Women Unchained reveals the struggle of Jewish women who exist in limbo after civil divorce, and suggests strategies for overcoming their dilemmas. The film was one of the most-discussed features of last year’s J-Film, the Pittsburgh Jewish Film Festival. Now it’s available for sale from the National Jewish Film Institute (click here). Shot in New York, New Jersey, Chicago, Miami, Los Angeles and Israel, Women Unchained includes illuminating interviews with leading women’s rights advocates, rabbis and experts. The film provides helpful historical background on the state of women’s rights in Judaism and details of “get-o-nomics” and the outlandish extortion schemes levied against some women.

In Estate of Mitchell, T.C. Memo. 2011-94, the owner of a California cattle ranch and oceanfront property passed away, leaving the real estate to his heirs. The estate’s CPA valued the properties by capitalizing their rental income streams, much as a business is valued. The IRS employed an expert who valued the properties by looking at their value in a sale (comparables) and then deducting the sum that a buyer might have to pay to terminate the lease.

Before jumping to a conclusion, consider the following facts: The oceanfront property was a 2 acre parcel with a 4,000 square foot house in a gated community, guesthouse, and nearly 200 feet of private beach on the Pacific Ocean near Santa Barbara. It was rented to tenants under a 20 year lease for $15,000 per month plus annual COLA.  The ranch was a 4,000 acre parcel in Santa Ynez Valley, one of the largest ranches in California. While it was partially used for cattle grazing, it also hosted CEOs and U.S. Presidents for an annual horse-riding event. It was leased to a family that operated the ranch under a twenty-four year lease for $32,000 per year. The estate valued the properties at $6 million and $2.6 million, compared to the IRS valuations of $13 million and $11 million. Thus, the capitalized rents were far less than what the properties could be sold for, in the opinion of the IRS. The IRS argued that selling the property would bring greater value than continuing to rent them, even if the buyer would have to pay the tenant to terminate the leases.

Still, the Tax Court held that the income capitalization method was appropriate and rejected the IRS method for valuing these rental properties. The Tax Court disagreed with the IRS expert, who testified that the income capitalization method should be limited to commercial properties and not residential leases. In its opinion, the Tax Court relied on prior decisions and an Appraisal Institute publication for its decision to reject the method advocated by the IRS expert. The Court also observed that the properties were leased under long-term leases, and the owner treated them as income-producing properties rather than personal residences. The Tax Court refused to accept the assumption that the tenants would agree to be bought out, and found that the expert’s estimate of the buy-out payment was too speculative. The Tax Court noted that this method had never been adopted in any other published decision.

• “Legal custody.” The right to make major decisions on behalf of the child, including, but not limited to, medical, religious and educational decisions.
• “Partial physical custody.” The right to assume physical custody of the child for less than a majority of the time.
• “Physical custody.” The actual physical possession and control of a child.
• “Primary physical custody.” The right to assume physical custody of the child for the majority of time.
• “Shared legal custody.” The right of more than one individual to legal custody of the child.
• “Shared physical custody.” The right of more than one individual to assume physical custody of the child, each having significant periods of physical custodial time with the child.
• “Sole legal custody.” The right of one individual to exclusive legal custody of the child.
• “Sole physical custody.” The right of one individual to exclusive physical custody of the child.
• “Supervised physical custody.” Custodial time during which an agency or an adult designated by the court or agreed upon by the parties monitors the interaction between the child and the individual with those rights.

Some parents ask me about “shared custody” of their children. What they mean varies from parent to parent. In the past, a custody arrangement was typically characterized by the children living with one parent during the workweek and spending weekends, vacations and holidays with the other parent. The law defined that arrangement as “primary physical custody” for the weekday parent, “partial custody” for the weekend parent, and usually, “shared legal custody” (the right to make major decisions concerning the child’s education, medical treatment, religious training, and other major issues). Some parents called that arrangement “shared custody” because both parents have physical custody from time to time. I call that a traditional custody arrangement. “Shared” can also refer to the right to participate in child-related decisions. Historically, the law referred to that right as “joint legal custody.” Now it is “shared legal custody.”

Over my twenty years in family law, I have witnessed a growing trend toward shared physical custody, meaning that the children spend part of every week with each parent. One form of “shared physical custody” is a 2-2-5-5 schedule. Using a calendar helps to understand this arrangement. For instance, the children might spend every Monday overnight and Tuesday overnight with Dad, every Wednesday overnight and Thursday overnight with Mom, and alternate weekends with each parent. Two days with Dad, two days with Mom, weekend with Dad, and then the beginning of the next week with Dad (5 days total); then two weekdays and the weekend with Mom (5 days total). This pattern repeats over and over throughout the year (except for holidays and vacations).

