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Fair Market Value – Everyone Else Is Using It, So Why Can’t We?

By Charles F. Vuotto, Jr., Esq.

Preliminary Statement

In light of Brown v. Brown, it is now well known that the new standard of valuation of businesses incident to divorce litigation in New Jersey is “fair value.”  348 N.J. Super. 466 (App. Div. 2002).  This article will not re-explore the facts of Brown, but will discuss how the rest of the country appears to be addressing the standard of value issue and suggest alignment therewith.  This article is intended to spark a discussion on the underlying policies of the  equitable distribution statute as to the standard of value to be applied to the valuation of assets subject to equitable distribution.  As it now stands, are we distributing “assets” or something else?

The Appellate Division decision of Brown (“the Brown case”) sparked much discussion at the time of its publication.  The fact that the Supreme Court denied the husband’s Petition for Certification on July 16, 2002, makes the Appellate Division’s decision one of the most important family law decision sincePainter v. Painter, 65 N.J. 196 (1974), Lepis v. Lepis, 83 N.J. 139 (1980) and Crews v. Crews, 164 N.J. 11 (2000).  Brown addresses whether valuation adjustments for  minority interest discounts/control premiums and marketability discounts should be applied when valuing a closely held business incident to divorce in those situations where sale of that asset is not imminent.  According to the decision, such discounts should only be applied in “extraordinary circumstances.”  More importantly, the decision creates a new standard of value to be applied when valuing an interest in a closely held corporation –“fair value.”

The term “fair value” is a context- and geographically-sensitive term, which usually represents a standard of value created by statute and/or precedent for specific circumstances.  In New Jersey, fair value is basically Fair Market Value (“FMV”) without discounts for lack of control or lack of marketability/liquidity, barring extraordinary circumstances.  However, over-application of this general rule is dangerous.  (Caveat: As issue not yet fully explored is that, “extraordinary circumstances” usually relates to the good or bad faith of the shareholders involved in the particular corporate action.  If fault is considered when applying “fair value” (as required by the shareholder dispute cases), this completely contradicts the equitable distribution statute, which makes marital fault irrelevant in deciding the asset distribution in divorce.  If fault is not applied, then “fair value” is not being used correctly.)

Significantly, no other state has exclusively adopted fair value as the proper standard of valuation for businesses in this context.  New Jersey’s unprecedented adoption of fair value prompts us to ask: “What standards of valuation are being used across the country?”  Out of the 50 states, 34 states use FMV; four states use net value, a derivative of FMV; one state uses intrinsic value; four states use multiple standards; and six states have no apparent standard of valuation that could be ascertained, leaving the determination within the court’s discretion.  Therefore, 68% of the country uses FMV as the standard of value when valuing a business interest incident to divorce.  No other state has adopted their shareholder dispute statute in the divorce context.  No other state has cited toBrown.

Fair Market Value

            FMV is the most widely accepted and most commonly used standard of valuation for businesses incident to a divorce litigation.  FMV is defined in theInternational Glossary of Business Valuation Terms as

the price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.


