While Getting Divorced In N.J., Do My Spouse And I Share Gains Or Loses As To Our Assets?

Yes. Both spouses shall equally share any fluctuations in the value of marital assets after your lawyer has filed your Complaint for Divorce. In Scavone v. Scavone, ex-husband Carmine D. Scavone appealed from portions of a judgment of divorce entered by the Superior Court of New Jersey, Family Part of Bergen County.  Specifically, the attorney for the ex-husband disputed how the New Jersey Family Court equitably distributed the assets of the marriage and awarded alimony. Carmine argued that the Family Part court improperly valued his seat on the New York Stock Exchange as of the date of the date of the trial instead of the date the complaint for divorce was filed, or in the alternative the date when his partner sold his one-half interest in the seat. He further argued that Family Part failed to consider what the tax consequences of the equitable distribution award would be.

Carmine and Jacqueline Scavone got divorced on November 29, 1988, after being married for thirty-seven years. While they were married, Carmine acquired an ownership interest in one-half of a seat on the New York Stock Exchange. Both Carmine and Jacqueline agreed that the seat was marital property whose value was subject to “market condition” fluctuations. The seat was valued between $ 350,000 to $ 400,000 when the complaint for divorce was filed, but its value increased to over $ 1,000,000 in 1987. Carmine’s partner sold his one-half interest in the seat for $ 250,000. By the time of the trial in October 12, 1988, the seat was valued at $ 700,000. Accordingly, Judge Krafte found that Carimine’s 50% interest in the seat on the New York Stock Exchange at $ 350,000.  The Family Part judge compared the differences between “passive” and “active” in a marriage, and reasoned that while the seat was acquired during the course of the marriage, it was still a passive asset, and because of market conditions, its value fluctuated from the date the complaint for divorce was filed to the day of the hearing. Relying on the 1984 New Jersey Appellate Division case of Bednar v. Bednar, he determined that the asset should be valued as of the trial date, not the day the complaint for divorce was filed.

Both Carmine and Jacqueline agreed about the valued of every other marital asset, and together with the seat of the New York Stock exchange, the total value of their marital property added up to $ 669,940. Each spouse was entitled to equal share of the property, as such Jacqueline was awarded $ 334,970, after the sale of the marital home, and Carmine was awarded his share in the New York Stock Exchange seat, certain life insurance policies, and the balance of the remaining funds in the former couple’s Keogh Plan after a portion was awarded to Jacqueline. She was also awarded $ 1,581 a month in alimony for November 1, 1988 through May 31, 1989, which would then reduce to $ 1,330 a month.

The New Jersey Appellate Division could find no error in the valuation method utilized by Judge Krafte. In Bednar v. Bednar, the appellate panel explained that while there was no steadfast ruled for calculating the value of a marital asset, New Jersey courts prefer the use of a consistent date, like the date the complaint for divorce is filed. That said, the issue of an increase or enhancement in the valued of the asset before the Family Part has equitably distributed is a different question which rests upon whether the increase of value was a result of inflation and market factors, or from the personal work from party controlling the asset. If a piece of marital property has raised in valued from the date the complaint for divorce was filed and the date the property is actually equitably distributed, but the increase in value came from the hard work of and enhancement of only one spouse, then only that spouse should be credited with its increment. However, if the increase in value comes from inflation or independent market factors then both parties should be able to equally share in the increment. The appellate panel illustrated their reasoning by citing Wadlow, in which a former couple was ordered to equally, share the increase their marital home’s value from the day the complaint for complaint was filed, and the date the actual hearing took place, because the increase was result of independent market factors, not the actions of either spouse.

In Scavone the Family Part judge determined that the seat on the New York Stock Exchange was a passive asset and its value increased from the day the complaint was filed and the day the trial took place. Moreover, the increase in value was result of independent market factors alone, not the actions of either party. Market forces were the most important factor in setting the seat’s value, and whether or not he worked on the floor of the stock exchange had no influence on the value of the seat at all. The appellate panel held that this was not an abuse of the Family Part judge’s discretion, because the increase in the asset’s value was solely based on independent market factors and not due to any effort expended by Carmine, and therefore not an abuse of the judge’s discretion. As such, the New Jersey Appellate Division affirmed the valuation method used by the Family Part judge.

The New Jersey Appellate Division also rejected Carmine’s argument that his seat’s value should have been fixed at $ 250,000, because that is how much his former business partner got from selling his % 50 interest in September 1988. Upon close scrutiny, the appellate panel found that the business partner was merely a limited partner, and the record suggested that he sold his interest in the seat for less than its fair market value because Carmine was planning on leasing the lease. That partner lived in Michigan, and knew he would not be able to supervise the lease. Thus, the sale did not represent the true value of the seat.

Carmine also contended that the Family Part judge should have consider the possible tax consequences of any future sale of the asset. He explained that he paid $ 42,500 to buy the seat, and any potential sale of that seat in the future would result in a “tremendous tax liability,” and that the Family Part judge should have taken this into account in determining the equitable distribution of the marital estate. In the 1989 case of Orgler v. Orgler, the New Jersey Appellate Division held that even though any hypothetical taxes must not be deducted from a marital asset’s value, potential tax consequences that stem from a future sale of that asset, is a valid factor that should be taken into account in the overall calculation of equitable distribution. That said, the court requires an evidentiary basis for the for the potential tax consequence, fixed by a credible expert’s testimony, before it will consider it as a factor in equitably dividing a couple’s property. That is because New Jersey Statute 2A:34-23.1 requires Family Part courts to make specific factual findings based on the evidence, when applying factors in equitably distributing the marital assets.

In Scavone, the Family Part judge refused to consider the effects of mere hypothetical taxes because there was no evidence to prove that Carmine intended to sell the seat in the future. At trial he testified that he leased the seat, to free himself of the pressure of maintaining it, while also receiving some income from it. The probability of it being sold in the future was pure speculation, and therefore, any tax consequences stemming from it were also pure speculation. Therefore, the New Jersey Appellate Division found that there was no abuse of discretion, and affirmed the Family Part’s order.

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