Business Owner Claims Value Down But Quit Advertising

Tennessee business valuation law case summary. Tennessee divorce and family law from the Tennessee Court of Appeals.

Mosley v. Mosley – Tennessee business valuation case

In this divorce case, the husband Stan Mosley was the 90% shareholder of Telescan, which had started in 1987.  The wife, Carrie Mosley, had been employed by Telescan before the couple was married, and returned after their 1995 marriage.

The husband’s expert witness was the CPA who had worked on Telescan’s books since 1998.  The CPA (who was not identified in the appellate opinion) testified that the book value of Telescan was $524,000 on August 31, 1999; $763,000 on December 31, 1998; and $546,000 on December 31, 1994.  This witness was not qualified to testify as an expert witness on business valuation.

The wife’s expert witness was another unnamed CPA who was a certified valuation analyst and was accredited as such since 1997.  This CPA testified that the husband’s interest in the business at the time of marriage was $639,000, and at the time of the separation, $801,900.  He testified that the value at the time of the divorce was $477,000, but that this value was less reliable, since it was based upon only eight months of the year.

This expert did, however, explain some reasons for a sudden decline in value.  The company had lost $201,000 in August of the year, “all of a sudden”.  This was partly explained by a $38,000 lawsuit settlement and a decline in advertising.  In 1998, Telescan had spent $40,000 on advertising, but in 1999, it had spent only $2,000.

The trial court concluded that the value of the company had increased during the marriage by $162,900, and that the wife was entitled to a share in the amount of $54,000.

On appeal, the husband argued that the trial court had erred in classifying this increase in value as marital property, since there was no evidence that the wife had made a substantial contribution to this increase in value.

The court of appeals held that this finding was supported by the evidence.  Not only had she done significant work for Telescan, but she also contributed as homemaker and mother.

The husband also argued that the court had used the wrong valuation date.  He argued that the relevant date was August 1999, which was closer to the date of the divorce, since the decree was in September 1999.  The Court of Appeals disagreed, and held that the trial court had acted within its discretion by setting the value as of 1998.  The husband had complete control over decisions, and could have made the business more profitable after he was separated by, for example, continuing the amount of advertising that the company had previously done.  Furthermore, the lawsuit settlement need not be taken into account, because it was a one-time event.

2002 WL 340593 (Tenn. Ct. App. 2002).

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.