Valuing the Business

Valuing a business in a divorce is no easy matter.  Alfred J. Pleasant had a business as a real estate broker when he got divorced.  His tax returns showed he made a gross income of $6,240 in 1989 and $7,343 in 1990.  His net was a loss of $2,500 each year.  He testified that his business was worth nothing.

The judge said, “I’m not going to buy the fact it is not worth anything because he takes a tax loss of $2500 on it each year.  I think the IRS would be rather upset if he was taking a tax loss on nothing.”

The judge then found that the business was worth $8,000.  On appeal, the court upheld the judge saying it could find nothing clearly erroneous in his finding.  This is why we encourage clients who own businesses to hire a business appraiser.  Even that’s no guarantee because the other side will hire one too and the judge will still have to decide the value.

Pleasant vs Pleasant, 97 Md. App. 711; 632 A.2d 202 (1993)