DIVIDING AN INTEREST IN A LAW FIRM
A discussion of the various approaches used in valuing a law firm
upon Equitable Distribution
BRIAN F. CORBETT
PROFESSOR ALAN R. PALMITER
LAW & VALUATION
April 22, 2000
Upon the dissolution of a marriage, courts in many jurisdictions throughout the United States attempt to divide the property of the marriage equally among the husband and wife. This process, known as equitable distribution, is defined as the process whereby courts distribute all of the property legally and beneficially acquired by either the husband or the wife during the marriage. The first step in this process is to classify the property in the marriage as either “separate” or “marital.” A typical state statute defines marital assets as the real and personal property acquired by either spouse during the course of the marriage. Separate property, on the other hand, is defined as the real and personal property acquired by a spouse before marriage or acquired by a bequest, devise, descent, or gift during the course of the marriage. This classification is crucial because marital property is subject to division whereas separate property is not.
Valuation of marital assets in an equitable distribution is primarily done on a case specific basis, taking into account the circumstances of the parties and the type of property. Certain types of property that can be specifically valued are valued in such a manner (i.e. market value), but often is the case that certain marital property has a value that is above and beyond its market value. This is often the case with property that has sentimental value or property that cannot be transferred to other parties. The judge in an equitable distribution case takes this into consideration and values this property as having a value other than market value.
Often, the equal division of the tangible marital assets will not adequately provide for a truly equitable division of the property. Take, for example, the situation where the husband develops a career and provides the financial support whereas the wife dedicates her efforts to taking care of the children and supporting her husband’s career. Upon divorce, the husband leaves the marriage with an increased earning power developed throughout the years of the marriage whereas the wife leaves the marriage with nothing but homemaking skills. While the wife has greatly contributed to her husband’s career and increased earning power, she is not adequately compensated for this contribution. This is especially true in the case of a professional, such as an attorney. In recognition of the resulting inequity, a majority of states recognize that a spouse’s interest in a law firm, including its goodwill, has value and is subject to equitable distribution.
Problems arise when the courts attempt to determine the value of a spouse’s interest in a law firm, mainly due to the confusion and disagreement about the concept of valuation itself. This confusion is reflected in the courtroom in that there is currently no universally accepted method of valuation among the states. In addition, experts’ valuation of the same asset is often as different as apples and oranges. In this paper I will: (1) discuss the different recognized methods of valuing a spouse’s interest in a law firm, (2) define the concept of “goodwill” and discuss the confusion surrounding it, and (3) compare and contrast two states’ approaches (North Carolina and New York) to valuing a law firm.
The two most widely accepted methods of calculating the value of professional
practices in marital dissolution matters are fair market value and intrinsic value (sometimes referred to as holder’s value). These methods are based upon different assumptions, take into account different factors, and often result in vastly different valuations. One thing is similar about these two methods – both attempt to value something that is virtually impossible to accurately measure.
Fair market value is the most commonly used method of valuing business and
professional practice interests in marital dissolution matters. It is a sale-based measure of value – the price that would result from an arm’s length transaction. The generally accepted definition of fair market value is “…the price at which such property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell, and both having reasonable knowledge of relevant facts.” The business is valued as if it will continue to operate, not as an asset to be liquidated. The valuation requires a hypothetical sale from a hypothetical buyer to a hypothetical seller, one in which the court does not take into consideration the motivations peculiar to real buyers and sellers.
Fair market value, a sale-based measure of value, is not a realistic measure of an asset’s true value. Sales do not take place in a vacuum and the motivations and peculiarities of the buyer and seller are always reflected in the determination of the purchase price. Thus, valuing an asset is an extremely subjective exercise that takes into account numerous variables that cannot be quantified on a hypothetical basis. Fair market value does not reflect such variables and, therefore, cannot be said to be an accurate indicator of the “worth” of an asset. Further, fair market valuation is based upon the assumption that the asset can be transferred (i.e. willing buyer and willing seller), however, many jurisdictions either ethically or statutorily preclude lawyers from selling their practice. The use of fair market value seemingly fails for two reasons: (1) it doesn’t take into account the specific circumstances of real buyers and sellers and (2) it attempts to place a “market value” on a non-transferable asset.