The following states have adopted, either explicitly or by application, FMV as the appropriate standard of valuation for business assets incident to  a divorce proceeding: Arizona, Arkansas, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Vermont, Wisconsin, and Wyoming.  See Sample v. Sample, 731 P.2d 604, 606 (Ariz. Ct. App. 1986); Ark. Code Ann. §9-12-315 (2005); Eslami v. Eslami, 591 A.2d 411, 416 (Conn. 1991); E.E.C. v. E.J.C., 457 A.2d 688, 694 (Del. 1983); Thompson v. Thompson, 576 So. 2d 267 (Fla. 1991); Antolik v. Harvey, 761 P.2d 305, 319 (Haw. Ct. App. 1988); McAffee v. McAffee, 971 P.2d 734, 740 (Idaho Ct. App. 1994); In re Marriage of Grunsten, 709 N.E.2d 597, 602 (Ill. App. Ct. 1999); Trost-Steffen v. Steffen, 772 N.E.2d 500 (Ind. Ct. App. 2002); In re Marriage of Frett, No. 4-083/03-1305, 2004 LEXIS 694, at 7 (Iowa Ct. App. May 14, 2004) (unpublished); Clark v. Clark, 782 S.W.2d 56, 58-59 (Ky. Ct. App. 1990);Ellington v. Ellington, 842 So.2d 1160 (La. Ct. App. 2003); Dargie v. Dargie, 778 A.2d 353, 357 (Me. 2001); Long v. Long, 743 A.2d 281, 291 (Md. Ct. Spec. App. 2000); Champion v. Champion, 764 N.E.2d 898, 901 (Mass. App. Ct. 2002); In re the Marriage of Berenberg, 474 N.W.2d 843 (Minn. Ct. App. 1991); Singley v. Singley, No. 1999-CT-00754-SCT, 2003 LEXIS 283, at 20 (Miss. June 12, 2003); L.R.M v. R.K.M., 46 S.W.3d 24, 29 (Mo. Ct. App. 2001); In re Marriage of Ortiz, 938 P.2d 1308, 1310 (Mont. 1997); Gohl v. Gohl, 13 Neb. App. 685 (Ct. App. 2005), No. A-03-1102, 2005 LEXIS 143, at 30-31 (Neb. Ct. App. July 5, 2005); I/M/O Watterworth, 821 A.2d 1107, 1114-1115 (N.H. 2003); Trego v. Scott, 961 P.2d 168, 172-73 (N.M. Ct. App. 1998); Morse v. Morse, 784 N.Y.S.2d 590, 591 (App. Div. 2004); Bond v. Bond, 916 P.2d 272, 275 (Okla. Ct. App. 1996); I/M/O the Marriage of Hanson, 86 P.3d 94, 98 (Or. Ct. App. 2004); Baker v. Baker, 861 A.2d 298, 304 (Pa. Super. Ct. 2004); Moretti v. Moretti, 766 A.2d 925, 928 (R.I. 2001); Dixon v. Dixon, 512 S.E.2d 539, 549 (S.C. Ct. App. 1999); Fausch v. Fausch, 697 N.W.2d 748 (S.D. 2005), No. 23316, 2005 LEXIS 63, at 11, 13-14 (S.D. May 18, 2005); Zeptner v. Zeptner, 111 S.W.3d 727, 738 (Tex. Ct. App. 2003); Goodrich v. Goodrich, 613 A.2d 203 (Vt. 1992), 158 Vt. 587, 591-92 (1992); Frawley v. Frawley, 693 N.W.2d 146 (Wis. Ct. App. 2005), No. 03-2550, 2005 LEXIS 7, at 4 (Wis. Ct. App. Jan. 6, 2005); Neuman v. Neuman, 842 P.2d 575, 581-82 (Wyo. 1992).

Net Value

            Some states, however, use “net value” when valuing businesses incident to divorce litigation.  Net value is the FMV of the business minus any debts, liens, liabilities, or encumbrances.  Alley v. Alley, No. COA02-594, 2003 LEXIS 1986, at 8-10 (N.C. Ct. App. Nov. 4, 2003) (unpublished) (remanding the case to determine the FMV of a closely held corporation and any debts or liens that will reduce FMV to properly reflect the net value).  Net value appears to be a derivative of FMV, using similar factors and considerations.  In fact, the two values are one and the same when there are no liabilities or debts that must be deducted.  See Walker v. Walker, No. COA03-998, 2004 LEXIS 1319, at 7-9 (N.C. Ct. App. July 20, 2004) (unpublished).  Nevertheless, the case law of Alaska, Nevada, North Carolina, and West Virginia suggest that these states use the net value approach as the proper standard of valuation.  SeeMcQueary v. McQueary, 902 P.2d 1326, 1327 (Alaska 1995) (remanding to ascertain the net value by subtracting the net present value of the zero-interest loan from the market value); Robison v. Robison, 691 P.2d 451, 455 (Nev. 1984) (remanding the court’s valuation of the community-owned business to determine the net worth value and to determine if debts were erroneously double counted); Alley, No. COA02-594, 2003 LEXIS 1986, at 8-10; Durnell v. Durnell, 460 S.E.2d 710, 717-18 (W. Va. 1995) (remanding the case for revaluation of the medical practice to determine the net value by considering future accounts receivable taxes and to deduct any expenses payable on the valuation date).

