Construction Co. Valued at $450K + Bonus Shared with Wife

Tennessee business valuation law case summary – Construction. Divorce and family law from the Court of Appeals.

Payne v. Payne – Tennessee divorce business valuation – Construction Management Company

Kimberly L. Payne and Michael R. Payne were married for almost thirty years before Kimberly filed for divorce based upon Michael’s alleged inappropriate marital conduct.  Michael filed a counterclaim alleging that it was Kimberly who had engaged in inappropriate marital conduct.

The trial court held that Michael’s 16.7% interest in his business, Winesett-Hill Constructors, Inc., was marital property, and that it should be valued at $450,000.  It reached this conclusion by finding that the interest was worth $500,000, but should be discounted by 10% to reflect that he owned only a minority interest in the company.  The trial court further reduced this value by $253,000 to reflect an indebtedness in that amount.  The trial court further held that the value should be adjusted to reflect whether or not certain bonuses were paid in 2004, since those amounts would reduce his indebtedness and increase his equity.

After 2004, the trial court held another hearing to determine the exact value, based upon these bonuses.  Michael had received a bonus of $92,335, and the court concluded that the value of this bonus, taking into account deductions, was $59,834.  The money was never paid directly to Michael.  Instead, it was used to reduce his indebtedness.  The trial court then awarded half of this benefit, $29,917, to Kimberly.

The overall valuation of the business was apparently not disputed, and neither party appealed the valuation.  On appeal, Michael argued that it was improper to award the additional $29,917 to Kimberly.  He argued that this changed the net award to her, but did not change the value of the share of the marital estate awarded to him.  However, the Court of Appeals noted that his interest in the company had increased because of the reduction of his indebtedness.  The Court of Appeals noted that his share of the marital estate was actually $41,200 greater than that of Kimberly, and that the distribution was equitable.

No. E2006-02467-COA-R3-CV (Tenn. Ct. App. Sep. 12, 2007).

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.