Aaron v. Aaron, 48636.

• Decision Date: 02 August 1979
• Docket Number: No. 48636.,48636.
• Parties: Barbara AARON, Respondent, v. Allen H. AARON, Appellant.
• Court: Minnesota Supreme Court

281 N.W.2d 150 (1979)

Barbara AARON, Respondent, v. Allen H. AARON, Appellant.

No. 48636.

Supreme Court of Minnesota.

June 1, 1979.

Rehearing Denied August 2, 1979.

James P. Rorris, Minneapolis, for appellant.

Meshbesher, Singer & Spence, Ronald I. Meshbesher, and Martin L. Swaden, Minneapolis, for respondent.

Heard before SHERAN, C.J., and YETKA and SCOTT, JJ., and considered and decided by the court en banc.

YETKA, Justice.

This is an appeal by Allen Aaron, respondent below, from a judgment and decree, as amended, for dissolution of marriage and distribution of property entered by the Hennepin County District Court. We affirm.

The parties, Allen and Barbara Aaron, were married on November 16, 1954. The petition for dissolution of the marriage was filed by Barbara Aaron on March 31, 1976. At that time, petitioner was 39 years of age and respondent (appellant herein) was 43 years of age. There were two daughters, aged 20 and 18.

After trial, the trial court found that the parties owned certain real and personal property and assigned to that property the following value or equity.

                                              VALUE OR EQUITY
                Homestead                     $ 58,600
                Parklawn Apartments              5,000
                East River Terrace             111,948
                Oxboro Apartments               72,215
                Fridley Apartments (59                1
                  percent of $37,228)           21,965
                Homestead furnishings            7,000
                Mr. Aaron's furnishings            684
                Mrs. Aaron's 1972
                 Buick                           2,675
                Mr. Aaron's 1977
                 Pontiac                         5,809
                Mrs. Aaron's jewelry             3,000
                Mr. Aaron's jewelry              1,000
                Mrs. Aaron's savings             1,471
                Mr. Aaron's savings             12,000
                Accounts Receivable -
                 law firm (25 percent)           2,500
                Mr. Aaron's vested
                 profit sharing                  1,500
                LaMaur stock                       400
                                              ________
                     Total                    $307,767
                

In its order of November 23, 1977, the trial court made the following distribution of the property:

                To petitioner Barbara Aaron
                  Homestead                  $58,600
                  Household furnishings
                   in the homestead            7,000
                  1972 Buick                   2,675
                  Jewelry                      3,000
                  Savings                      1,471
                  LaMaur stock                   400
                                             _______
                       Total                 $73,146
                To respondent Allen Aaron
                  Parklawn Apartments        $  5,000
                  East River Terrace          111,948
                  Oxboro Apartments            72,215
                  Fridley Apartments           21,965
                  1977 Pontiac                  5,809
                  Jewelry                       1,000
                  Savings account              12,000
                  Accounts receivable           2,500
                  Profit sharing plan           1,500
                  Household furnishings
                   in respondent's
                   apartment                      684
                                             ________
                       Total                 $234,621
                

In addition, the trial court ordered appellant to pay petitioner $70,000 in equal quarterly installments over a 7-year period, beginning January 1, 1978. Interest on the unpaid balance was to be computed and paid quarterly at 8 percent per year beginning January 1, 1979. The monetary award was made because appellant's interest in the apartment buildings could not be easily liquidated. The apartment buildings are owned by SPGA Associates, a partnership made up of appellant and his law partners, in which appellant holds a one-quarter interest.

After the trial court issued its November 23, 1977, order, appellant moved for amended findings of fact and conclusions of law or, in the alternative, for a new trial. After a hearing on this motion, the trial court amended its original order as follows:

1. A life insurance policy, with a cash value of $773, was added to petitioner's assets.

2. The equity in the homestead was increased to $69,953 (in the previous valuation, costs of sale of $11,353 had been deducted).²

3. The amount of the cash award was reduced to $60,000.

Appellant raises three issues on appeal:

1. Did the trial court err by not considering the potential tax liability of appellant in connection with certain properties?

2. Did the trial court err by not considering that the apartment properties would most likely be sold at a discount on a contract for deed?

3. Did the trial court err by not considering that appellant would be required to pay a sales commission out of the proceeds of any future sale?

We have explicitly recognized that the trial court has broad discretion in dividing property upon dissolution of a marriage, and we will not overturn the trial court's decision absent a showing of clear abuse of that discretion. See, e.g., Podany v. Podany, 267 N.W.2d 500 (Minn.1978); Bogen v. Bogen, 261 N.W.2d 606, 609 & n. 5 (Minn. 1977); Peterson v. Peterson, 308 Minn. 365, 242 N.W.2d 103 (1976).

1. Appellant argues that the district court erred because, in making the property distribution, it did not consider that appellant would be required to pay substantial capital gains taxes when the apartment properties are sold. The value assigned to appellant's interest in the apartment properties equaled one-fourth of SPGA's equity in the properties. The trial court calculated SPGA's equity in each of these properties by subtracting the balance still owing on the mortgage from an appraiser's estimate of the current market value. Appellant's one-fourth interest in the four properties was thus valued at $211,128.

Appellant claims that if the properties were to be sold at the estimated values adopted by the trial court, he would realize a capital gain of $211,761.41,³ on which he would be required to pay taxes of approximately $84,700. Consequently, he argues, although it appears that the property is equally divided between the two parties, he has actually received a smaller share.

Generally, courts base the distribution of property on the value of the property at the time of distribution and, therefore, are willing to consider only those tax consequences that arise from the distribution itself. Because they are hesitant to speculate about the future value of the property, they are also hesitant to consider the possible tax consequences of either party's future dealings with the property. See, e. g., In re Marriage of Goldstein, 120 Ariz. 23, 583 P.2d 1343 (1978); Burkhart v. Burkhart, 349 N.E.2d 707 (Ind.App.1976). For example, a California district court had valued the husband's interest in his law partnership on the basis of his contractual right to withdraw from the firm. In arriving at that value, the district court considered the tax consequences he might incur if he withdrew at some future time and reduced the value accordingly. The California Supreme Court...