A 2-2-5-5 arrangement is favored by some parents because it creates a predictable routine for the kids. Kids will know where to be every Monday, Tuesday, Wednesday and Thursday. They only have to remember which parent’s weekend it is. This schedule also allows frequent contact with both parents. On the other hand, it does require more transitions than a “week-on, week-off” schedule.

No one can say for sure that 2-2-5-5 is better than week-on, week-off; or that shared physical custody is better than a traditional custody arrangement. That depends upon the best interests of the children and the specific circumstances of each family. But it helps to understand the terms.

In Estate of Gallagher v. Commissioner, T.C.Memo 2011-148, the IRS disputed the business valuation used by a decdent’s estate in an IRS Form 706 estate tax return. Rather than the $35 million dollar value claimed by the taxpayer, the IRS asserted a value of $49.5 million for the decedent’s 15% interest in a newspaper publishing conglomerate. The taxpayer and IRS each obtained new appraisals for trial, which narrowed the gap somewhat, with the Tax Court eventually finding the value to be $32 million.

Initially, the Tax Court noted that the taxpayer’s “admission” of the company’s value ($35 million reported on the tax return) was merely rebuttable evidence of the value, which could be overcome by a preponderance of evidence at trial. This ruling allowed the taxpayer to offer its appraisal of $28 million during the trial, rather than being bound by the taxpayer’s assertion on its tax return.

The Court also found that recent arm’s-length transactions in the company’s stock may be the most reliable method of valuing the company. Yet, in the absence of such transactions, expert opinions are probative evidence of value, and the Court may mix-and-match the findings of competing experts in arriving at its conclusion.

One of the hot topics addressed by the Court in Gallagher is the consideration of data or events that are subsequent to the date of valuation. The Tax Court held that it was proper to consider quarterly financial statements that were issued shortly after the death of the taxpayer because they were more accurate than those issued just before the valuation date. Hindsight was admissible in this case because the data in the subsequent financial statements was knowable on the valuation date; it just hadn’t been fully compiled or analyzed at the time of death. It did not matter to the Court that the subsequent financial statements would not have been available to a buyer on the valuation date (and in a transaction of this magnitude, a buyer probably would not rely on internal financial statements without performing due diligence anyway).

Another hot topic was the IRS expert’s use of market-based methods in his valuation report. Perhaps it demonstrates the proficiency of the Tax Court that the Court was willing in Gallagher to reject the IRS expert’s reliance on the guideline public company method rather than deferring to the expert’s professional judgment. The Court found that the IRS expert did not sufficiently prove the similiarity of the subject company to comparable public companies. If a company the size of this company is not sufficiently similar to public companies, it is hard to imagine how a more modestly-sized company could be valued under this method.

The Gallagher opinion also analyzed the experts’ use of the discounted cash flow (DCF) method. The DCF method is hardly ever used in divorce cases, partly because it is difficult to get reliable earnings projections from owners who are embroiled in matrimonial litigation. For this reason, the Court’s DCF analysis will not be reviewed in this article. A good summary of the Gallagher decision (in chart form) is available here.

The Gallagher court declined to tax-affect the earnings of the subject company, which was organized as a Subchapter “S” corporation until it was converted to an LLC prior to the valuation date. Simply put, the Court found no compelling reason to apply a hypothetical shareholder-level tax liability against earnings in order to place the company’s valuation on equal footing with a Subchapter “C” corporation. The Court cited Gross v. Commissioner as legal authority for its position, without further explanation. Later in the opinion, the Court also rejected a bottom-line adjustment made by the taxpayer’s expert to account for the benefits realized by “S” corporation shareholders.

The next section of the Gallagher opinion is a concise, learned discussion of capitalization rates and valuation discounts. The Court held that minority discounts may be applied only if the expert’s method yields the value of a controlling interest, and should not be applied if the expert has calculated value on a minority basis. Since the Court adopted the opinion of the expert who calculated enterprise value, the minority discount was applied. However, the Court adjusted the minority discount, finding that the expert underestimated the control premium. The experts’ calculations of marketability discounts were nearly identical.

The father was charged with aggravated assault, simple assault, child endangerment, reckless endangerment and criminal harassment. Before the criminal trial, the court held a hearing under the Tender Years Hearsay Act (“TYHA”), 42 Pa.C.S. 5985.1, to determine whether the child’s out-of-court statements to CYF and the psychologist could be used to convict the father of a crime. First, the trial court ruled that the child’s statements were “non-testimonial,” meaning that she did not realize that her statements would be used in court. Second, the trial court ruled that the statements were admissible under the TYHA because the context provided sufficient indicia of reliability. Based on these statements and other evidence, the father was convicted in 2005.

