COURT OF APPEALS OF VIRGINIA 

Present: Judges Benton, Willis and Overton 

Argued at Alexandria, Virginia 

NORMA JEAN ARBUCKLE 

v. Record No. 1546-95-4 OPINION BY 

 JUDGE JERE M. H. WILLIS, JR. 

GARY R. ARBUCKLE APRIL 30, 1996 

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 

Thomas S. Kenny, Judge 

 James A. Watson, II (Surovell, Jackson, 

Colten & Dugan, P.C., on briefs), for 

appellant. 

 James Ray Cottrell (Gannon, Cottrell & Ward, 

P.C., on brief), for appellee. 

 On appeal from a final decree of equitable distribution, 

Norma Jean Arbuckle contends that the trial court erred (1) in 

discounting the value of Gary R. Arbuckle's dental practice by 

estimated capital gains taxes on a hypothetical sale, and (2) in 

not similarly discounting the value of the oil stock allotted to 

her. Dr. Arbuckle has moved that this appeal be dismissed for 

lack of merit. That motion is denied. We reverse the judgment 

of the trial court. 

 Dr. and Mrs. Arbuckle were married in January, 1958. They 

have three children, all of whom are now emancipated. The 

parties separated in April 1993, after thirty-five years of 

marriage. A final decree of divorce was entered on April 14, 

1995. Due to an impending sale of the marital residence and the 

parties' inability to agree on the terms of a property division, 
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the proceedings were bifurcated. An equitable distribution and 

spousal support decree was entered on June 22, 1995, nunc pro

tunc April 14, 1995. In that decree, the trial court found that 

there was "an equal marital partnership, and accordingly, the 

assets should be divided equally." The decree provided Mrs. 

Arbuckle a monetary award to "equalize the division of marital 

assets." The trial court allotted to Dr. Arbuckle his dental 

practice and to Mrs. Arbuckle shares of oil stock titled in her 

name. The trial court reduced its valuation of the dental 

practice by the amount of capital gain tax liability that would 

have accrued had the practice then been sold. It made no similar 

adjustment to its valuation of the oil company stock. The effect 

of the dental practice valuation adjustment was to reduce the 

amount of Mrs. Arbuckle's monetary award. 

 "Fashioning an equitable distribution award lies within the 

sound discretion of the trial judge and that award will not be 

set aside unless it is plainly wrong or without evidence to 

support it." Srinivasan v. Srinivasan, 10 Va. App. 728, 732, 396 

S.E.2d 675, 678 (1990). 

 There are three stages to making an equitable 

distribution of property. The court first 

must classify the property as either separate 

or marital. The court then must assign a 

value to the property based upon evidence 

presented by both parties. Finally, the 

court distributes the property to the 

parties, taking into consideration the 

factors presented in Code § 20-107.3(E). 

Marion v. Marion, 11 Va. App. 659, 665, 401 S.E.2d 432, 436 
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(1991). 

 The trial court found that Dr. Arbuckle's dental practice 

was a marital asset. Both Dr. Arbuckle and Mrs. Arbuckle 

presented expert testimony on the value of the practice. The 

trial court considered the experts' valuations, weighed the bases 

for their opinions, and considered their relative experience in 

transactions involving the sale of similar professional 

practices. It determined that the value of the practice was 

$281,000. The record supports this determination. 

 The trial court considered the factors set forth in Code 

§ 20-107.3(E) and found that the marital assets should be 

distributed equally. However, the court also found that 

§ 20-107.3(E)(10) required it to consider the putative tax 

treatment of Dr. Arbuckle's dental practice in making a fair and 

equitable award. The court acknowledged that Dr. Arbuckle had no 

intention of selling his practice and that consideration of 

potential capital gain taxes indulged a "legal fiction." 

Nonetheless, the trial court reduced the value of the practice by 

the amount of taxes that it calculated would be incurred if the 

practice were sold on the date of the hearing. Thus, the court 

reduced the value of the practice by 33.7%, leaving a net value 

of $186,303. 

 Mrs. Arbuckle contends that the trial court erred in 

considering tax consequences of a hypothetical sale of the dental 

practice in determining its value. She argues that this 
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consideration is too speculative to bear on the present value of 

the practice. Alternatively, she argues that if the court acted 

properly in considering the tax consequences of a hypothetical 

sale of the dental practice, that same analysis should apply in 

the court's valuation of the oil stock allocated to her. She 

argues that the trial court erred in treating the two items of 

property differently. 

 The trial court erred in considering the tax consequences of 

a hypothetical sale when valuing the dental practice. Dr. 

Arbuckle did not intend to sell his dental practice. No evidence 

established that a sale would occur in the near future. 

Accepting, for the sake of argument, that such a sale might occur 

in the future, the record did not permit the trial court to 

determine the value that would then be involved, what Dr. 

Arbuckle's financial circumstances would be, or what rules of 

taxation would then apply. Thus, the tax consequences of a 

hypothetical sale were too speculative to be considered by the 

trial court in determining the present value of Dr. Arbuckle's 

dental practice. For the same reason, the trial court did not 

err in declining to discount the value of stock allotted to Mrs. 

Arbuckle. 

 Citing Barnes v. Barnes, 16 Va. App. 98, 428 S.E.2d 294 

(1993), Dr. Arbuckle argues that this Court has approved 

consideration of the tax consequences attributable to a potential 

future sale in the fashioning of an equitable distribution award. 
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 We perceive no disagreement between the holding in Barnes and 

our decision in this case. Indeed, Code § 20-107.3(E)(9) directs 

consideration of the tax consequences to each party in the 

fashioning of an equitable distribution scheme and award. 

However, Barnes did not address the specific issue raised in this 

appeal. 

 In Barnes, the jointly owned marital home was allotted to 

the husband. The parties' marital property was appraised at its 

then value. In applying the factors of Code § 20-107.3(E), the 

trial court noted that should the husband at some time sell the 

home, he would be liable for any resulting capital gain tax. 

Applying all the statutory equitable factors, the trial court 

determined that the wife should receive 35% of the total value of 

the marital property. Affirming the judgment of the trial court, 

we said: 

 [T]he trial judge, by noting that the husband 

would bear the responsibility of the capital 

gains tax, did no more than recognize what 

the Internal Revenue Code would require of 

the husband should he later sell the 

property. 

Id. at 106, 428 S.E.2d at 300. The trial court did not employ 

hypothetical tax consequences in determining the value of the 

home. It merely recognized that the transfer of the jointly 

owned property to the husband shifted to the husband a potential 

tax liability flowing from the wife's present ownership interest, 

and utilized that information in determining "[t]he amount of any 

division or transfer of jointly owned marital property, and the 
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amount of any monetary award, the apportionment of marital debts, 

and the method of payment" as required by Code § 20-107.3(E). 

 Every capital asset has a value basis and, thus, a potential 

liability for capital gain tax upon sale. That potential 

liability is a proper consideration in the determination of a 

property division and an award, if it is not speculative. 

However, by basing its appraisal of the dental practice on 

potential liability resulting from a hypothetical sale, the trial 

court constructed an appraisal that was not based on the present 

fair market value of the property, and in doing so erred. 

 The judgment of the trial court is reversed and this case is 

remanded for further proceedings consistent with this opinion. 

 Reversed and remanded.