NO. 88-100 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1-988 

IN RE THE MARRIAGE OF 

CHRISTINE BOZARTH MILESNICK, 

Petitioner and Respondent, 

and 

THOKAS OWEN MILESNICK, 

Respondent and. Appellant. 

APPEAL FROM: District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin, 

The Honorable Joseph Garyv, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

James A. Johnstone, Bozeman, Montana 

For Respondent : 

John P. Atkins; Bryan & Atkins, Rozeman, Montana 

- .. <;3 f 2 (- , 

sled: 

Submitted on Briefs: Sept. 1, 1988 

Decided: December 8, 1988 
Mr. Justice William E. Bunt, Sr., delivered the Opinion of 

the Court. 

Both parties in a dissolution action appeal the property 

distribution ordered by the District Court of the Eighteenth 

Judicial District, Gallatin County. The husband also appeals 

the District Court's refusal to allocate dependency 

exemptions between the parties. We affirm. 

The husband raises the following issues on appeal: 

1. Whether the District Court abused its discretion by 

refusing to allocate the tax exempti-ons for the parties' 

dependent children. 

2. Whether the District Court abused its discretion in 

valuing the husband's interest in a trucking partnership. 

3. Whether the District Court abused its discretion by 

failing to include the ranch operating debt when it computed 

the net worth of the husband's estate. 

On cross-appeal, the wife adds the following issue for 

review: 

1. Whether the District Court abused its discretion by 

discounting the value of the parties' stock in the family 

ranch corporation. 

Christine and Thomas Milesnick were married on September 

15, 1979. They were separated on April 1, 1986. During the 

marriage, two sons were born. Thomas also adopted 

Christine's son of a previous union. 

The husband brought substantial assets into the 

marriage, including a trucking partnership, a two-story home, 

the entire interest in 106 acres, and a one-half interest in 

348 acres. The real property was heavily encumbered. 

The other interest in the 348 acres was owned by the 

husband's parents. In 1980, the parents incorporated their 

holdings. Both Thomas and Christine were given, as qifts, 

shares in the corporation. Thomas received 2,284 and 
Christine received 1,790 of the total 40,000 outstanding 

shares. 

Throughout the marriage the couple engaged in the 

farming and ranching business. The wife did not work 

outside the home and ranch until February, 1986. At the time 

of the dissolution hearing, she was employed as a secretary 

and swimming instructor. 

The wife petitioned for dissolution on August 29, 1986. 

A two-day hearing was held on May 28 and 29, 1987, after 

which the District Court issued findings of fact, conclusions 

of law and a decree of dissolution with an accompanying 

memorandum. 

The District Court awarded the parties joint custody of 

the children and ordered the husband to pay child support of 

$636 for 10 months each year. The court recommended that the 

children reside with the wife during the school year and at. 

least one month each summer but declined to specifically 

order such an arrangement, leaving it to the parties to work 

out the details themselves. 

The trial court divided the property of the parties by 

comparing the net value of the husband's separate assets as 

of 1979, the time of the marriage, and 1986, the time of the 

filing of the petition for dissolution. The court concluded 

that the husband's property had depreciated by $75,940 over 

the seven-year period. The court deducted the amount of 

depreciation from the value of the marital assets, leaving a 

net of $94,334. It then split that number in half, awarding 

each party 50 percent or $47,167. Determining that the 

marital property, consisting mainly of stock in First 

Security Bank and Milesnick Ranch, Inc., should remain with 

the husband, the court ordered Thomas to pay a monetary sum 

to Christine as her share of the property award. Thomas was 
to pay an initial remittance of $30,000 with the balance to 

be paid in four annual installments of $4,300. 

Unhappy with the outcome of the decree, both parties 

moved the District Court to amend the findings of fact and 

conclusions of law. The court denied all but one of the 

parties' motions to amend. The amendment adopted, that 

allowing cost of living increases for child support, is not 

at issue here. The majority of the amendments denied 

comprise the topics of the present appeal. 

