Articles

SPECIAL ISSUES IN VALUING PROFESSIONAL PRACTICES:  ADVICE TO ACCOUNTANTS

I. Introduction

There are many accounting considerations in valuing a professional practice. There are guidelines in the Internal Revenue Code and practice tips for the accountant and business appraiser. From state to state, however, the accountant must understand the case law in the local jurisdiction. In Pennsylvania understanding the case law can be confusing, as each decision adds to a body of knowledge and provides a new twist for lawyers and accountants to consider.

The Pennsylvania Divorce Code, allowing for equitable distribution of assets titled in one spouse, was passed in 1980. The first major pronouncement on the value of a professional practice came in 1986 when the Beasley decision was issued. Therefore, new appellate cases were reported.

First, this article will summarize the major cases, in chronological order. (Citations follow the summary.) As further cases issue, one cannot assume that all law firms will be valued like McCabe and Beasley or all veterinary practices will be handled like Solomon. Therefore, in the later analysis, this article will try to outline the questions the accountant should ask. Also provided is a synopsis of cases on date of valuation. Although it may seem the lawyer should have the answers, they will not be able to provide them without the help of the accountant's analysis. The interplay between the professionals is critical in this field. Any report on a professional practice should be done in draft for the lawyer, and the case law reviewed carefully to see how it applies to the facts at hand. Welcome to the labyrinth.

II. History of Pennsylvania Appellate Cases On Valuation

A. Beasley, 1986 In the 1986 case of Helen M. Beasley vs. James E. Beasley, the Pennsylvania Superior Court analyzed the marital value of husband's law practice. Mr. Beasley, a prominent plaintiffs litigator, had a sole proprietorship law practice. Mr. Beasley employed fourteen to fifteen lawyers, but he exclusively controlled the operation of the practice. The practice was conducted under a firm name listing several lawyers, which the Court found to be inconsequential. In addition, the Court found that there was a clear possibility of irreversible harm if it allowed the intrusion into confidential records and the relationships with clients. This review focuses on whether the Court found that goodwill should be included in the law practice value.

Mrs. Beasley wanted the Court to consider capitalization of excess earnings. Yet the Court distinguished the sole proprietorship from a partnership, professional corporation, or other small business. The Court found that this personal injury law practice was dependent upon the reputation of Mr. Beasley. Furthermore, the goodwill value of the law practice is absolutely non-transferable pursuant to the Pennsylvania professional code of ethics. The Superior Court stated that where goodwill is dependent upon the reputation of the owner it should not be considered marital property subject to equitable distribution.

Some confusion is created by the decision, as clearly Mr. Beasley had such an extensive practice that he kept fifteen other lawyers busy. If the business is not a law practice, it is apparent from later appellate cases, some sole proprietorship, professional practices, will have marital goodwill value.

B. DeMasi,1987 In August, 1987, the Superior Court issued its next decision. Tonya J. DeMasi vs. Rocko J. DeMasi. Here the husband was a rheumatologist in a two doctor medical practice. The Appellate Court found that the trial Court erred, when it attributed a present value to the goodwill of the medical practice. After analyzing the type of practice, the Superior Court found that any goodwill which existed was unique to Dr. DeMasi, and upon his death or retirement, his medical practice was not likely to retain any of his patients.

In order to arrive at this conclusion, the Superior Court considered the fact that (a) Dr. DeMasi's medical practice was a specialized one; (b) each partner acquired patients separately via independent sources; (c) the partners did not share patients within the office; and (d) Dr. DeMasi's partner could not treat the necessary rheumatology patients, as the partner was only an internist, and without the necessary rheumatology training.

The Court noted that it was Dr. DeMasi, not the business practice, that attracted the rheumatology patients. Although Dr. DeMasi had some referrals from local nursing homes, 70% of his patients were derived from physician referrals, who referred to him as the only rheumatologist in the York area. It was found that Dr. DeMasi was " the essence of any goodwill" in his business interests.

C. Buckl, 1988 Only a year later, in 1988, the Superior Court issued a new opinion Werner A. Buckl vs. Sally A. Buckl. The trial Court had determined that husband's partnership interests in his architectural firm did not constitute marital property. The Appellate Court focused on the problem of valuing a professional partnership. The Superior Court overturned the trial Court and approved the Master's approach, wherein the Master found the partnership did have marital value. The Appellate Court suggested that the lower Courts must consider the firm's earnings, and the goodwill of the partnership as a going concern. It welcomed evidence concerning the various factors in valuation, including the guidance provided by a partnership agreement. While the partnership agreement will not necessarily dispose of the issue of value, it should be considered an important factor.