Father appealed to the Superior Court and the Pennsylvania Supreme Court, both of which affirmed the conviction. Later the U.S. Supreme Court vacated and remanded the case (without opinion) for further consideration in light of its decision in Michigan v. Bryant, 131 S.Ct. 1143 (2/28/11).

On remand, the Pennsylvania Supreme Court reviewed several recent precedents as to whether out-of-court statements are testimonial or non-testimonial. These cases have established a two pronged test: (1) whether the statements were made in the context of an ongoing emergency; and (2) whether the primary purpose of the interrogator is to establish past events relevant to criminal prosection. In this case, the Pa. Supreme Court held that there was an ongoing emergency because the victim was living with his twin brother, whom Father had accused of causing the injury; and although the CYF caseworker may have had mixed motives, his primary purpose in questioning the 4 year-old witness was not prosecution of the perpetrator but protection of the children.

The child’s subsequent statements to the psychologist were held to be testimonial in nature. However, since those statements were cumulative evidence not necessary to convict the father, the Court held the error harmless.

The trial court had applied a version of the TYHA that was amended after the date of the injury; and Father argued in his appeals that he was convicted under an ex post facto law. Specifically, he argued that the revised version of the TYHA made it easier to convict him by relaxing the evidentiary rules. The Pa. Supreme Court disagreed, holding that the amendment of the TYHA law did not relax the burden of proof or type of evidence needed to convict Father, but instead expanded the class of persons who were qualified to offer that evidence.

Five of the seven Justices joined the opinion to affirm; two Justices did not participate; and two joined in a concuring opinion.

Additionally, the support guidelines provide for reimbursement of child care expenses, private school tuition and summer camps, and extracurricular activities for children.

In order to receive any reimbursement for medical expenses for 2011, the parent or spouse who paid the expense must submit a detailed request to the other parent, including the date, amount and nature of the expense; and proof of payment. If a request is not made by March 31, 2012, the right to receive reimbursement may be forfeited for 2011.

The lawyers and paralegals of my law firm frequently assist our clients in preserving or defending these types of claims. Contact Brian Vertz (or my assistant Ms. Kelly) for further information.

Relying upon Nicholson v. Combs, a 1997 decision of the Pennsylvania Supreme Court, the husband argued that his contractual support obligation was unenforcable in divorce or support proceedings. The trial court held that the affidavit might be enforceable in a private civil suit, but not in divorce court. The Superior Court distinguished Nicholson, which involved a child support provision of a marital settlement agreement. The Court held that Nicholson did not preclude the immigrant wife in this case from enforcing the agreement in support proceedings, where they would constitute grounds for deviation under Rule 1910.16-5. Judge Bowes also pointed to § 3105(a), which authorizes the divorce court to enforce agreements in the same manner as court orders.

Giving instructions to the trial court on remand, the Superior Court cited Naik v. Naik, a 2008 New Jersey decision where the citizen spouse may be required to make up the difference, if any, between the guideline amount of spousal support and 125% of the federal poverty guidelines. However, the Superior Court held that the trial court should not impose an earning capacity upon the immigrant wife. On the other hand, the Superior Court recognized the wife’s common law duty to mitigate. The Court held that it would be the husband’s duty to raise and prove the affirmative defense of failure to mitigate.

In a dissent, Judge Freedberg wrote that she would have affirmed the trial court’s order, leaving the immigrant wife to assert her claims in a separate civil suit.

In Summers v. Summers, 2012 PA Super 3 (1/5/2012), Judge Strassberger refused to overturn the trial court’s decision to modify child support, in a case where the father did not give any notice in his petition as to why the trial court should modify his obligation. Using the standard court-issued form, the petitioner checked a box but did not fill in the blank to describe his grounds for modification. His obligation was initially modified at the conference level, and then further modified at a de novo hearing subsequently requested by the mother. On appeal, the defendant argued that her due process rights were violated when the trial court proceeded without advance notice of the nature of father’s claims. The mother also challenged the trial court’s reliance on a physician’s information request form issued by the court, which the father offered into evidence to prove his disability.

