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Steneken v. Steneken

183 N.J. 290, 873 A.2d 501 (2005)

CORPORATIONS; DIVORCE; VALUATION —A court is permitted to use different income determinations to calculate alimony and to value closely-held corporations for equitable distribution purposes.

A couple was married for twenty-five years. The husband was the sole shareholder and operator of a corporation which he acquired and successfully expanded during the course of the marriage. They decided to divorce, and all of the issues were resolved except for the amount of alimony that the wife was to receive and the manner in which the husband’s company was to be valued for purposes of equitable distribution. In determining these issues, the lower court heard testimony from the husband’s expert who asserted that the husband had overpaid himself during the last five years of the marriage. He testified that the market value for the husband’s services for the company was $150,000 a year, but that the husband actually paid himself up to $207,797 a year. The lower court used the market value of the husband’s services to compute the amount of alimony and the company’s value of equitable distribution purposes. The wife appealed, asserting that the lower court erred in using the market value of her husband’s services to determine alimony. She contended that the lower court should have used the actual salary that her husband had earned. The Appellate Division agreed, and remanded the matter for the lower court to award alimony based on the husband’s actual salary. On remand, the lower court calculated alimony as instructed based on the man’s earned salary and the man appealed. On appeal, he asserted that the lower court’s use of different income figures for alimony and equitable distribution constituted impermissible double counting. The Appellate Division affirmed the lower court’s ruling, concluding that double counting only applies to pension benefits that have been treated as an asset for purposes of equitable distribution. The husband appealed further.

The Supreme Court affirmed the Appellate Division’s ruling. It found that although alimony and equitable distribution calculations are interrelated, the asset methodologies in computing both are different. New Jersey statute requires that a court use the actual income of the paying spouse to compute alimony. Conversely, when valuing a closely-held corporation for purposes of equitable distribution, the ultimate goal of a court is to determine a fair market value for the corporation’s stock. In order to reach this goal, a court may be required to normalize excess salary expenses, as the lower court did in this case. As a result, it found no impermissible double counting and held that it is appropriate for a court to use different methodologies when computing income for alimony and equitable distribution purposes.

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