4.A Difficult to Classify (Business Increases in Value)

Question 1

How to you state the rule for Piera and Van Camp?

Answer 1

state the need to apportion business value increase between CP/SP.

If attributed to the managing spouse’s time, skill and effort, the courts apply Pereria - which favors the community.

If attibuted to the nature or value of the asset itself, the courts apply Van Camp - which favors the SP interest.

Question 2

What is the Pereria formula?

Answer 2

SP = initial value + calculation below

(Initial value x 0.10% simple interest x # years from marriage/acquisition to SEPARATION)

CP = Value at DIVORCE less SP value above

Question 3

How do you calculate increase in value from separation to divorce using Pereria?

Answer 3

Reverse it, starting with CP:

CP = Value of CP at separation + calculation below

(CP value at separation x fair rate of return x years of separation)

SP = FMV of CP at divorce less CP

Question 4

What is the Van Camp formula

Answer 4

CP: Market value of managing spouse’s services x no. of years less family expenses

SP: Value at DIVORCE less CP

Question 5

How do you calculate increase in value from separation to divorce using Van Camp?

Answer 5

SP: Reasonable value of services during separation less amount already paid.

CP: CP at divorce less SP

Question 6

Goodwill of Professional Practice

Answer 6

Value beyond assets and liabilities or return on investment and labor is “goodwill.” It is CP if earned during a marriage.

Value = (1) market sale value, (2) per expert testimony or (3) AS AN ALTERNATIVE: CAPITALIZE EXCESS EARNINGS attributable to goodwill.