The Superior Court’s decision is intriguing, not only for what Judge Strassburger said, but also what he did not say in his opinion. First, in dismissing the mother’s due process argument, the Superior Court placed great weight on the fact that mother had an opportunity to prepare for the de novo hearing after the support conference where father’s claims were first revealed. The Court observed that a conference summary mailed to the parties contained a reference to the physician’s information request form describing the father’s disability. Still, the Court did not even distinguish between the bifurcated support procedure under Rule 1910.16-11 and the expedited procedure under Rule 1910.16-12. In affirming the trial court’s decision, the Superior Court simply held that the defendant suffered no prejudice in this case. What if the hearing had proceeded on the same day, as is done in Allegheny County? Judge Strassburger did not comment on whether his opinion would be different if several weeks had not elapsed between the conference and the hearing.

Second, the opinion did not place any emphasis on the fact that the final support order was an increase from the initial support order, replacing an interim order that temporarily decreased the obligation. That fact, and the fact that the opinion was published, leads this author to believe that the Court meant to relax the pleading requirements in child support cases, or at least to dismiss any notion that the due process rights of defendants might be violated by the existing court-issued forms for modifying child support.

Little effort was made in the Court’s opinion to reconcile what appears to be a clear violation of Rule 1910.19(a), which requires the petitioner to “specifically aver the material and substantial change in circumstances upon which the petition is based.” Nor did the Court mention the recent amendment of Rule 1910.3(b) or the Court’s recent decision in Brickus v. Dent, 5 A.3d 1281 (Pa.Super.2010)(2-1).

A well-argued dissenting opinion was issued by Judge Donohue, who would have vacated the trial court’s decision to modify child support. In her dissent, Judge Donohue cited a sentence from Brickus where the Court held that each party should have advance notice of claims in order to prepare and advocate its position. Judge Donohue argued that ignoring the dictates of Rule 1910.19(a) would thwart settlement by delaying notice of the petitioners’ claims, thereby increasing the court’s burden. She also noted that the defendant had to suffer an unwarranted restriction of her family’s cash flow from the date of the support conference until the de novo hearing. Judge Donohue also disagreed with the Court’s decision to permit the use of the physician’s information request, since the conference officer would not even allow mother to view it until the midst of the de novo hearing.

The recent amendments of Rule 1910.3(b) does not appear to resolve the issues raised by this case, so it appears that the difference of opinions will continue until resolved by the Supreme Court.

Married people frequently re-invest their nonmarital property in other assets during the marriage. Funds might be withdrawn from a bank account and deposited in a different account. A certificate of deposit or bond might mature, and the proceeds might be reinvested in other assets. Premarital money or inheritance might be used to purchase real estate or other tangible assets. Generally, the property that is acquired in exchange for nonmarital property is still nonmarital if it has not been retitled in joint names.

“Tracing” is the process of proving that property acquired during the marriage was derived from a nomarital source, such as premarital property, gifts or inheritance. Tracing requires a chain of evidence from the original nonmarital property to the new property that was acquired in exchange for the original property. Sometimes there are gaps in that chain of evidence.

In Childress, the spouses lived in a residence that was previously owned by husband’s mother. When she died, husband inherited the home. Husband’s real estate appraiser provided an opinion of what the home was worth when he inherited it, which was more than listed in the deceased mother’s estate; and wife’s appraiser testified to what it was worth at the time of separation and subsequent trial. The court did not accept husband’s appraisal for the trial date, because his appraiser “artificially” limited her search for comparables to a maximum price range. The Superior Court affirmed.

Husband also owned a vacation home, which was purchased during the marriage using the proceeds of husband’s premarital home. In measuring the increase in value from marriage to separation, the trial court started with the value of the proceeds that husband received when he sold his premarital home during the marriage. Note that the premarital home might have increased from the date of marriage to date of sale, but this was not the subject of this appeal.

Husband objected that the trial court did not consider his investment in home improvements, which enhanced the value of the vacation home. In its opinion, the Superior Court held that husband did not adequately prove that he used nonmarital funds to make those improvements. [Note that if he had done so, the court also might have questioned whether to give a dollar-for-dollar credit for those investments, since $1 of repairs or improvements might not result in $1 increase in the home's value.] While husband did produce cancelled checks and other evidence of what he spent, he did not prove that those expenses were paid with his nonmarital funds.

The Superior Court did not consider husband’s further argument that he should have been given credit for paying down the principal balance of the mortgage loan after separation. Husband argued that the trial court should have taken judicial notice of an amortization table that he attached to a brief for the equitable distribution master and trial court. Since the issue was not specifically raised in the appeal or addressed by the trial court’s opinion, the Superior Court declined the opportunity to weigh in. Normally, the marital component of nonmarital property is measured from the date of marriage or date of acquisition (whichever is later) to the date of separation or date of trial (whichever results in the smaller value).