Appeals Court backs away from 'Heller' double dip framework

Bohme v. Bohme, 2015 Ohio App. LEXIS 325 (Jan. 30, 2015)

Double dip has long been a contentious issue in the valuation profession and is fueling a fresh round of debate among practitioners based on a recent ruling from the Ohio Court of Appeals. This is the same court that issued the seminal 2008 Heller decision requiring courts "to keep marital property division and spousal support separate, and to consider the potential ‘double dip’ when ruling upon these issues in cases where one spouse’s ownership in a going concern is discounted to present value and divided, and where excess earnings arising from that ownership interest will constitute part of the spouse’s stream of income into the future.”

The new divorce case centered on the husband’s dental practice. Appealing the trial court’s spousal support award to the wife, the husband alleged that the trial court used the very income that was the basis for valuing the business, of which the wife received her share, again, as the basis for determining spousal support.

This time, however, the Court of Appeals was not receptive to the argument. The double dip analytical framework, it said, “works well for fixed assets that produce an income stream, such as a pension or annuity.” But it was less useful when using income from a closely held business, particularly a wholly owned professional practice, both as a tool to value the business and then as actual income for a spousal support calculation, the court found.

The appeals court strained to distinguish the facts in the instant case from Heller, but it also said bluntly that, to the extent the instant case resembled Heller, “we decline to follow it because of the difficulty in the double-dipping analysis when dealing with solely owned, closely-held business valuation as opposed to defined income-stream distribution.”

Interestingly, the Court of Appeals did not discuss the most obvious reason for backing away from Heller: the fact that Ohio’s revised code on spousal support awards expressly allows for the consideration of income from all sources, “including, but not limited to, income derived from property divided."

One thing the ruling makes clear: Heller is on shaky ground.

To read more about this important decision, click here.

Meanwhile, the experienced appraiser, Rob Levis (Levis Consulting), suggests that much of the profession’s hand-wringing over double dipping is based on a misconception. To find out what that is, click here.