D. Fexa, 1990; Robert J. Fexa vs. Barbara A. Fexa, the Superior Court issued its decision in August of 1990. In this instance, Dr. Fexa was a member of a dental partnership involving several owners. The Appellate Court found, by plurality, that the trial Court erred in excluding any goodwill value. In contrast, the Superior Court found that the goodwill of a dental practice was capable of being valued, since there were buy-ins and withdrawals. Therefore, goodwill had been considered an asset of the business in the past. In contrast, if the economic goodwill was found to be purely personal to the professional spouse, it would not be alienable, and should not be included in equitable distribution. Although the lower Court felt it was riding the tide of Beasley and DeMasi disapproving of goodwill value, the Superior Court noted that the partnership in Fexa, in particular, had seen dentists come and go. The practice continued notwithstanding new or departing dentists. Therefore, goodwill existed separate from Dr. Fexa, which should be included in the value for equitable distribution.

E. McCabe, 1990 The further pronouncement of the Pennsylvania Supreme Court came a few months earlier in May, 1990. In Nellie Vestine McCabe vs. J. Grant McCabe, III, Mr. McCabe was a lawyer in the firm of Rawle and Henderson who pursued his case to the Supreme Court. The parties were married in 1948 and separated in 1980. Ten years later, the Supreme Court found that the value of Mr. McCabe's partnership interest was minimal, as was mandated by the partnership agreement. The Supreme Court found that as others left the partnership, the partnership agreement controlled. The agreement clearly and narrowly defined the rights of partners. They had no right to receive a proportionate share of the accounts receivable, work in progress accounts, and other accounts included in a "going concern" value. Unlike many common types of business enterprises, particularly when the business is a law practice, the entity had no shares that could be traded publicly or privately. There is no market to which the partner can refer to ascertain the value of the law partnership interest. No one partner could force the liquidation of the law firm partnership. On the contrary, the departing partner would receive his/her capital account, and the designated share of undistributed profits. Upon retirement, the partner did not receive a share of the firm's profits thereafter. Under all of these circumstances, the Supreme Court found that it would be inequitable to apply a going concern value to the partner's share.

Under these facts, the Supreme Court found that in appraising the value of Mr. McCabe's interest in his firm, instead of a value of $286,276, argued by Wife, the partnership interest was worth only $18,900. The Court specifically stated that it would be a fiction to appraise the practice as if there were no limitations. Therefore, in this instance, the law firm's partnership agreement was binding.

F. Solomon, 1992; In Kathleen D. Solomon vs. William J. Solomon, decided by the Supreme Court in 1992, Pennsylvania's highest Court again addressed the value of a professional practice, focusing on the issue of goodwill. Here Dr. Solomon had established an equine clinic and horse breeding business in York County. The Supreme Court generally agreed with the Superior Court that in principal, if a business qualifies as marital property, to the extent the business has established goodwill, such value should be considered in equitably dividing the marital estate. The trial Court, however, must determine whether the business has established Goodwill by the nature of the business itself. The Court must consider what factors have given rise to the positive reputation, i.e., goodwill. If that positive reputation is due only to the reputation of a single individual, the goodwill does not belong to the entity in general. Where the reputation is enjoyed by the business entity, and the single individual contribution is less substantial, and goodwill is capable of "surviving the disassociation of the single individual".

The Supreme Court noted that this veterinarian specialized in the breeding of horses. His business was as a sole proprietor and was dependent upon his own expertise. His wife argued that the doctor's staff included other veterinarians and general facilities unrelated to the specialized knowledge of Dr. Solomon. The trial Court disagreed, and the Supreme Court found that the trial Court had not abused its discretion.

The Supreme Court noted that the trial Court in particular was persuaded by the testimony of numerous clients regarding Dr. Solomon's professional expertise in sustaining the business. The trial Court found that the assisting veterinarians were only two recent graduates, employed for a brief period of time with no independent clients or patients. Therefore, the Supreme Court affirmed the decision of the trial Court. The Supreme Court in a footnote, observed that in its earlier decision, McCabe, the trial Court had focused on whether husband had an interest in the "going concern" value of the partnership, such as equipment, books, and cash. The Supreme Court noted neither of the McCabe experts argued goodwill should be included in the appraisals submitted by the parties in McCabe.