Intrinsic Value

Another well-known standard of valuation is intrinsic value.  Intrinsic value, also known as fundamental value or holder’s interest, is the value to an investor of an investment, such as common stock, based upon available data.  Intrinsic value  depends on the subjective facts of the case.  Lannes v. Lannes, No. 1321-04-2, 2005 LEXIS 176, at 6-7 (Va. Ct. App. May 3, 2005) (unpublished).  Significantly, Virginia is the only state that requires an application of intrinsic value when determining the value of businesses the divorce context.  See Gardner v. Gardner, No. 0468-04-03, 2005 LEXIS 10, at *15 (Va. Ct. App. Jan. 11, 2005) (unpublished).  In Lannes, the court affirmed the valuation of a software business using intrinsic value rather than FMV, basing the amount on the husband’s income, business profit, and capitalization rate.  No. 1321-04-2, 2005 LEXIS 176, at 2, 6-7.  In Hoelbelheinrich v. Hoelbelheinrich, the court noted the importance of subjective facts when determining intrinsic value, and in light of the evidence, affirmed the trial court’s valuation of a medical practice, excluding a lack of marketability discount as there was no intent to sell.  600 S.E.2d 152, 156 (Va. Ct. App. 2004).

Use of Multiple Standards of Value

            Although many states prefer using one particular standard of value, at least four states allow the use of multiple standards when assessing businesses in divorce proceedings.  Those states are California, Michigan, North Dakota and Ohio.  In California, for example, courts have used both FMV and investment value to assess the worth of corporate assets.  In In re Cream, the court held that the trial court’s responsibility is to fix the FMV of the community estate when assessing business values for distribution purposes.  16 Cal. Rptr. 2d 575, 579 (Ct. App. 1993).  Conversely, California will sometimes use “investment value” as another standard of valuation.  Investment value is the specific value of an investment to a particular investor or class of investors based upon individual investment requirements.  Valuing a Business, 28 (4th Ed. 2000).  For instance, in In re the Marriage of Hewitson, the court approved the use of investment value, as distinguished from market value, to value corporate shares.  142 Cal. App. 3d 874 (Ct. App. 1983).

As for Michigan, there is no single method of valuation uniformly applied to measuring business assets for the purpose of marital property distribution. See Kowalesky v. Kowalesky, 384 N.W.2d 112, 115 (Mich. Ct. App. 1986).  As demonstrated in Golden v. Golden, some courts accept the use of FMV.  No. 218106, 2001 LEXIS 1057 (Mich. Ct. App. Mar. 20, 2001) (unpublished) (affirming the lower court’s use of FMV for a business valuation).  Id.  Other courts permit the use of investment value as the standard for valuing a business.  Sutherland v. Sutherland, No. 240158, 2004 LEXIS 174, at 9 (Mich. Ct. App. Jan. 20, 2004) (unpublished).  In Sutherland, the court determined that under certain circumstances investment value may be a more appropriate standard of valuation than FMV for business valuations incident to divorce proceedings.  Id.  Michigan courts also approve the use of the business’s intrinsic value.  In Conger v. Conger, the appellate court affirmed the lower court’s use of the holder’s interest in valuing the corporation, because the closely held corporation was worth more than the FMV.  No. 219373, 2000 LEXIS 315, at 4 (Mich. Ct. App. Dec. 26, 2000) (unpublished).

