In domestic relations cases, where one or both of the parties own a business interest, it is generally necessary to establish a value for the business. The valuation serves two purposes, allowing first for an equitable division of assets (Ohio law provides that the court’s division of assets is to be equitable, not equal). And if there is an income stream for the business, the second purpose is to determine appropriate spousal and/or child support. However, where the two are so intermingled, the concept of “double dipping” becomes an issue.
The concept of double dipping may occur when the same income stream which is used to provide a value to the business for purposes of division of assets, is also used to calculate the amount of spousal or child support.
Although each case will certainly depend upon its own unique facts, the seminal case arguing that this concept constitutes impermissible double dipping is Heller v. Heller (June 30, 2008), Franklin App., 2008-Ohio-3296. In Heller the trial court’s order provided the wife one-half of the husband’s business interest, ordered husband to pay spousal support to wife in the amount of $8,000 per month, plus additional spousal support based upon husband’s future payments of additional income or profits from the business. The issue in Heller was the “additional” spousal support which was derived from a percentage of future distributions by the business to the husband. The issue was not the underlying or traditional spousal support order, which was based upon the husband’s yearly income.
Other Ohio courts of appeals have rejected the “double dipping” argument. In Hutta v. Hutta, 177 Ohio App.3d 414 (Stark County 2008), the court stated “the *421 income generated by the business interests retained by appellee pursuant to the division of marital assets needed to be evaluated and considered by the trial court in determining the appropriate amount of spousal support, along with the remaining 18(C) factors.” Similarly, the Hutta court ruled “the double-dipping argument advanced by appellee and adopted by the trial court was rejected by this court in Bagnola v. Bagnola, Stark County App. No. 2003-CA-00120, 2003-Ohio-5916, 2003 WL 22501764 (basing division of marital assets on business valuations that were based on husband's earned income from three businesses, while also basing award of spousal support on same earned income, did not result in improper “double dipping” for wife).”
Another argument against the “double-dipping” theory, is found in the First District of Ohio Court of Appeals, in Kahn v. Kahn (1987), 42 Ohio App.3d 61. In Kahn, the court of appeals determined that the goodwill value associated with a medical practice did not duplicate the future earnings available to the spouse for purposes of prospective support (“Therefore, a court may consider both future earnings capacity and professional goodwill without being accused of considering exactly the same assets twice.”)
For more information regarding this issue and the process involved, please contact Joseph Stafford at Stafford Law Co., L.P.A. (216) 241-1074; or http://staffordlawcompany.com.