Question of whether the Court used correct approach when placing values on marital assets and whether the division of marital property was proper.
Couple Parties were married in 1977. Prior to marriage, Husband worked for company owned by Wife’s parents. At the time of the marriage, the Husband had other employment. In 1985, the Husband was rehired to work for Wife’s parent’s company. The Wife also worked for this company. The testimony at trial indicated that the Husband would lose his job once divorce case was over.
In 1990, Wife’s father transferred 137 shares of company stock to the Wife who signed a promissory note for $137,000.00. Both Wife and her Father testified that the stock was a gift. In 2000, Wife’s parents sold their shares of stock to the company for $4,000.00 per share and transferred 21 additional shares to the Wife. The company became an “S” corporation in 2006 and the wife started receiving disbursements. In 2006, she received a $100,000 disbursement, In 2007, she received $375,000.00 in disbursements and in 2008, she received an $85,000.00 disbursement.
The Husband hired a CPA who eventually determined the value of the company to be 3.3 million. Each share of stock was worth approximately $10,541.00. The Wife’s expert, also a CPA, determined that the company was worth $1,000,000 because of the oil spill’s negative affect on the shrimp industry. The Wife’s father testified at trial that he had no plans to close or liquidate the Company.
The Court awarded the Wife all the 158 shares of stock and the Husband $120,000 alimony in gross, representing his share of the parties’ marital assets. The Husband appealed.
When determining the value of a “closely held business, the court must determine the ‘fair value’ of the entity and not the ‘fair market value.’” The Appeals court stated, “We have determined that a trial court valuing a business for divorce purposes cannot use discounts that artificially deflate the value of a company because such an approach is inequitable.” The case was remanded with instructions to the court to determine the fair value of the stock and that it was divisible as marital property.
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