Intrinsic Value, commonly referred to as holder’s value, is the value of an asset
as a going concern to a particular owner. This method does not take into consideration the marketability of the practice, only its value to the owner. While a law degree is not transferable to another, the degree has a certain value to its holder. It allows the holder to generate a benefit stream that is often in excess of normal compensation. Thus, while a law degree doesn’t have any value on the market, it does have a value to the specific holder of the degree. The same is true of a law practice. Although a law practice is often non-transferable, it still is a valuable asset to the owner or owners of the practice. This is one of the reasons that many legal and financial scholars favor the use of intrinsic value to determine the worth of a law practice in the context of an equitable distribution.
Valuing a law practice as a “going concern” for the purposes of equitable distribution is much more accurate than valuing the practice based on its fair market value for the reason that the firm will most likely continue to do business after the divorce. Absent evidence that the practice will be sold or liquidated, valuing the practice as an asset that will continue on is a more accurate depiction of the actual circumstances of the case. Furthermore, scholars have noted that the use of an intrinsic value approach to value a professional practice is an extension of the principles of the case specific valuation used by courts in an equitable distribution.
Valuators, using both fair market value and intrinsic value, attempt to take into
account the goodwill of a company or practice. A majority of states recognize goodwill as a marital asset subject to equitable distribution. Goodwill, “the most intangible of intangibles,” was defined by Judge Story as:
[t]he advantage or benefit which is acquired by an establishment
beyond the mere value of the capital, stock, funds, or property
employed therein, in consequence of the general public patronage
and encouragement which it receives from constant or habitual
customers, on account of its local position or common celebrity,
or reputation for skill or affluence, or punctuality, or from other
accidental circumstances or necessities, or even from ancient
partialities or prejudices.
Another view of goodwill is the accounting definition - the payment in excess of the fair market value of the identifiable net assets of a business. The valuation process attempts to approximate the price that a willing buyer would pay to purchase a company’s future stream of excess earnings (goodwill). Thus, in order to accurately value the worth of the business, it is important to include goodwill in the calculation of the value of a company. The most commonly relied upon approach for valuing the goodwill of professional practices, including law firms, is the capitalization of excess earnings approach.
Under the capitalization of excess earnings approach, three steps are taken to value goodwill. First, the normalized earnings of the business must be established. In order to do this one must take the average earnings of the last five years less any adjustments such that the earnings fairly reflect probable future earnings. Reasonable compensation is deducted from this amount by determining the average income of a practitioner with similar qualifications, education, experience, and capability. If excess earnings exist, the next step is to determine an appropriate capitalization rate. In order to determine a rate, a valuator must consider the risks involved and the particulars of the practice. The type, location, and demographics of the firm as well as the relationship between supply and demand are all factors to be considered. The lack of accepted discount rates for these factors makes the determination of the capitalization rate the most subjective component of the valuation. Because of this, the value of goodwill is never considered “indisputable or conclusive.” After the capitalization rate is determined, the normalized excess earnings are divided by the rate to give the valuator the value of the firm’s goodwill.
The value of goodwill can easily be miscalculated, mainly because it requires so
many subjective judgments on the part of the appraiser. Much of the confusion is caused by the distinction between personal and classic (or enterprise) goodwill. Classic is the goodwill generated by the business whereas personal is the goodwill generated by the individual’s reputation, skills, and ability. Classic goodwill is a marketable asset whereas personal goodwill is particular to the individual and not freely transferable. The traditional view is that classic goodwill is the only component of goodwill subject to equitable distribution. Courts rely upon market value to calculate its worth and the focus of this approach is whether there is a market for the sale of the goodwill. Thus, if it the goodwill is particular to, and inseparable from the individual, then it cannot be included as a marital asset.
A growing number of states now recognize personal goodwill as an asset subject to equitable distribution. Under this approach, goodwill need not be marketable to be subject to equitable distribution. In order to determine its value, the court may look to factors such as the practitioner’s age, health, past earning power, reputation in the community, skill, knowledge and past success. This approach seems to rely more upon intrinsic value in recognizing that while personal goodwill cannot be bought or sold, it still has value to the professional as a going concern. The problem is that the courts accepting this approach generally do not distinguish between personal and classic goodwill. Applying a sale-based valuation method to two very different assets – one that is transferable and one that is that is not – is not an accurate indicator of these assets’ true value. In order to be truly accurate it seems as though a court must distinguish between the two and apply the appropriate valuation method to the corresponding component.
