It Need Not Be Rocket Science
It Need Not Be Rocket Science

A business, professional practice, or (until recent statutory amendments) license may be valued as a asset for divorce purposes based upon the amount of income it generates for the owner/holder. That asset may then be equitably distributed by granting the non-owner a monetary award equal to some percentage of the value.

Double-dipping, or double-counting, is the term for using the same stream of income both to value the business/practice, and then, after distributing an award to the non-owner based on the asset’s value, using the stream of income generated by the business/practice to base an award of spousal support (or child support, for that matter). If the non-owner spouse receives a “piece” of the income stream as an asset award, should the spouse get another piece as spousal support (maintenance)?

The “law” is yes, no and maybe. There is a rule against double-dipping, except when there’s not.

For the most part, if the business/practice is recognized as a “tangible asset,” just as the court would characterize a piece of real property, or publicly-traded stock, or a privately-held company whose income is a result of the work of many people, then it is generally held that the rule against double-dipping does not apply. The non-owner would get a distributive award based on the asset. Maintenance may also be awarded based upon the income generated by the tangible asset business. The rule against double-dipping rule does not apply.

If however, the business value is recognized as an “intangible asset,” then the rule against double-dipping applies, and the same stream of income may not be twice used.


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Rocket launch child.jpgIn its November 14, 2012 decision in Shah v. Shah, the Appellate Division, Second Department, held that Suffolk County Supreme Court Justice Mark D. Cohen did not improperly “double count” the income generated by the husband’s business when he awarded the wife four years of maintenance.

That business was started by the husband and a partner during the marriage, and was purportedly transferred by the husband for no consideration to his partner shortly before commencement of the divorce action. Justice Cohen awarded the wife 30% of the value of the husband’s interest in the business and additionally awarded the wife $4,000 per month for four years.

Among the issues presented on the appeal was whether the income generated by the business should have been considered when making that maintenance award.

Put differently, the question is (or should be) if the income generated by assets has already been “divided,” should that income again be “divided” through a maintenance award.

That issue became focused when the Court of Appeals in Grunfeld v. Grunfeld (94 N.Y.2d 696 [2000]) recognized the inequity of double-counting income, at least when awarding maintenance after the asset value of a license or degree has been divided. In 1985, in O’Brien v. O’Brien (66 N.Y.2d 576), the Court of Appeals had determined that New York would be unique and recognize the enhanced earnings attributable to attaining a license or degree as property to be divided upon a divorce. Earnings enhanced during the marriage through some achievement are an intangible asset capable of being divided.


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