In Solomon, it appears the Supreme Court relied on the discretion of the trial Court. In cases heard after Solomon, each trial judge must balance the uniqueness of the individual professional's contribution against the argument that it is the business entity which has developed a positive reputation which is separate from the importance of the single individual.

G. Butler, 1995 Again, York County was featured in this Pennsylvania Supreme Court decided 1995, Carol Butler v. Leon Butler. Here the husband's accounting practice, a small partnership, was being valued. The Court considered the partnership buy/sell agreement and wife's proposed formula valuing husband's interest in the firm. The Supreme Court specifically found that husband's partnership had no goodwill value.

In contrast to the McCabe situation, the Supreme Court found that the shareholder buy/sell agreement did not provide helpful guidance to the trial Court. The Supreme Court recognized that under the terms of the shareholder buy/sell agreement, Mr. Butler would not be able to liquidate his share in the business based on the going concern value. The Supreme Court found, however, that the shareholder agreement should not control like it did in McCabe. In McCabe, the agreement specifically provided a formula based on current monetary value as opposed to the predetermined fixed value in Butler. On Mr. McCabe's departure, the partner would receive a monetary amount bearing relationship to the firm's current profits. The record was clear in Butler that the shareholder agreement did not reflect the company's current financial picture. Likewise, the Supreme Court found the $100,000 death benefit under the partnership agreement failed to represent true value, but rather the amount of proceeds of an established life insurance policy.

Without the partnership agreement to rely upon, the Supreme Court then considered whether valuing the accounting practice as a going concern should include a goodwill factor. The Supreme Court reviewed the decisions discussed above: Buckl, Solomon, DeMasi, Beasley, and Fexa. The Court also noted that where there is an existing award of alimony by the Butler trial Court, should not be subject to a double charge where the value to the goodwill is wholly personal to the professional spouse.

The Supreme Court affirmed the decision of the trial Court noting that husband's clients were personal to him, and if he left his partnership, his clients would follow. At least some of the intangible value attributed to husband's interest in the accounting firm represented goodwill of a personal nature. The Supreme Court found this inalienable, and incapable of presently being realized. Upon remand, the trial Court would have the responsibility to re-determine the value of husband's partnership interest, excluding the goodwill which was wholly personal to Mr. Butler. In a footnote, the Supreme Court cautioned that goodwill and going concern value, are technically two distinct considerations. Going concern value refers to the ability of the business to generate income without interruption even when there is a change of ownership. Goodwill represents a preexisting relationship arising from the continuous course of business which is expected to continue indefinitely. It was not clear that the Supreme Court addressed the possibility that there could be personal goodwill and entity goodwill in the Butler case.

H. Gaydos, 1997 In May, 1997, the Superior Court considered the argument of the husband in Martha Gaydos v. Edward A. Gaydos, that his solely owned dental practice should not include goodwill value for the purpose of equitable distribution. Husband focused on the fact that as a sole proprietor, the goodwill of the practice, should not be a marital asset subject to distribution. The Superior Court noted that although Solomon involved a veterinary solo proprietorship, the Supreme Court discussed goodwill of the business entity, but found that in the facts of Solomon, the positive reputation of the horse breeding enterprise was inseparable from the professional reputation of husband. Likewise, in Beasley, the husband himself constituted the practice and his reputation could not be sold or transferred. The Superior Court interpreted Butler as acknowledging not only that entity goodwill is subject to distribution, but the professional goodwill is not subject to distribution. Only such professional goodwill which was personal to Mr. Butler, should be found excluded from marital value.

The Superior Court considered the facts of Dr. Gaydos' dental practice. The trial Court rejected husband's "fire sale" value of the practice. It also rejected wife's expert who used 75% of husband's gross receipts during the year prior to separation. The trial Court itself took yet another approach, averaging five years of net earnings prior to separation.

The Superior Court recognized that both husband's and wife's experts admitted that dental practices are routinely sold with goodwill as a part of the selling price. Husband argued that the difference between the Court^-value and the net value of the assets must be professional goodwill. Husband argued that under Solomon husband's professional goodwill must not be included in the marital estate. The trial Court, in defending its approach stated that it valued going concern value, a separate method of valuation. The Superior Court noted that the trial Court felt it could avoid an inequitable result by calculating the business' going concern value, rather than goodwill.

