And then there were four:Idaho decides marital goodwill in professional practices

BVWireIssue #54-1
March 7, 2007

In a case of first impression, the Idaho Supreme Court just considered the appropriate valuation of professional practice goodwill in marital dissolution cases.  In Stewart v. Stewart (January 26, 2007), the husband owned a dermatology practice, valued by the trial court at $130,000 in tangible assets and $211,000 in total “professional” goodwill.  The husband appealed, urging the court to adopt the current majority rule, currently on the books in 28 states, which distinguishes between enterprise and personal goodwill in divorce.  Despite a strong dissent, the Court declined to enter that “morass” and decided that professional goodwill in private practices (as in other marital businesses) was divisible property.

That leaves just four U.S. jurisdictions that have yet to consider the disposition of marital goodwill (four states hold that neither form of goodwill is marital property).  Appraisers and attorneys can expect challenges in these and also the fourteen states currently endorsing the minority rule.  For example, Kentucky and Ohio have already entertained appeals this year—and these case abstracts appear in Business Valuation Update™, and full text of the court opinions at BVLaw™.

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