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High Valuations Complicate Division of Sizable Marital Estate

Appeals court affirms trial court’s above fair market value determinations regarding husband’s interests in various family businesses and the resulting equalization judgment but rejects trial court’s means with which to enforce payment of judgment.

Diez v. Davey

Court rejects expert’s “excess working capital” analysis to determine income for child support purposes saying it conflicts with state statute’s requirement to rely on historical practices when assessing legitimacy of undistributed earnings of an S corp.

Zelouf International Corp. v. Zelouf (I)

In fair value appraisal proceeding, New York court finds DLOM inappropriate given low probability of sale of family business and finds assumption of hypothetical impediments to sale irrelevant; New York law does not mandate DLOM in every circumstance.

Cavallaro v. Commissioner

Taxpayer parents incurred gift tax liability when, based on improper valuations, they agreed to merge their S corp. with their sons’ S corp. and accepted an unduly low interest in the new company while sons received an unduly high interest, Tax Court says ...

Crider v. Crider

Appeals court affirms trial court’s above fair market value determinations regarding husband’s interests in various family businesses and the resulting equalization judgment but rejects trial court’s means with which to enforce payment of judgment.

Marshall v. Marshall

Appeals court says parties’ agreement is ambiguous as to whether distributions related to husband’s ownership in S corp. are includable in alimony and child support calculation; on remand, trial court must determine what income parties meant when specifying use of pretax income from employment.

Courts Agree Reasonable Compensation Is Sound Method for Calculating Spousal Support in S Corp Context

Appeals court says parties’ agreement is ambiguous as to whether distributions related to husband’s ownership in S corp. are includable in alimony and child support calculation; on remand, trial court must determine what income parties meant when specifying use of pretax income from employment.

Appeals Court Tiptoes Around Tax Affecting in Divorce Setting

Appeals court agrees that in valuing husband’s S corp for marital distribution “national case law” (Kessler, Bernier) supports his expert’s tax affecting but says it must defer to trial court’s decision to adopt competing expert’s position not to tax affe ...

Hamelink v. Hamelink

Appeals court agrees that in valuing husband’s S corp for marital distribution “national case law” (Kessler, Bernier) supports his expert’s tax affecting but says it must defer to trial court’s decision to adopt competing expert’s position not to tax affe ...

Tax methods used for valuing S corporations

Bernier v. Bernier (II)

Massachusetts Court of Appeals remands the case—for the second time—to the trial court for an appropriate valuation of the parties’ S corporations, including a tax affecting according to the “Kessler metric” (adopted from the Delaware Chancery Court).

In re Marriage of Rodenback

Appellate court disavows day-of-trial valuation by expert that used the husband’s “off the cuff” forecasts, preferring value based on historical earnings, without consideration of the tax burden the husband would have to bear in making the equalization pa ...

Tax Court Rejects Tax Affecting, CSRP, Poor Comps, and More

Tax Court dismisses guideline company comparable method in this case for lack of true comparables and rejects experts’ DCF for tax affecting and other adjustments without sufficient justification or support.

Second Post-Bernier Court Says Income Approach May Be Preferred, But Not Exclusive

Massachusetts court precludes discounts in valuing marital business in divorce, and says that while income approach is preferred, net asset value may be appropriate in the absence of determinable market value.

Gallagher v. Commissioner (I)

Tax Court dismisses guideline company comparable method in this case for lack of true comparables, and rejects experts’ DCF for tax affecting and other adjustments without sufficient justification or support.

Dawyot v. Catawba Capital Mgmt., Inc.

In buyout dispute, court sets aside third-party appraisal performed pursuant to redemption agreement; court says final appraisal report contains at least one “palpable error” related to normalization of earnings that had a significant effect on the valuation; appraiser did not testify at trial.

Palmerino v. Palmerino

Massachusetts court precludes discounts in valuing marital business in divorce, and says that while income approach is preferred, net asset value may be appropriate in the absence of determinable market value.

Adams v. Adams

Massachusetts Supreme Judicial Court rejects direct capitalization method for valuing hedge fund partnership interest, finding DCF method is more appropriate, plus tax-affecting.

Expert insights on valuation and bankruptcy

Expert insights on valuation and bankruptcy

We’ve just posted numerous new articles from Insights, the esteemed valuation quarterly published by Willamette Management Associates and provided exclusively to subscribers of BVResearch.

In re Marriage of Williams

Montana high court rejects 35% minority discount to husband’s half interest in a closely held, family business, which he owned with his father and had equal say over operations, management, and application of funds.

‘Dueling Over Discounts’ in Divorce of Minority Shareholder

Court considers the applicability of discounts to a minority shareholder’s interest in an S Corp, and whether the company’s retained earnings may be properly attributable to a minority owner for child support determinations.

Wright v. Wright

Court considers the applicability of discounts to a minority shareholder’s interest in an S corp, and whether the company’s retained earnings may be properly attributable to a minority owner for child support determinations.

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