The first issue for our consideration concerns whether 

the District Court abused its discretion by refusing to 

allocate the federal income tax exemptions for the parties' 

dependent children. Resolution of this question involves a 

two-step analysis. We must first examine whether the Montana 

state courts have jurisdiction to allocate the exemption. If 

the state courts have jurisdiction, we must then determine 

whether the District Court abused its discretion bl7 failing 

to make the allocation. 

Until the Tax Reform Act of 1984, there was general 

agreement that the state courts had the power to assign the 

dependency exemptions for the children of parties to a 

dissolution action. See, e.g., In Re the Marriage of Greeler 

(Minn.Ct.App. 1985), 368 N.W.2d 2; MacDonald v. MacDonald 

(N.H. 1982), 443 A.2d 1017; Niederkorn v. Niederkorn 

(Mo.Ct.App. 1981), 616 S.W.2d 529. The pertinent statute at 

that time, 26 USC S 152 (e) (1976), provided that the 

custodial parent received the exemption unless the 

dissolution decree gave the exemption to the noncustodial 

parent and that parent provided at least $600 toward the 

support of the child during the year. If the divorce decree 

was silent on the matter, the noncustodial parent was 

entitled to the exemption if he or she provided $1,200 or 
more in child support during the year and the custodial 

parent could not establish that he or she contributed more. 

The dependency exemption provision of the Internal 

Revenue Code was originally enacted in 1967. Its aim was 

to provide a vehicle by which divorced parents could negotiate 

the exemption between themselves without involving the 

Internal Revenue Service (Service). - See, Comment, Tax 

Planning in Divorce: Both Spouses Benefit from the Tax 

Reform Act of 1984 (1985), 21 Willamette L.Rev. 767, 801. 

Unfortunately, the statute did not promote amicable 

parental settlements. The Service continually found itself 

caught in battles over which parent was entitled to the 

exemption. Therefore, in 1984, Congress amended the law. 

The present statute provides that the parent with 

physical custody of the child for the greater part of the 

year shall take the exemption unless (1) he or she signs a 

waiver that releases the exemption to the noncustodial parent 

or (2) the noncustodial parent received the right to claim 

an exemption in a divorce decree dated prior to January 1, 

1985 and he or she contributed at least $600 per year in 

support. 26 U.S.C. § 152(e). There is no mention in the 

statute, as amended, of the effect of the allocation of 

exemptions in a decree of dissolution issued after January 1, 

1985. 

A small number of courts have held that the 1984 

amendments divested the states of jurisdiction to award 

dependency exemptions in conjunction with dissolution 

actions. Lorenz v. Lorenz (Mich.Ct.App. 1988), 419 N.W.2d 770; 

In Re the Marriage of Vinson (0r.Ct.App. 1987), 732 P.2d 79, 

review denied, 736 P.2d 566. The majority of courts that have 

considered the question, however, have held that the 

amendments to 26 USC § 152(e) were enacted merely to promote 

administrative efficiency and were not intended to encroach 
upon the state's power to determine financial matters between 

the parties in a dissolution action. Hughes v. Hughes (Ohio 

1988), 518 N.E.2d 1213, cert. denied, - U.S. - , 109 S.Ct. 

124, - L.Ed.2d - ; Cross v. Cross (W.Va. 19871, 363 S.E.2d 

449; In Re the Marriage of Lincoln (Ariz.Ct.App. 1987), 746 

p.2d 13; Fudenberg v. Molstad (Minn.Ct.App. 19861, 390 N.W.2d 

The majority's position is supported by the explanation 

of the changes given by the Staff of the Joint Congressional 

Committee on Taxation. 

The present rules governing the allocations of the 

dependency exemption are often subjective and 

present difficult problems of proof and 

substantiation. The Internal Revenue Service 

becomes involved in many disputes between parents 

who both claim the dependency exemption based on 

providing support over the applicable thresholds. 

