Professional practices and licenses, such as law degrees and CPA designations, certainly have a value to them and such values should be a consideration in the equitable division of the marital estate in a divorce proceeding. But such cases can also demonstrate the potential for some wildly off-base calculations and the use of “voodoo valuation” practices, according to Michael A. Paschall in a recent issue of Business Valuation Alert newsletter. Divorce cases will often see the introduction of seemingly well-reasoned valuation studies when it comes to assigning a value for a partnership interest in a professional practice or the value of a professional license. Sometimes, though, the underlying logic of these valuations can be deeply flawed and the result will be far from an equitable division of property if a family court judge buys into that faulty logic. Paschall walks through case law and some colorful real-life examples to help practitioners find the pitfalls in this contentious area of valuation practice.
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This story is from the CCH’s monthly Focus on Tax newsletter, which provides advise and guidance on federal and state tax issues for tax and accounting professionals.
Read this article from CCH’s Journal of Taxation of Financial Products.