice. The wife’s expert determined the value of the husband’s shares under the fair market value standard but the trial court and supreme court went with the agreement value.
In re Hembree
In this appeal of a denied motion by the wife to set aside a marital settlement order, the appellate court affirmed the trial court. The wife claimed that the husband did not disclose a number of marital assets and misrepresented the values of certain marital assets. The trial court appointed its own expert for valuation of assets. The expert was unable to value a number of the assets for lack of information including a lack of proof of existence of some alleged assets.
Appellate Court (California) Affirms Denial of Wife’s Motion Claiming Missing Assets and Undervalued Assets
In this appeal of a denied motion by the wife to set aside a marital settlement order, the appellate court affirmed the trial court. The wife claimed that the husband did not disclose a number of marital assets and misrepresented the values of certain marital assets. The trial court appointed its own expert for valuation of assets. The expert was unable to value a number of the assets for lack of information including a lack of proof of existence of some alleged assets.
BV News and Trends May 2023
A monthly roundup of key developments of interest to business valuation experts.
Lieberman-Massoni v. Massoni
The trial court in this New York divorce awarded the value of the husband’s class B units in lieu of awarding a portion of the actual units to the wife and also barred the wife from any distributions on those units occurring after the valuation date.
New York Appellate Court Affirms Award of Value of Husband’s Class B Units in Lieu of Actual Distribution of Share of Units
The trial court in this New York divorce awarded the value of the husband’s class B units in lieu of awarding a portion of the actual units to the wife and also barred the wife from any distributions on those units occurring after the valuation date.
Have you tried Abbott’s passive appreciation calculator?
In last week’s BVWire, we mentioned that Dr. Ashok Abbott (West Virginia University) has developed an online application that produces a passive appreciation factor on a national level for businesses in the retail sector.