The Changing Tax Affecting Landscape in S Corporation Valuations: Time to Say “I Do” in Divorce Cases?

Litigation and family law partner Drew Soshnick authored an article for the Journal of the American Academy of Matrimonial Lawyers titled “The Changing Tax Affecting Landscape in S Corporation Valuations: Time to Say “I Do” in Divorce Cases?” The article provides background on S corporations and their primary purpose and how federal courts have considered whether to tax affect S corporation earnings in business valuations of those entities.

Soshnick walks through the progression of federal tax precedent to current date, including the recent Michael Jackson estate litigation and the impact of the important Delaware Open MRI Associates v. Kessler Delaware Court of Chancery opinion. The article also reviews the most notable divorce precedent addressing this issue and evaluates this precedent and concludes that divorce courts must tax-affect earnings when valuing businesses structured as S corporations in order to most accurately determine value.