First the Colorado family court accepted a 33% marketability discount for a controlling (70%) interest in a $1.7 million oil and gas operation (see BVWire #72-2). Then just last September, the appellate court confirmed the valuation—and rejected the wife’s argument that discounts should be precluded when valuing marital assets for divorce, as they are in statutory fair value cases in Colorado (see BVWire # 84-4). The wife appealed the decision again, and just last week the state’s highest court had the final say:

The Colorado Supreme Court affirms the court of appeals’ determination with respect to marketability discounts, holding that trial courts may in their discretion apply marketability discounts when valuing an ownership interest in a closely held corporation in marriage dissolution proceedings.

“This is big news for Colorado family law,” says Ron Seigneur (Seigneur Gustafson).  “Fair market value now ‘works’ in divorce cases, in addition to value to the owner, at the courts’ discretion, so it will create some interesting battles between experts,” clients and counsel.  “Colorado changes its place on the continuum,” comments Jay Fishman (Financial Research Associates, and co-chair of the BVR/Morningstar 3rd Annual Summit on Business Valuation in Divorce on Sept. 13-14 in Chicago.). What remains to be seen: whether the Colorado decision opens the door to marketability discounts in states with broad, equity-based or other “discretionary” standards of value.

Read the complete digest of IRM Thornhill in the next Business Valuation Update™; the Colo. Supreme Court’s opinion will be available soon at BVLaw™.