North Dakota courts utilize both FMV and fair value when valuing businesses.  See Sommers v. Sommers, 660 N.W.2d 586, 590 (N.D. 2003).  InFisher v. Fisher, the court affirmed the trial court’s use of fair value, excluding a minority discount in its valuation of the wife’s minority interest.  568 N.W.2d728, 732-33 (N.D. 1997).  In Kaiser v. Kaiser, the court affirmed the trial court’s use of stock market valuation instead of liquidation valuation in valuing the Wife’s family business.  555 N.W.2d 585, 587-88 (N.D. 1996).  Furthermore, the court affirmed the trial court’s use of fair value in determining whether a minority discount is necessary and its application of a discount that was between the values provided by experts.  Id. 587-88.

Finally, Ohio courts are not confined to any particular valuation standard; however, the courts often use FMV and intrinsic value as the proper standards.  Cronin v. Cronin, 2005 Ohio 301 (Ct. App. 2005), No. 02-CA-110, 03-CA-75, 2005  LEXIS 268, at 5-6 (Ohio Ct. App. Jan. 28, 2005).  InCronin v. Cronin, for example, the trial court properly accepted the FMV of husband’s business, because it was supported by the expert and evidence.  Id.  Conversely, in Brookhart v. Brookhart, the court affirmed the trial court’s valuation of husband’s work truck using intrinsic value over the State’s benchmark standard, FMV.  No. 93 CA 1569, 1993 LEXIS 5586, at 12-13 (Ohio Ct. App. Nov. 18, 1993) (unpublished).

No Standard of Value Identified

            Notably, there are six states that appear not to specify their preferred standard of valuation for assessing businesses incident to divorce litigation:  Alabama, Colorado, Georgia, Tennessee, Utah, and Washington.  In Alabama and Georgia, no case law was found that discussed the standards used in business valuation incident to divorce.  In Colorado, one appellate court noted that the trial court has discretion to choose the valuation standard used by one party over the other, or to arrive at its own reasonable determination of value.  See In re the Marriage of Nordahl, 834 P.2d 838 (Colo. Ct. App. 1992).  In Tennessee, while one court used FMV, another court explicitly rejected it.  See Kerce v. Kerce, No. M2002-01744 – COA-RE-CV2003, 2003 LEXIS 608, at 16-17 (Tenn. Ct. App. Aug. 29, 2003) (unpublished) (affirming trial court’s decision to use the expert’s FMV of the business, which included a goodwill value, as it was not against the weight of the evidence or record); See also Powell v. Powell, 124 S.W.3d 100, 106 (Tenn. Ct. App. 2003) (based upon the evidence, the trial court appropriately applied a valuation that did not reflect the FMV and instead, valued the ongoing concern).  Finally, the courts in Washington have broad discretion in adopting valuation standards that are supported by the evidence and that will not be disturbed absent an abuse of discretion.  See Rubens v. Rubens, No. 49450-3-I, 2003 LEXIS 1544, at 7 (Wash. Ct. App. July 21, 2003) (unpublished).

Why Fair Value?

            Therefore, it is clear that New Jersey has adopted a specific standard of valuation that is foreign to the other 49 states in the country.  Although it is true that  a small segment of states do use standards somewhat similar to “fair value,” no one state uses the specific standard adopted in New Jersey by way ofBrown.  (Note, however, that North Dakota allows for the use and consideration of fair value in assessing the worth of a business, more recent cases indicate a shift toward the use of FMV.  See Sommers, 660 N.W.2d at 590.  Moreover, in Kaiser, although the court affirmed the trial court’s use of fair value for determining whether a minority discount applied, the court still applied an 11.3% discount.  555 N.W.2d at 587-588.)  However, when using fair value, as implemented in New Jersey, no discounts may be applied except in extraordinary circumstances, and it is likely that a court will not have the same discretion as in North Dakota.  See Brown, 792 A.2d at 478.  (Caveat: What those “extraordinary circumstances” may be is not defined and will likely be difficult to distinguish from factors used to build the capitalization rate in an income approach valuation method.)  Again, it is clear that New Jersey stands alone in its implementation of fair value.

