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The TaxProf Blog reported an interesting story about a husband who failed to report his share of passthrough income from the medical billing company that he and his estranged wife owned together. The Tax Court was not impressed with the husband’s explanation that his wife had locked him out of the home where the business was located, raided their business and personal bank accounts, and ran up more than $50,000 […]

In Baker v. Baker (2004), a predecessor to the Smith case reported previously in this blog, the Superior Court considered the intangible goodwill value of a veterinary practice located in rural Lycoming County. The husband, who was a sole practitioner, had purchased the practice of a deceased veterinarian for $250,000 (including real estate worth $90,000) approximately six months prior to the separation of husband and wife. Aside from $10,000 withdrawn […]

A hot topic confronting the valuation community these days is whether to discount the earnings or cash flows of a Subchapter “S” corporation by subtracting the shareholder-level income taxes before capitalizing those earnings or cash flows in a business valuation. Intuitively, it stands to reason that an S corporation is not intrinsically more valuable than a C corporation that would generate the same net income or cash flow if it […]

In Smith v. Smith, the Pennsylvania Superior Court ventured into the murky waters of goodwill, an intangible element of business value. Goodwill may be derived from the positive reputation of a business, its location, and its unique products and services. This type of goodwill is generally known as “enterprise goodwill” in divorce parlance. On the other hand, goodwill also may be derived from the personal skills of a business owner […]

Welcome to BVSource, a blog about business valuation and divorce. In the coming weeks, I hope to begin a dialogue about current and recurring issues that are of interest to business owners who are experiencing or contemplating divorce, their lawyers and valuation experts, and others who may be interested.