The cost to the parties and the Government to 

resolve these disputes is relatively high and the 

Government generally has little tax revenue at 

stake in the outcome. The committee wishes to 

provide more certainty by allowing the custodial 

spouse the exemption unless that spouse waives his 

or her right to claim the exemption. Thus, 

dependency disputes between parents will be 

resolved without the involvement of the Internal 

Revenue Service. 

H.R. Rep. No. 432, Part 11, 98th Cong., 2d Sess. 1498-99, 

reprinted - in 1984 U.S. Code Cong. & Ad. News 697, 1140. 

The above report persuades us that the 1984 changes were 

not enacted to strip state courts of the power to allocate 

dependency exemptions between parties to a dissolution 

action. The report demonstrates that the purpose of the 

amendments was to reduce the Service's involvement in 

litigation over questions of dependency exemptions. We see 

no reason why a state court's allocation of the deductions in 

a decree of dissolution will interfere with this goal. If a 

custodial parent d-efies a district court's order by refusing 
to sign the waiver of exemptions, the noncustodial parent can 

enforce the decree by way of a contempt action in state 

court. The Service need not be involved in any aspect of the 

dispute. 

Having decided that the District Court had the 

jurisdiction to allocate dependency exemptions, we must now 

determine whether the court abused its discretion by refusing 

to do so. We hold that the assignment of dependency 

deductions is a factor a district court may consider when 

ordering child support. It is not an abuse of discretion, 

however, for a district court to refuse to award the 

exemptions to either party. 

A failure to assign the deductions to the noncustodial 

parent does not prevent that party from ever receiving the 

exemptions. The tax code provides that the custodial parent 

may voluntarily relinquish the exemptions to the other parent 

by signing a waiver. This provision provides flexibility. 

It allows the parties to examine, on a yearly basis, their 

respective tax burdens to ascertain which party would benefit 

most from the exemptions. The District Court may not wish to 

interfere with this flexibility by ordering the custodial 

parent to execute a waiver or be subject to contempt. 

Furthermore, by providing that the custodial parent may 

claim the exemption unless he or she executes a release, the 

statute has given that parent added leverage to ensure that 

the noncustodial parent pays the court-ordered child support. 

By leaving the exemptions in the hands of the custodial 

parent, the district court gives the noncustodial parent an 

incentive to keep current with his or her child support 

payments. It also gives the custodial parent added 

bargaining power at tax time. 

In summary, we hold that the 1984 amendments to the 

federal statute regarding exemptions for dependent children 
of divorced parents did not divest state courts of 

jurisdiction to allocate the exemptions in a decree of 

dissolution. A district court may assign the exemptions j.f 

it finds that the allocations would serve the best interests 

of the children and the parties. However, a district court's 

refusal to award the exemptions does not constitute an abuse 

of discretion. 

The next issue called to our attention concerns the 

value of the husband's interest in a trucking partnership. 

The husband argues that no substantial credible evidence 

exists to support the partnership value found by the District 

Court. 

In 1977, the husband formed a partnership with another 

individual. The partnership purchased a cattle truck and a 

Public Service Commission permit authorizing the commercial 

hauling of livestock throughout the state. In 1984, the 

truck was destroyed. The only partnership asset that 

remained at the time of the dissolution was the PSC permit. 

The husband testified that the partnership was worth 

$2,000. The wife did not testify as to the value of the 

partnership, although she estimated its worth as $2,500 in 

her proposed findings of fact and conclusions of law. The 

District Court valued the partnership at $10,000. The court 

based its valuation on the tax returns of the parties, such 

returns showing a partnership gain three out of five years. 

A district court has far reaching discretionary powers 

to determine the value of property in a dissolution action. 

Its valuation can be premised on expert testimony, lay 

testimony, documentary evidence, or any combination thereof. 

