Tankersley v. Tankersley
In Tankersley v. Tankersley, 182 W.Va. 627, 390 S.E.2d 826 (1990), the husband filed for and was granted a divorce from his wife. One of the property issues resolved by the circuit court involved a funeral home that was owned by the husband.
The Tankersley opinion characterized the funeral home as a closely-held corporation.
The trial court concluded that the funeral home was marital property and had a market value of $ 325,000.00. The husband appealed the trial court's ruling on the value of the funeral home.
In the appeal, the husband argued that the trial court erred in deducting only one debt from the market value of the business. It was the husband's position that the court should have deducted all the debts of the business to determine its net value.
In addressing the issue of valuing a closely-held corporation, this Court made the following observation:
Commonly, the purchase of a closely held corporation occurs in one of two ways. Where the purchaser acquires the stock of the corporation, he ordinarily acquires all of the corporation's assets and liabilities. In this situation, the amount paid to the owner-seller for his stock ordinarily represents the net value of the business because the owner-seller is not obligated to pay off the corporate debts.
The second method of purchasing a corporation or business is where the buyer acquires its assets. Under this arrangement, the market value does not equal the net value because the owner-seller will ordinarily be responsible for some or all of the business's debts or liabilities. Again, the pertinent inquiry is what is the net sum that will be realized by the owner of the business if it is sold for its fair market value.
(Tankersley, 182 W. Va. at 631, 390 S.E.2d at 830.)
The decision further held:
"The net value of a closely held corporation or business equals the net amount realized by the owner should the corporation or business be sold for its fair market value. The pertinent inquiry that must be made is whether the owner-seller will be responsible for the debts of the corporation or business, assuming a sale for its market value." Tankersley, 182 W. Va. at 631, 390 S.E.2d at 830.
Ultimately, the decision reversed and remanded the case for further consideration of the valuation of the funeral business.