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New case - Yates v. Yates - Sales Commissions on Marital Residence

February 26th, 2016

James Mason Yates v. Sally Jo Seitz Yates

Click Here for a PDF of the case.

Case Number: M2015-00667-COA-R3-CV
Appeal from the Circuit Court for Rutherford County
Originating Judge: Judge Royce Taylor
Date Filed: Wednesday, February 24, 2016

The Yates appellate case focused mostly on the prenuptial agreement signed by the parties. Wife requested a prenuptial agreement, Husband prepared one that he presented to Wife before marriage and both parties signed. The couple was married for a little over three years when Husband filed a complaint for divorce. Based on the provisions of the prenuptial agreement, the trial court determined which property was separate and which was marital, then distributed the marital property. Husband appealed from the trial court’s final order and the appellate court affirmed the trial court’s judgment in all respects but one.

The trial court deducted six percent from the value of the marital home to account for broker’s commission and closing costs that the parties would have to pay if the home were sold, but the parties submitted no evidence that they were planning to sell. Husband contended the trial court erred by deducting the six percent before determining the value of each party‘s interest in the residence – and Wife agreed. The appellate court reversed the one aspect of the trial court’s decision to deduct the six percent cost since both parties agreed that the trial court should not have made the reduction and the appellate court was not aware of any factual or legal basis for the reduction.

Comment: This opinion is one of many that deal with taking “hypothetical” deductions from the value of marital property in a Tennessee divorce. One of the decisions that is controversial in the business valuation profession is Bertuca v. Bertuca, 2007 WL 3379668 (Tenn.Ct.App.). In Bertuca, The Middle Section ruled that a discount for lack of marketability (a very common deduction under the fair market value standard) should not be deducted if the business is not for sale or intended to be sold, “Thus the value of the business is not affected by the lack of marketability and discounting the value for non-marketability in such a situation would be improper.”

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