- See In Re the Marriage of Reich (Mont. 1986), 720 P.2d 286, 

287-88, 43 St.Rep. 1167, 1168-69; In Re the Marriage of Garst 

(1983), 206 Mont. 89, 94-95, 669 P.2d 1063, 1066. As long as 

the valuation is reasonable in light of the evidence 
submitted, we will not disturb that finding on appeal. In Re 

the Marriage of Luisi (Mont. 1988), 756 P.2d 456, 459, 45 

St.Rep. 1023, 1026; In Re the Marriage of Staudt (Mont. 

1985), 700 P.2d 175, 177, 42 St.Rep. 740, 743. 

Conflicting evidence was before the District Court in 

the present case. When confronted with conflicting evidence, 

the court must use its fact-finding powers to determine which 

evidence is more credible. Having had the opportunity to 

observe the witnesses, the trial court is in a position 

superior to that of the appellate court to judge the 

credibility of the testimony. In Re the Custody of Holm 

(1985), 698 P.2d 414, 417, 42 St.Rep. 504, 507. Unless there 

is a clear preponderance of the evidence against the District 

Court's valuation, its findings, where based on substantial 

though conflicting evidence, will not be disturbed on appeal. 

Garst, 206 Mont. at 93-94, 669 P.2d at 1066. 

The conflicting evidence in the instant case leads us to 

conclude that the District Court did not abuse its discretion 

by assessing the partnership value at $10,000. On one hand, 

the husband testified that the livestock truck was destroyed 

in 1984 and that the value of the remaining asset, the PSC 

permit, was only $2,000. The 1986 tax return, which 

attributed no income to the partnership, supported the 

husband's appraisal. On the other hand, the 1981 to 1985 tax 

returns reflected partnership gains three out of five years. 

The 1985 return in particular showed an income of $12,638, 

even though the truck had not been in service that year. The 

husband testified that a portion of the 1985 income was due 

to an insurance settlement on the truck. However, no 

evidence was introduced to account for the remainder of that 

year's income. There was also testimony that the permit 

could be leased to other trucking outfits for a percentage of 

the profits. 
With all of the evidence taken together, it was 

reasonable for the District Court to assume that, although 

the truck had been destroyed. in 1984, the partnership 

retained income producing potential and thus had a higher 

value than that attributed to it by the husband. There was 

substantial documentary evidence to support the District 

Court's valuation. The valuation was reasonable in light of 

the evidence submitted. There was no abuse of discretion. 

The husband next contends that the District Court abused 

its discretion by failing to include the 1986 farm operating 

debt when it computed the net worth of his estate. The 

husband argues that the trial court erred by valuing the debt 

at a time different from the time at which it evaluated the 

other assets and liabilities. We do not agree that this 

procedure was error. 

Generally, valuation of assets should be made at or near 

the time of the dissolution hearing. In Re the Marriage of 

Hammill (Mont. 1987), 732 P.2d 403, 406, 44 St.Rep. 220, 223. 

This rule, however, is not hard and fast. The choice of time 

for valuation is within the broad discretion of the district 

court. In Re the Marriage of Krause (1982!, 200 Mont. 368, 

379, 654 P.2d 963, 968; In Re the Marriage of Krum (1980!, 

188 Mont. 498, 503, 614 P.2d 525, 527. If a single valuation 

date would lead to an inequitable distribution of property, 

the District Court may choose several different times for 

valuation. - See, In Re the Marriage of Halverson (Mont. 

1988)~ 749 p.2d 518, 45 St.Rep. 162; In Re the Marriage of 

Hurley (Mont. 1.986), 721 P.2d 1279, 1286, 43 St.Rep. 1271, 

In the instant case, the District Court used September, 

1986, a time shortly after the petition for dissolution had 

been filed, as the valuation date for the majority of the 

assets and liabilities. The court assessed the operating 
debt, however, as of the date of the dissolution hearing, 

nine months after the petition had been filed. The husband 

argues that this failure to appraise all of the assets and 

liabilities at the same time resulted in an overvaluation of 

his net worth. 

