Tax rate slipup in dental practice valuation

BVWireIssue #260-3
May 15, 2024

marital dissolution/divorce
divorce, dental practice valuation, marital estate, spousal support, equitable distribution, accounting, marital property

In a North Dakota divorce case, both sides had expert valuations done on the husband’s dental practice. The husband’s expert used the income approach, took a 15% DLOM, used a tax rate of 19%, and came up with a value of $999,000. The wife’s expert used the income and market approaches (both approaches reaching essentially the same value), did not take a DLOM, and used a 38% tax rate.

Oops: The husband’s expert admitted that his tax rate of 19% was inaccurate, but, had he corrected the taxes, the value would have been lower and more in the husband’s favor. The district court found the wife’s expert to be more credible and valued the practice at $1,300,000. The husband appealed, arguing that his expert was more experienced and accurate.

The state’s supreme court affirmed the district court’s opinion. This was a matter of credibility, and choosing one expert over the other in this case was not “clearly erroneous.”

The case is Kemmett v. Kemmett, 2024 ND 65; 2024 N.D. LEXIS 52; 2024 WL 1459637, and a case analysis and full court opinion are on the BVLaw platform.

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