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Divorce and Medical Practice Owners in Ohio: Series on Divorce Part 17

Ohio Divorce Attorney for Doctors
Larry J. Kasper, CPA, CVA , CBA is appearing as a Guest Blogger on our site.  He does not work for the Law Offices of Virginia C. Cornwell, and is not being paid to write this article.


Ohio Court of Appeals Affirms and Settles Business Valuation Issue

Hissa v Hissa, 2010 WL 2637905 (Ohio. July 1, 2010)

This case in Domestic Relations involved a divorce that had been litigated for 10 years.  One of the disputes revolved around the valuation of the husband’s orthopedic practice.  In particular,  the valuation of the receivables was disputed.  Both experts used the fair market value standard and both placed great emphasis on the value of the receivables.

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Doctor's Divorce Lawyer in OhioThe husband valued the receivables using records from 1999.  The wife’s expert used the value of receivables in 1998.  The husband claimed that the wife’s expert did not use the most recent financial information.  However, according to the court, the husband did not provide the most recent receivable information to the wife, nor did the husband have his expert testify, instead relying on an affidavit authenticating the contents of the report.  The Appeals Court also noted discrepancies in the 1999 records and the differences in information he provided to the two experts, and used this to support it’s finding that the Wife’s expert opinion was more credible.

In general, the trial Court found the husband’s expert report less credible and the Appeals Court found no abuse in relying on the wife’s expert’s testimony and report.

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Ohio Professional Practice Divorce AttorneysTraditionally, valuations are performed at a particular time and as of a valuation date.  This case really emphasizes the importance of the two sides agreeing on a common valuation date.  Had they agreed that 1998 was the valuation date, the issue of timely data, and discrepancies would never have occurred.  The case also shows how the court’s perceived failure to disclose can backfire on the party who has the information advantage, normally the owner spouse.

Business Valuation Divorce Attorney OhioFinally, the exceptional period in delay from filing to final trial, points out the cost of multiple valuations which can be avoided with a fixed valuation date.  Experts are not usually required to update their reports except at an additional cost.    Dating the valuation as close to the divorce as possible can avoid the cost of updating the report, but may not reflect the valuation realities of the marital assets.

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The relevant date is when the parties effectively terminated the marriage, either by separate living arrangements, or by filing for separation or divorce.  This approach acknowledges that divorces sometimes take time, but the delay in the court decision should not affect the value of the marital property at the time of divorce.  This approach would eliminate the cost of updating the report since any updates would be irrelevant, baring unusual changes in circumstances.  If there were unusual circumstances, the effect could be introduced at trial without a complete revaluation.

Larry J. Kasper, CPA, CVA, CBA is the author of the popular CBA seminar, “Tax Aspects of Divorce” and the award winning book, Business Valuations: Advanced Topics.  He is a valuation expert and also reviews reports prepared by other experts to identify strengths, weaknesses, inconsistencies and problems with valuation reports.

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