Standards of Value: Theory and Applications, 2nd Edition

CHAPTER 5

Standards of Value in Divorce

INTRODUCTION

In this chapter, we address the theory and application of the standards of value used in divorce. As in stockholder oppression and dissent cases, the standards of value in matrimonial matters are state specific and often case specific.

As one commentary has indicated:

Matrimonial actions are unique types of litigation. While people in litigation are people in conflict, people in matrimonial litigation are involved in conflicts that go to the very root of their existence.1

Divorce cases are often acrimonious and adversarial. It is the task of business valuation professionals to sort through these issues and evaluate a business based on the objective application of valuation methodology that is consistent with the laws of a given state.

In the absence of statutory guidance, the application of the standard of value is left to the courts within the individual states. These courts can often inconsistently apply the underlying assumptions of a standard of value, to achieve what they believe to be equitable solutions consistent with the policy expressed in each state's statutes.

When we compare the way valuation issues are viewed in the U.S. Tax Court to the way they are viewed in many matrimonial courts, we often find significant differences. In the Tax Court, precedents have fashioned a consistent premise, value in exchange, and a consistent standard, fair market value, and have provided guidance to practitioners as to the application ...