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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
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Atkins, Rozeman, Montana

Submitted on Briefs:

Sept. 1, 1988

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Decided: December 8, 1988
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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 3. failing the net On review: 1. the husband's interest in a trucking partnership. Whether the District Court abused its discretion by to include the ranch operating debt when it computed worth of the husband's estate. cross-appeal, the wife adds the following issue for 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 dependent children. two-step analysis. abused its discretion by refusing to allocate the federal income tax exemptions for the parties' Resolution of this question involves a 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 b 7 failing l 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 custodial parent received the exemption unless the 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). - Comment, Tax See, 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.

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