In a Massachusetts divorce case, the wife argued that the normalization adjustments to her salary from her dental practice were based on unreliable data. The husband’s valuation expert used data from Salary.com and Indeed.com and adjusted her salary downward for the three past years he used for the valuation (the capitalized cash flow method). The court did not find those sources to be totally unreliable and accepted the adjustments for two of the three years in the analysis. However, the adjustment for the most recent year was rejected because the data did not delineate between a regular dentist and a prosthodontist, which became relevant to the practice during that year. Also, the wife did not offer the opinion of a qualified business valuation expert.
The wife appealed, but the appellate court affirmed the lower court’s decision. It also affirmed a 21% goodwill discount the husband’s valuation expert applied, reflecting the estimated loss of clients that would occur if the wife left the practice.
The case is Kwak v. Bosarth, 2023 Mass. App. Unpub. LEXIS 179; 102 Mass. App. Ct. 1116; 2023 WL 2817904, and a case analysis and full court opinion are on the BVLaw platform.