Divorce and the Family Partnership Farm
As a family law attorney in Wisconsin, I can state unequivocally that divorce cases involving a family farm partnership can bring about many interesting issues. One of these issues is how to properly value a farm partnership interest. This is a very brief overview the issue.
How much would you pay for 1/3 of a cow: A case for Farmer Joe.Not an uncommon scenario: Joe and his two brothers own a large dariy farm. Ann, Joe's wife has had enough of Joe's ways and files for divorce. To keep this short and simple, suppose the only thing the farm partnerhsip owns is 99 cows each valued at $1000. Ann wants to be bougth out by Joe for $16,500: 99 cows divided by 3 brothers equals 33 cows per partner; Joan's 1/2 marial interest would then be $16,500. What Joan is overlooking is that Joe actually owns 1/3 of each cow, not 33 cows. Big difference. Who wants to buy 1/3 of a cow? Attorneys handling such cases need to be aware of the appropriate discounts available to their client in just such a scenario. The most commonly used discounts are the Lack of Control Discount and the Lack of Marketability Discount. Knowing this could save Joe thousands of dollars when buying out Ann. This would be inadditon to an appropriate discount for taxes.
How about an argument for Ann?An attorney for Ann facing this scenario may want to consider the following: if the partnership is not going to be sold (i.e. its going to the kids when we die) why should taxes be considered. Further, does the partnerhip agreement allow for a forced dissolution by any member? If so, are these valuation discounts even appropriate? These are things to consider.