Typically, the expert will discount the value by an appropriate tax rate as an immediate and specific tax consequence Marriage of Fonstein (1976) 17 Cal.3d 738 Determining the Value of WIP/AR (cont’d) (9 Cir 1943) 135 F.2d 125 But see Johnson v. U.S. H awarded the business with outstanding AR Each party reported one-half of A/R when collected IRS gave W a refund and assessed H a deficiency 9th Cir REVERSES, holding that A/R is CP income, so they can’t all be assigned to H Partnership/Shareholder Agreements Typically, a trial will disregard partner/shareholder agreements which limit the value of the business As value is determined as place” value to spouse who will be continuing in the business “in (1982) 134 Cal.App.3d 451 Marriage of Fenton Other Issues re Accounts Receivable Partnership/Shareholder Agreements (cont’d) However, in the unusual situation in trial a business has multiple owners who operate under an agreement which limits a partner/shareholder’s ability to receive his or her share of AR pro rata Then the court has the discretion to disregard AR (shareholder agreement provided that a shareholder’s compensation was not Marriage of Nichols linked to A/R and CA-3 affirmed decision which ignored value of AR) Other Issues re Accounts Receivable Partnership/Shareholder Agreements (cont’d) Marriage of Nichols was followed in Marriage of Iredale and Cates (2004) 121 Cal.App.4th 321 CA-2(4) held that, where partner did not into” firm’s WIP/AR at the front end, the value “buy of his/her partnership interest for marital disso purposes did not include value of pro rata WIP/AR Issues re Accounts Receivable In re Marriage of Kilbourne (1991) 232 Cal.App.3d 1518 (CA-1(1)) H had personal injury practice with significant WIP at DOS H argued unsettled cases should be allocated to him at zero value on basis that court should not reserve jurisdiction over an asset and there was no value yet since not settled CA-1(1) but finds a limited time period reservation was acceptable REVERSES In addition, H refused to provide evidence necessary to make determination of present value (on confidentiality basis), so reservation only possible method Contingency Cases Impact on Spousal Support
Typically, the expert will discount the value by an appropriate tax rate as an immediate and specific tax consequence Marriage of Fonstein (1976) 17 Cal.3d 738 Determining the Value of WIP/AR (cont’d) But see Johnson v. U.S. (9 Cir 1943) 135 F.2d 125 H awarded the business with outstanding AR Each party reported one-half of A/R when collected IRS gave W a refund and assessed H a deficiency 9th Cir REVERSES, holding that A/R is CP income, so they can’t all be assigned to H Partnership/Shareholder Agreements Typically, a will disregard partner/shareholder agreements which limit the value of the business As value is determined as “in place” value to spouse who will be continuing in the business Marriage of Fenton (1982) 134 Cal.App.3d 451 Other Issues re Accounts Receivable Partnership/Shareholder Agreements (cont’d) However, in the unusual situation in a business has multiple owners who operate under an agreement which limits a partner/shareholder’s ability to receive his or her pro rata share of AR Then the court has the discretion to disregard AR Marriage of Nichols (shareholder agreement provided that a shareholder’s compensation was not linked to A/R and CA-3 affirmed decision which ignored value of AR) Other Issues re Accounts Receivable Partnership/Shareholder Agreements (cont’d) Marriage of Nichols was followed in Marriage of Iredale and Cates (2004) 121 Cal.App.4th 321 CA-2(4) held that, where partner did not “buy into” firm’s WIP/AR at the front end, the value of his/her partnership interest for marital disso purposes did not include pro rata value of WIP/AR Issues re Accounts Receivable In re Marriage of Kilbourne (1991) 232 Cal.App.3d 1518 (CA-1(1)) H had personal injury practice with significant WIP at DOS H argued unsettled cases should be allocated to him at zero value on basis that court should not reserve jurisdiction over an asset and there was no value yet since not settled CA-1(1) REVERSES but finds a limited time period reservation was acceptable In addition, H refused to provide evidence necessary to make determination of present value (on confidentiality basis), so reservation only possible method Contingency Cases Impact on Spousal Support trial trial
2017%20AFLC%20Day%20Two%20Outline%20Business%20Valuation.docx