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MARITAL PROPERTY - Equalization or division - Considerations - Taxation consequences or costs of disposition - Asset types - Business, commercial or non-family assets

Thursday, December 01, 2016 @ 7:00 PM  

Appeal by the husband from an order valuing family property and debt and ordering him to pay compensation to the wife to effect an equal division of family property and debt. The compensation payment was only payable on the eventual sale of the husband’s dental practice. He conducted his practice through a professional corporation, HMI. The husband owned all of the voting shares of HMI, while its non-voting shares were held by the HMI family trust, of which the husband was trustee. The beneficiaries of the trust were the parties, their children and another corporation, ELC. The parties were equal shareholders in ELC. The parties also owned other significant assets, including a home, vehicles, bank accounts and RRSPs. The judge found the net value of the family property was $3,449,373, including values of $877,000 for HMI and $1,215,719 for ELC. As these were included as assets of the husband, he was left owing the wife an equalization payment of $413,674. The wife was obliged to transfer her ELC shares to the husband. HMI was listed for sale in 2014 for $1,200,000. By the time of trial, there had been limited interest in the practice and no offers.

HELD: Appeal dismissed. The judge was not obliged to take into account corporate taxes that might be payable upon the sale of HMI and/or ELC in determining the fair market value of the corporations. Fair market value was the price at which a transaction would occur in an open market. The taxes could not be considered a family debt as they were not incurred during the marriage and not incurred thereafter for the purpose of maintaining family property. Because the tax implications of a sale of HMI were speculative, it was appropriate for the judge not to take them into account in equalizing family property. HMI was advertised at a price substantially in excess of its value. The date of a sale was uncertain.