In September, 1986, the husband owned livestock w0rt.h 

$138,319 and owed an operating debt of $24,000. By the time 

of the dissolution hearing, some of the cattle had been sold 

and the operating debt had been paid with the proceeds. The 

sale of the cattle and payment of the debt were made to 

effectuate a tax savings to the husband. 

In its memorandum denying the husband's motion to amend 

the findings of fact, the trial court recognized that, alonq 

with erasing the operating debt, the sale of cattle reduced 

the value of the herd. The court refused, however, to 

include the operating debt in its computations. It also 

declined to decrease its valuation of the herd. The court 

stated that these factors had been included in its overall 

valuation of the assets as well as its decision to distribute 

the property equally between the parties. 

Under the circumstances, we cannot hold that the 

District Court abused its discretion. The memorandum 

demonstrates that the court considered the facts as presented 

and determined that differing valuation dates would aid in 

the equitable division of the property. In the final 

analysis, an equitable distribution was accomplished. We 

therefore affirm the District Court on this issue. 

On cross appeal, the wife argues that the District Court 

erred by discounting the value of the parties1 stock in the 

Milesnick family corporation. She maintains that discounting 

stock in a closely held corporation is improper where the 

stock's value has been based on an appraisal of the 

underlying assets. 
Milesnick Ranch, Inc. was formed by the husband's 

parents in 1980. Soon after the creation of the corporation, 

the parents began gifting the stock to their children and 

their children's spouses. Through this gifting program 

Thomas received 2,284 and Christine received 1,790 of 

the total 40,000 shares outstanding. 

In a letter introduced into evidence by the husband, the 

corporation's accountants placed the fair market value of the 

Milesnick Ranch stock at $53.85 per share. The appraisal was 

based on net asset value, that is, the sum of the fair market 

value of the assets less the liabilities. In its findings of 

fact, the District Court discounted the stock by 25 percent, 

from $53.85 to $40.39, to take into account the couple's 

status as minority shareholders in the corporation. 

We have previously approved the practice of 

discounting stock in a closely held corporation. In Re the 

Marriage of Jorgensen (1979), 180 Mont. 294, 300, 590 P.2d 

606, 610. However, a district court need not discount the 

stock in a close corporation in all instances. See, In Re 

the Marriage of Johnston (Mont. 1986), 726 P.2d 322, 43 

St.Rep. 1808; In Re the Marriage of Buxbaum (1984), 214 Mont. 

1, 692 P.2d 411. 

The wife relies on Buxbaum for the proposition that 

discounting stock is improper whenever the market value is 

founded on net asset value, as it is in the instant case. 

This is not so. Whether a discount is proper depends on the 

facts of the case, not on the method used to ascertain the 

underlying value of the stock. In Buxbaum we approved the 

district court's decision not to discount for a minority 

interest because the court found that, even though the 

husband was a minority shareholder, he had actual control of 

the corporation. 
A discount for a minority interest is appropriate when 

the minority shareholder has no ability to control salaries, 

dividends, profit distributions and day-to-day corporate 

operations. Jorqensen, 180 Mont. at 300, 590 P.2d at 610. In 

the present case, there is no doubt that Thomas and Christine 

Milesnick were minority shareholders. Together they owned 

only 4,074 shares of stock, a little over 10 percent of the 

total number. Furthermore, although Thomas worked with his 

parents on the ranch and had some input into day-to-day 

operations, the parents had the final say on all major 

decisions. We do not believe, under these circumstances, 

that the District Court abused its discretion by discounting 

the stock in Mil-esnick Ranch by 25 percent due to the 

parties' minority interest in the corporation. 

In conclusion, we hold that the District Court did not 

err in its valuation of the husband's partnership interest or 

in its valuation of the parties' stock in Milesnick Ranch. 

Nor did the District Court err by failing to include the 

operating debt in its computation of the net worth of the 

husband's estate or by refusing to all-ocate the tax 

exemptions for the parties' dependent children. 

We affirm the District Court. 

i &?F*&-/ #/' 

, 

Justices ,./