The Superior Court took yet another approach to valuation. It found that reliance on book value alone was inappropriate. It also found that husband had a right to exclude the value of his individual professional goodwill from the marital estate and therefore it was incumbent upon the trial Court to determine the value of that professional goodwill. The Superior Court recognized that the goodwill value under Butler is a component of a going concern value. The Superior Court suspected that much of what the trial Court considered going concern value was actually professional goodwill. The trial Court must consider whether husband's solo practice would have any significant power to earn future revenue if husband himself was not the dentist. Therefore, on remand, husband's professional goodwill may not be included in the marital estate and must be excluded from the value available for equitable distribution.

I. Rohrer, 1998 In the matter of Yettand L. Rohrer v. Howard E. Rohrer, the Superior Court in 1998 squarely addressed the relevance of retained earnings and the risk of the double dip. This was also considered in Butler, mentioned above. While Rohrer did not expand on the dilemma of identifying the goodwill to be excluded or included in the marital value of a professional practice, it did acknowledge the overlap between the alimony and equitable distribution issues regarding retained earnings. The Superior Court cautioned that retained earnings which had already been considered in support calculations, could not also be considered an asset of the business. In this decision in particular, the parties' support award covered 1992 and 1993, and therefore all retained earnings for those years, should be excluded from the value of the marital business interest. Such exclusion, would not extend to the retained earnings accumulated prior thereto. The retained earnings were considered for support, when the support utilized husband's "pass through" income to calculate his total earnings/earning capacity when setting the amounts to be paid for child support and spousal support. For those two years, therefore, the earnings actually retained by the company but charged to husband in support Court, should not be further subject to equitable distribution.

Although the Rohrer case did not involve a professional practice, it will clearly have an impact on future valuation cases. The lawyer and accountant must be aware of the treatment of business earnings for support purposes, so as to exclude those from consideration upon equitable distribution of business assets.

III. Emerging Issues In Valuing The Professional Practice

As each individual Appellate Court case has been decided, the "clear implications" of the prior cases become clouded. Some legal outlines from a few years ago relied on factors that have been discounted by more recent decisions. Clearly there is room for advocacy when the lawyer and accountant are representing one side. The "mutually selected evaluator" has the dilemma of trying to find a reasonable midway point to satisfy both sides. A close reading of Appellate decisions reveals that the Appellate jurists disagree among themselves as to how the prior cases should be applied to a particular fact situation.

The burden is on the person doing the business evaluation to discuss all of the issues. A sample of the questions to be answered are listed here:

A. Is there a business agreement?

The existence of a shareholders agreement or a partnership agreement providing buy/sell arrangements is clearly important. In Buckl, it was an important first step in the analysis. In McCabe, it was found to be dispositive of current value available to the departing partner, even though it had nothing to do with the going concern value of the law practice. Butler gave us an example of the partnership agreement of little import. There the fixed dollar value based on outdated data was rejected.

Therefore, it appears that a business agreement will be considered relevant if it is based on current market conditions. As in Fexa, if partners have come and gone per the agreement terms, it likely reflects fair value. In the case of a law firm, as in McCabe, where the partnership interest is not transferable and partners come and go based on that formula provided, this will be considered the key indicator for valuation of that type of professional practice. The least relevant partnership agreements are those which are out of date, and not based on clear market considerations.

Sole proprietors such Mr. Beasley, Dr. Solomon and Dr. Gaydos, may have more success proving professional goodwill unique to the individual. Such personal goodwill, will not be valued for the purposes of equitable distribution. Likewise, in a two-person practice, such as DeMasi, where the husband was rheumatologist specialist, or Butler, where the accountant had clearly identifiable clientele who were loyal to the individual, rather than the practice, the ability to exclude professional goodwill will be more persuasive. In Solomon and Gaydos, the Courts recommended that the trial Courts closely consider whether the business will survive without the individual professional at the helm. In Solomon, if the husband had not been a horse breeding expert, and his associates had been much more involved with patients and customers, the argument for individual goodwill would have been weakened. In Gaydos, on remand, it is just this inquiry which must be made by the trier fact. In Beasley, it was assumed that even though the sole proprietor had fourteen or fifteen associates, some of whom were included in the firm name, the business was found to be unique to Mr. Beasley, and therefore not subject to enterprise goodwill valuation.

