Marriage of Charles
The subtext of this date-of-valuation-of-a-community-business case illustrates a lesson for family law practitioners in how a strategy can backfire. Often, the spouse who doesn’t manage a community business – the “nonoperating†spouse – worries about the dissipation of the business’s assets in the period between the date of separation and the date of trial. Accordingly, it is often the nonoperating spouse who brings a motion to value the business as of the date of separation, not the date of trial. (See Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2012) ¶ 8:1383, p. 8-330.2.) By contrast – at least in the typical dissipation scenario – operating spouses have no incentive to value a community business as of the date of separation. Time is on their side as value slip slides away.
In the present case, in line with the habitude of community businesses to decline in value in the post-separation period, the operating spouse sat back during the four-year period between the date of separation and the looming trial date, confident the community share of the business (a two-man design partnership) would be valued at a figure less than its value as of the date of separation. After all, the CPA firm jointly hired to value the business had, in 2009 – about a year and a half before trial in 2011 – valued the community’s share at $198,000. The $198,000 figure was comfortably less than the $226,000 figure at which the same accountants had valued the community share at the 2006 date of separation.
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