In re Marriage of Edwards, a case from Supreme Court of Montana, involved husband and who wife who were married in 1989. The couple had three children. All three of their children were over 18 years old at time of divorce. The parties purchased a house located on 35 acres of waterfront property. Additionally, husband had purchased his family's well-established supermarket.
At time of divorce, the business estate included the building in which supermarket was located, a 350 acre ranch, a new home located on this ranch, and old home on the ranch, another older home and shop, and various equipment and personal property. Total assets of their marriage were valued at $2.25 million.
Trial court attempted to divide martial estate equally and awarded their home and 35 waterfront acres and 350 acre ranch to wife and all remaining business assets to husband. There was considerable expert testimony, which established under IRS guidelines, if husband sold any assets of the business during a 10-year period, he would incur substantial corporate tax consequences. Judge still ordered husband to transfer business real estate but ordered husband to use an IRS reorganization procedure to which wife's expert testified to minimize tax consequences.
Husband moved District Court to reconsider judge's order on grounds this IRS procedure would not work for his situation, would essentially destroy his business, and would destroy future value of the estate. He also argued judge's valuation of assets was not supported by evidence. District court denied his motion on ground he was not asserting anything different from during trial, and all evidence was properly considered. At this point, husband appealed trial court's order and District Court's ruled to state supreme court.
On appeal, court looked at whether trial judge had abused his discretion in ordering an IRS reorganization procedure to effectuate an equitable dissolution of their marriage, and whether he had properly violated business assets.
As applied to this case, an IRS “D Reorg” would require supermarket company to create a subsidiary called new market, for example. Supermarket company would transfer ranch to new market. Stock would be issued to supermarket company and immediately transferred to husband. Husband would control both companies during a reorganization then transfer stock in new market to wife. While this will allow for a transfer with minimal tax consequences if approved by IRS, husband asserts this reorganization is not being done for a valid business purpose and would not satisfy IRS requirements. Birmingham divorce attorneys can explain how important it is to understand how a property dissolution order may affect overall value of marital property.
Appellate court noted there was substantial conflicted testimony presented at trial over whether this reorganization would work as intended by trial judge. Appellate court also noted it was trial judge's place to make a determination based upon evidence and facts presented at trial, and appellate court would not disturb trial court's ruling, as this would involve second guessing. Appellate court was also unwilling to second-guess trial judges valuation of value of supermarket company.
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