The essence of fair value, according to Brown, is that dissenting shareholders must be protected from majority shareholders wanting to buy out shares at a reduced price.  792 A.2d at 474-75.  However, in the realm of divorce litigation, fair value is unnecessary since FMV can adjust adequately in accordance with the facts and evidence of a case.  In other words, such facts can lead to a different distributive share.  For example, in I/M/O the Marriage of Hanson, the appellate court affirmed the trial court’s FMV of a closely held business, which consequently, excluded a discount for lack of marketability to avoid double-counting, yet still referred to FMV as the standard of valuation.  86 P.3d 94, 98 (Or. Ct. App. 2004).  Conversely, in Rattee v. Rattee, the appellate court affirmed the trial court’s decision to reduce the fair value of the husband’s stock interest in the family company to reflect a minority interest discount in order to reach the FMV.  767 A.2d 415, 421 (N.H. 2001).   Therefore, when the occasion arises for a court to consider discounts in valuing a business in a divorce proceeding, courts do not need to apply the rigid fair value standard since FMV can be assessed with or without those discounts.  Thus, there is no need for such a stringent standard as fair value in New Jersey.

What is an “Asset Subject to Equitable Distribution”?

            This is the policy question.  What are we distributing?  Are we distributing “assets” or some other thing of value?  Why do the majority of states in this country use FMV when valuing a closely held business for purposes of divorce?  I posit that the reason lies in the nature of assets and the fact that a “fair value” standard of valuation (excluding discounts where otherwise appropriate in a FMV setting) does nothing but put a present value on a future stream of income instead of accurately assessing the value of an asset.

Typically, although not always, an asset is something that can be sold or transferred for value.  The mere fact that something has “value” does not make it an “asset.”  The determination of value, by any standard, is not the end of the inquiry when determining whether a particular thing is an “asset subject to equitable distribution” under the laws of our state.  I value my family, my wife, my child, my employment, my co-workers, my professional colleagues and innumerable other things that exist in my world.  That does not make these things “assets” subject to equitable distribution.  The fact that an owner of a closely-held business or professional practice has value as a result of his continued ownership of that entity does not make it an asset subject to equitable distribution.  It may be an “asset” in the very broad sense of the term, but not an “asset subject to equitable distribution.”

I respectfully submit that we have lost the forest for the trees due to our debate over the appropriate “standard of value” to be applied when valuing an interest in a closely-held business incident to divorce.  The fact that value may exist (whether the standard of value is “fair market value,” “fair value,” “intrinsic value,” “equitable distribution value,” “value to the holder,” “investment value” or some other value) does not mean that an asset exists, that is subject to equitable distribution.

Simply put, the existence of value does not equate to the existence of an asset subject to equitable distribution.  That is why the majority of jurisdictions in this nation rely upon the FMV standard, rather than some other standard, when valuing an asset subject to equitable distribution.  The majority of the courts of this country have recognized that a thing that has value that cannot be sold or transferred is not an “asset” subject to distribution by that jurisdiction’s divorce laws.  Although the thing may have value because it throws off income to the holder or owner, most courts (including the Supreme Court of the State of New Jersey) have long since determined that this does not transform that thing into an asset for equitable distribution since future income is not an asset subject to equitable distribution.  (See Stern v. Stern, 66 N.J. 340 (1975)).  That is also why most jurisdictions differentiate between “professional goodwill” and “enterprise goodwill.”

