Value Can Be Zero in Tennessee Business Valuation Divorce

Tennessee business valuation law case summary – scrap value inventory. Tennessee divorce and family law from the Tennessee Court of Appeals.

Greer v. Baker – Tennessee Divorce Business Valuation Case

Can a Tennessee Trial Court give a zero value to a business when deciding division of marital assets during a divorce?  According to the Tennessee Appellate Court’s decision in Greer v. Baker, the answer is yes, if there is evidence on the record that could support the Trial Court’s decision.

Georgia Faye Baker and James L. Baker were married on October 11, 1980.  Mr. Baker had one prior marriage and Ms. Baker had been married twice before.  Although the couple did not have children together, Ms. Baker had two children from her previous marriage, Trina Greer and Anita MacAdoo.

On February 22, 2002, Ms. Baker filed a complaint for divorce against Mr. Baker.  After a hearing on April 10, 2003, the Trial Court granted the couple a divorce on April 22, 2003, but reserved all other issues, including division of marital property, for future determination.

On June 22, 2004, Ms. Baker passed away.  Consequently, the trial court substituted Ms. Baker’s children, Trina Greer and Anita MacAdoo, as parties. On July 20, 2006, the Trial Court made its determination regarding division of the marital assets, awarding Ms. Greer and Ms. MacAdoo $678,431.00 in property.  However, the Trial Court assigned a zero value to Mr. Baker’s interest in the inventory of a business he had owned with his son-in-law.

Ms. Greer and Ms. MacAdoo disputed the zero business valuation on appeal, alleging that the Trial Court erred in assessing no value to the inventory of Mr. Baker’s personal business during the marriage, despite the admission of value and the presence of a tax estimate near the time of the divorce stating otherwise.

The facts relating to the business were testified to during the hearing.  Mr. Baker and his son-in-law, Bill Greer, were in business together from approximately 1996 until 1999.  As of January 1, 2000, Mr. Baker turned the business over to Mr. Greer, taking only his portion of the accounts receivable, but no inventory.  What portion of the inventory existed at the time of the divorce was never ascertained.

Mr. Greer testified that the estimated value of this inventory was $20,000, but his tax statement indicated that the inventory was worth up to $40,000.  Mr. Baker, on the other hand, testified that the inventory was nothing more than scrap metal, and as such, had little or no value.  There was also evidence that Mr. Baker would have paid someone to carry the inventory off because he believed it was worth nothing. The Trial Court agreed.

On appeal, the Tennessee Appellate Court affirmed the Trial Court’s business valuation.  The Appellate Court noted that pursuant to Tenn. R. App. P. 13(d), findings of fact made by a trial court sitting without a jury are reviewed by the Tennessee Appellate Court under a de novo standard with a presumption of correctness for those findings, unless the preponderance of the evidence is otherwise.

The Appellate Court held that the Trial Court’s valuation of the business inventory was not outside the reasonable possibilities under the facts, since, according to the evidence, a reasonable valuation of the inventory could have ranged anywhere from $40,000 to $0. Consequently, the Appellate Court could not conclude that the Trial Court erred in its valuation of the inventory.

W2007-00340-COA-R3-CV (Tenn. Ct. App. Apr. 9, 2008).

See original opinion for exact language. Legal citations omitted.

To learn more about Tennessee business valuation law, see Business Valuation in Tennessee Divorce Law. To learn more about the division and valuation of professional practices in divorce, see When Professionals Divorce in Tennessee: Valuing Professional Practices.

Miles Mason, Sr. JD, CPA handles complex divorce matters including business valuations and forensic accounting issues. View his professional biography listing books and articles published on business valuation and forensic accounting and seminars presented to lawyers, judges, business valuation experts, and forensic accountants. Miles Mason, Sr. authored The Forensic Accounting Deskbook: A Practical Guide to Financial Investigation and Analysis for Family Lawyers, published by the American Bar Association. The Miles Mason Family Law Group, PLC’s offices are located in Memphis, Tennessee and serves West Tennessee and Nashville. Contact Us today at (901) 683-1850.