Likewise in the partnerships, the smaller the partnership, the more likely clients are- identified with individual partners. This creates individual goodwill, subject to exclusion. In Fexa, where the dentists came and went and in McCabe where there were many partners who had left under the buy-out arrangements of the firm, there was no individual goodwill. Rather, the partnership agreement is likely to control in determining marital value.

In DeMasi, the doctor's rheumatology specialization was so unique, that the partnership with a general internist did not overcome the fact that patients came to Dr. DeMasi in particular because of his special skills. Although it was not specifically stated in Beasley, Mr. Beasley's significant reputation and name recognition overcame the fact that he titled his firm with several fellow lawyers. It was treated like "the Beasley firm" and valued as unique to the professional. In Butler, notwithstanding the fact that this accounting firm added and lost an accountant during the pendency of the litigation, the Court only reiterated its position that the Butler clients would follow Mr. Butler even if he left the entity. His identification with the Greek community was specifically recognized by the Court. Likewise, in Solomon, a veterinary practice that offered general services, was found to be unique when the clients were looking for Dr. Solomon's specialization as a breeder. Therefore, the client base may be specialized based on ethnic background, specialty practice, etc. As long as the clients identify with the individual professional and not the entity in general, the portion of goodwill attributed to that individual will not be subject to equitable distribution.

IV. Date of Valuation of Business Assets

Although the general rule of the Supreme Court's decision in Sutliff v. Sutliff (citation below) urges trial Courts to value assets closest to date of distribution, there is no clear guidance for business assets. Generally, the smaller the entity, the more likely the Courts will consider the personal effort of the spouse who contributes to the post-separation growth or decline of the business. In many cases this will lead to valuation as of date of separation. The case summaries are attached. Again, careful discussion with legal counsel may be required to justify the date of valuation selected. Below is a sample of key cases on date of valuation:

If, as has been suggested, marital property values were to be fixed as of the date of the parties' separation, or as of the date of filing a complaint in divorce, severe injustices would at times be inflicted upon the parties concerned. Volatile market conditions and changing economic circumstances can render assets that had been valuable months or years earlier virtually worthless in the present, and vice versa.... Privately owned business interests may be valued as a gold mine, or as a scrimption, depending on the times... In view of these commonly recognized aspects of valuation data, it is difficult to conceive justification for the view that stale valuation data, i.e., data that does not reflect values reasonably proximate to the date of distribution scheme.

Examination of [23 Pa.C.S.A. § 3502] reveals numerous grounds for an inference that marital property must be distributed with reference to its value at the date of distribution.... § 3502 expressly focuses on the parties financial circumstances at the time when marital property is to be distributed.

B. Cases Before Sutliff

1. Sergi v. Sergi, 351 Pa. Super. 588, 506 A.2d 928 (1986). Trial court valued the marital home as of date of trial rather than date of separation, even though in four and a half years from date of separation to date of trial marital property increased in value as result of husband's expenditures, where husband was allowed to occupy home for four and a half years without paying rent.

2. Winters v. Winters, 355 Pa. Super. 64, 512 A.2d 1211 (1986). The Court should select date for valuation of asset which best serves to provide for economic justice between the parties. Trial court applied value as of date of master's hearing.

3. Morschhauser v. Morschhauser, 357 Pa. Super. 339, 516 A.2d 10 (1986). The trial Court was free to select date which best served economic justice between the parties. Court valued the business as of the dissolution proceeding, more than three years after date of separation, after determining that there was little difference in valuation between date of separation and date of dissolution proceeding. The Court held that any increase which may have occurred was properly distributable to wife because of its desire to provide her more than fifty percent of the marital property.

C. Cases After Sutliff

1. Aletto v. Aletto, 371 Pa. Super. 230, 537 A.2d 1383 (1988). Husband and wife's business interests for purpose of equitable distribution were properly valued as of trial date rather than date of separation.

2. Gioia v. Gioia, 382 Pa. Super. 538, 555 A.2d 1330 (1989). Most recent date for which complete financial data were available for husband's business interest was appropriately selected as valuation date for interest; date of separation, many years earlier, was not most appropriate valuation date.

3. Tocco v. Tocco, 389 Pa. Super. 310, 567 A.2d 303 (1989). Parties' marital assets were properly valued as of date of hearing on equitable distribution rather than on date of parties' separation - court noted that the decrease in value of the securities was due to market forces beyond husband's control.