In an article in the Family Advocate, a practice journal published by the ABA Family Law Section, David H. Levy stated, “[t]he distinction between personal and enterprise goodwill is particularly important given the national trend to treat personal goodwill not as an asset of the professional practice but as an aspect of the professional spouse’s future earning capacity for use in calculating maintenance or marital property division.”  See David H. Levy, Hunting (Professional) Goodwill, 25 A.B.A. Fam. Advoc. 31, 32 (2003).        Aside from the simple fact that future earning capacity is not an asset subject to equitable distribution, the other major problem with treating future earning capacity as an “asset” subject to equitable distribution is the “double dip conundrum” that arises from such practice.  Notwithstanding our Supreme Court’s recent pronouncement in Steneken v. Steneken, 183 N.J. 290 (2005), Mr. Levy stated in the aforementioned Family Advocate article, “[o]ther courts have held that to assign personal goodwill independent value is to ‘double charge’ the professional spouse, because ‘the goodwill of a sole practitioner is related only to his future earnings.’”  Levy, Hunting (Professional) Goodwillsupra, at 32 (citing Holbrook v. Holbrook, 309 N.W.2d 343, 352 (1981)).  In Casey v. Casey, the South Carolina Supreme Court held that personal goodwill should not be considered because it is “too speculative” and too closely connected with future earnings, since such earnings are already considered in a maintenance award.  362 S.E.2d 6 (1987).  In Powell v. Powell, the Kansas Supreme Court, likewise, held that because good will is so tied to future earnings, it has no independent value.  648 P.2d 218 (1982).  Justice Mountain, in the landmark case of Stern v. Stern, agreed with these sentiments three decades ago when he wrote:

. . . a person’s earning capacity, even where its development has been aided and enhanced by the other spouse, as is here the case, should not be recognized as a separate, particular item of property within the meaning of N.J.S.A. 2A:34-23.  Potential earning capacity is doubtless a factor to be considered by the trial judge in determining what distribution will be ‘equitable’ and it is even more obviously relevant upon the issue of alimony.  But it should not be deemed property as such within the meaning of the statute. (Emphasis added)


66 N.J. at 345.


Mr. Levy writes that, “[f]or goodwill to be allocable, it must be an asset.  For goodwill to be an asset, it must be saleable.”  Levy, Hunting (Professional) Goodwillsupra, at 33.   According to Mr. Levy, the leading case on proving the existence of goodwill is Hanson v. Hanson, 738 S.W.2d 429, 435 (Mo. 1987), in which the Missouri Supreme Court held that for personal goodwill to be divisible, one must demonstrate that it exists and that it is saleable.  Levy, Hunting (Professional) Goodwillsupra, at 33.  The Court noted that mere testimony as to value does not prove that goodwill exists, as a valuator can assume existence, plug in a formula, and come up with a value.  See Hanson, 738 S.W.2d at 435.  Rather:

Existence of goodwill is shown only when there is evidence of a recent actual sale of a similarly situated professional practice, an offer to purchase such a practice, or expert testimony and testimony of members of the subject profession as to the existence of goodwill in a similar practice in the relevant geographic and professional market.  Id.


Mr. Levy writes that the capitalized excess earnings approach (such as applied in Dugan), once favored, is now viewed by many as too speculative. Levy, Hunting (Professional) Goodwillsupra, at 33.  Many courts require offers to purchase as proof of the existence of goodwill and thereafter of its value. Id. at 33.

The proposition espoused herein is further supported by considering the concept of “executive goodwill” or “enhanced earnings.”  If we are going to believe that an owner of a closely-held business or professional practice can be charged with having an asset subject to equitable distribution based solely on future income even though that asset cannot be sold, then aren’t we also bound to accept the concepts of “enhanced earnings” or “executive goodwill?”  This author has written previously on this topic and suggested that one could conclude, based upon cases such as Dugan v. Dugan, 92 N.J. 423 (1983), Piscopo v. Piscopo, 232 N.J. Super.  559 (App. Div. 1989), and Brown,  that executive goodwill can be viewed as an independent asset.  Other respected matrimonial practitioners of our state have cogently written in opposition to this concept.  See article co-authored by Cary Cheifetz, Esq. and Brian Schwartz, Esq. of Ceconi & Cheifetz, LLC.  I suggest that you cannot accept the concepts of equitable distribution value, or value to the holder, and especially fair value under the Brown decision, without also accepting the concepts of enhanced earnings or executive goodwill.  To do so is to speak with the proverbial forked tongue.

