No Silver Lining for Divorcing Spouse
In Silver v. Silver, a 2007 decision of the Ohio Court of Appeals, Second Division, the court discussed a business owner’s income for support purposes in conjunction with a business valuation for equitable distribution purposes. The husband was the sole shareholder of a marketing business, which was marital property subject to equitable distribution. Both spouses offered expert reports and testimony as to income and business valuation. While husband’s expert averaged his net income over a period of three years, wife’s expert used his most recent year’s net income, which was greater than the average of the prior three years. The appellate court endorsed the trial court’s finding on this issue, noting that income had been growing constantly throughout the period. Since husband was a sole shareholder but failed to present evidence of capital expenditures, the trial court declined his request to reduce income for capital needs.
This case is consistent with decisions of the Pennsylvania appellate courts, which have held that retained earnings and undistributed income of a business controlled or owned solely by a spouse will be presumed to be income for support purposes unless there is strong evidence of a need for capital expenditures. On the other hand, if the business owner is a minority shareholder, lacking the ability to manipulate income and expenditures, the burden shifts to the non-owner spouse to show that the retention of earnings is not justified.