4. Adelstein v. Adelstein, 381 Pa. Super. 221, 553 A.2d 436 (1989). Court applied the date of separation value to the husband's business which increased in value significantly, (from $10,000 to $700,000), before date of distribution. "This [increase in value] has been accomplished in large measure by the post-separation efforts of husband and his co-owner of the business. To these post-separation efforts, the wife-appellant has made no contribution. This, too, may be considered by the trial court in ordering distribution of marital assets equitably between husband and wife."

5. Downey v. Downey, 399 Pa. Super. 437, 582 A.2d 674 (1990). Trial court appropriately used fair market appraisals in valuing marital property, rather than values at time of parties' separation 20 years earlier.

6. Holland v. Holland, 403 Pa. Super. 116, 588 A.2d 58 (1991). Valuation date for marital property is generally held to be time of distribution.

7. Beener v. Beener, 422 Pa. Super. 351, 619 A.2d 713 (1992). Court used the date of separation. Husband's post-separation action intentionally decreased the value of the family owned corporation. To permit husband to benefit from his improper action would not achieve economic justice between the parties.

8. McNaughton v. McNaughton, 412 Pa. Super. 409,603 A.2d 646 (1992). Court used date of separation, because the value of husband's family business could vary greatly due to husband's influence. Further, it is within the lower court's discretion to adopt a date of valuation which best works economic justice between the parties. In cases where long period of time has passed between separation and distribution, court should set values of marital property as close to distribution as possible.

9. Goldblum v. Goldblum, 416 Pa. Super. 438, 611 A.2d 296 (1992). Trial court valued husband's sole proprietorship medical practice as of date of trial rather than date of separation for purposes of achieving economic justice between the parties in equitable distribution of marital estate, even though husband contended that there was increase in value of practice after separation of parties. Utilization of value on date of separation by trial court would not have been fair since major asset was medical practice.

10. Butler v. Butler, 423 Pa. Super. 530, 621 A.2d 659 (1993). Value of marital property is to be determined at date of equitable distribution, although husband's share of the firm should be determined as of the date of separation.

11. Benson v. Benson, 425 Pa. Super. 215, 624 A.2d 644 (1993). Trial court properly valued husband's business as of date of separation because the equitable nature of the divorce code warranted valuation of business as of date of parties separation because business was under sole control of former husband. "A family business warrants deviation from general rule that assets should be valued as of the date of distribution because of the great influence that the controlling spouse may have upon business' assets."

12. Oaks v. Cooper, 536 Pa. 134, 638 A.2d 208 (1994). Supreme Court follows the general rule from Sutliff that in the usual case, court should use a valuation date reasonably proximate to date of distribution.

V. Finalizing The Valuation Of A Professional Practice

It appears that the Appellate Courts, and perhaps the trial Courts, are seeking to find a common vocabulary. Going concern value is likely to include goodwill factors. Goodwill which is attributed to the entity must be separated from the individual professional goodwill. Unfortunately, even in the Gaydos decision references are made to professional goodwill without drawing the clear line between the individual and the entity. Hopefully, future business valuation reports will highlight the goodwill attributed to the professional, which should be excluded from marital value. If it is determined that there is entity goodwill, such that the professional practice will survive after the departure of the individual, that should clearly be noted, and included in the marital value.

If the forensic accountant and business evaluator do not explicitly address these issues, the burden on the Court is tremendous. Consider that in Butler and Gaydos, the Appellate Court recognized that husband had one method of evaluation, wife had another method of evaluation, and the trial Court used a third method. In both cases, the matter was returned to the trial Court for re-determination of marital value using a fourth approach. Many trial Courts may seek impartial evaluators who have a reputation for fairness, in order to provide a rationale that is palatable under the evolving Pennsylvania law.

In the Rohrer case, a business evaluation without the professional practice twist, the Court specifically addressed the dilemma of income being charged to the business person during support hearings, which may result in business assets subject to equitable distribution. The Superior Court has clearly advised that it is appropriate to exclude the retained earnings from the equitable distribution value if they have been considered in Support Court. The potential mathematical complications are likely to elevate the stature of the forensic accountant in divorce litigation. If date of valuation is at date of trial, this is a likely complication. If it reverts back to date of separation, the concern won't arise. The Appellate Courts continue to give us much to think about, and many reasons for the clients to be dependent on their professional advisors.