This author suggests that we should be consistent and use common sense.  Common sense dictates that you cannot distribute the value of a business interest unless it is premised upon it equivalent value assuming that it is sold or transferred.  To do otherwise is simply the distribution of future income, which will be earned after the marriage and is therefore expressly non-marital.  This is specifically prohibited by our statutory framework and Supreme Court.  More importantly, we are causing the business owner spouse to pay for something at a level, which may not exist.  On top of that, we are now not giving due consideration to the obvious double-dip.

If we accept the proposition that the only assets to be distributed in equitable distribution are those that can be traded in an open market for actual value, then we must accept the proposition that the valuation of those assets must be based on FMV and take into account various forms of discounts when appropriate.  These discounts can include, but not be limited to, lack of marketability and minority interest discounts.  The fact that an asset is not going to be sold does not detract from the appropriate application of these discounts when assessing its value.

Some well-respected authorities in this state have argued that the discounts can be equated with hypothetical taxes (see Orgler v. Orgler, 237 N.J.Super. 342 (App. Div. 1989))  and hypothetical real estate commissions (see Wadlow v. Wadlow, 200 N.J. Super. 372 (App. Div. 1985)).  This is error.  When we value a parcel of real estate, the appraisal that we receive does not reference taxes or real estate commissions.  However, the valuation does take into account comparable sales.  These “comps” consider the nature of the subject property and other appropriate factors that would affect its sale price on the open market.  This pre-tax/pre-sales commission value is no different than the valuation of a closely-held business after application of appropriate discounts.  This writer would agree that the hypothetical taxes and sales commissions that may be involved in the sale of a closely-held business should not reduce the distributable value, but rather be a factor to be considered when determining the distributive share to the non-owing spouse.  Therefore, Orgler and Wadlowdo not support the failure to apply appropriate discounts when valuing a closely-held business.


            Other than pensions (which are sui generissee Steneken, 367 N.J. Super. at 439), FMV is almost universally used as the standard of value for all other major categories of non-business family assets (e.g., homes, cars, personal property, brokerage accounts, stock, stock options, etc.) in all states, including New Jersey.  (See Jay E. Fishman & Bonnie O’Rourke, Value: More Than a Superficial Understanding Is Required,  15 J. Am. Acad. Matrimonial Law 315, 316 (1998) (stating that fair market value is well known to business valuators and is frequently used in income, gift, estate and other matters).  As detailed above, the majority of states use FMV to value an interest in a closely held business incident to divorce.  Therefore, this writer proposes that the law in New Jersey be made clear and consistent with the majority of states in the country.  An interest in a closely-held business is only an asset subject to equitable distribution incident to divorce if it can be assigned a value under a FMV standard of value.


Mr. Vuotto is shareholder with the Woodbridge based law firm of Wilentz, Goldman & Spitzer, P.A..  He is certified by the Supreme Court of the State of New Jersey as a Matrimonial Law Attorney.  Mr. Vuotto is a member of the New Jersey State, Union and Middlesex County Bar Associations and a member of each Association’s Family Law Section.  He is a member of the Executive Committee of the New Jersey State Bar Association’s Family Law Section, and serves on various subcommittees regarding arbitration and technology.  He is also the Chair-Elect of the Matrimonial Section of the Association of Trial Lawyers of America – New Jersey.  Additionally, Mr. Vuotto is an Associate Managing Editor of the New Jersey Family Lawyer. Special Thanks to Veronica Allende, Seton Hall University School of Law, Class of ’06, and Melinda Colon, Rutgers University School of Law – Newark, Class of ’07, 2005 Summer Associates at Wilentz, Goldman & Spitzer, P.A.

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