Only those assets that are characterized as marital are subject to division among spouses. Marital assets are those assets acquired by either spouse or both spouses during the course of the marriage whereas separate assets are generally those assets acquired before or after the marriage. Thus, the timing of the acquisition of assets is critical to the determination of whether an asset will be considered marital or separate for the purposes of equitable distribution. Goodwill, an asset subject to equitable distribution, is based upon the future expectations of a business. This brings into question whether it is accurate to characterize goodwill as a marital asset or whether this violates the prohibition against sharing post-divorce earnings. Post-divorce earnings are a factor that should be considered for alimony calculations, not equitable distribution matters. By characterizing goodwill as a marital asset, there is a risk that goodwill be counted for both property division purposes (equitable distribution) and for the purposes of calculating post-divorce support obligations (alimony). While some courts have excluded goodwill as a marital asset for this very reason, those courts choosing to include it for equitable distribution purposes should keep in mind the double-counting risk when awarding post-divorce support.
State statutes typically provide little or no guidance for a court seeking to value an asset for the purposes of equitable distribution. In addition, there is not a valuation method that is generally accepted among financial experts. Thus, the burden of determining the proper valuation method ultimately rests upon the court. As a result, the standards emanating from case law vary widely from state to state.
New York takes a very proactive approach to equitable distribution by subjecting numerous assets to division among the spouses. State statutes reflect this proactive approach in that “marital property” (property subject to division among spouses) is defined very broadly so as to include a wide range of assets whereas “separate property” (property not subject to division) is defined very narrowly. Defining marital property broadly and separate property narrowly results in a “marital property pot” consisting of many assets typically not subject to division in other states. New York courts have even included celebrity goodwill as a marital asset subject to distribution. In addition, New York is the only state that considers professional licenses and enhanced earnings as marital property. Much of the property subject to equitable distribution in the state of New York, including both law licenses and enhanced earnings, cannot be bought, sold, or otherwise transferred. As such, a valuation standard based on the fair market value of this property is grossly inadequate. Thus, the valuation methods used by New York courts are based upon the intrinsic value or the value to the holder.
In the event of an equitable distribution, New York courts now divide the value of a spouse’s interest in a law firm as well as the value of his or her law license. Early case law rejected the valuation of both interests for the purposes of equitable distribution, upon the belief that it would result in unfair “double-counting.” Known as the “merger doctrine,” courts believed that after a certain period, the value of a spouse’s license merged into the value of his or her firm or practice. This doctrine was rejected by the state’s highest court in 1995 because of the logical and practical difficulties in applying it. The Court held that “[t]he merger doctrine should be discarded in favor of a commonsense approach that recognizes the ongoing independent validity that a professional license may have and focuses solely on the problem of valuing an asset in a way that avoids duplicative awards.”
New York courts will generally value a law firm, as well as most marital assets, as of the date of the commencement of the suit. However, in certain instances (such as the loss of a major client and resultant loss of the business’s value or by other adverse forces outside the spouse’s control), the court will value the firm at the date of trial. The legislature has not provided any guidance for the courts in determining the value of marital assets. Further, there is no uniform rule among the courts. Thus, the determination is one that is within the fact-finding power of the trial court, guided by expert testimony. In some instances, courts have relied upon provisions in partnership agreements, including those providing for death benefits, to arrive at value for an interest in a partnership. While courts occasionally use such provisions, many courts favor approaches that more realistically value the spouse partner’s actual participation in an ongoing business enterprise. An example of such an approach is the capitalization of excess earnings approach, the method utilized by the court in Grunfeld.
After determining the value of the firm, the court must next determine the value of the spouse’s law license. In doing so, the court must value the license in a way that avoids duplicative awards. In determining this value, the court must take into consideration two components – the value of the “bare” license and the enhanced earning potential created by the license. In order to determine the value of the “bare” license, the court calculates the value of the license in the hands of the average licensee. This is done by determining the difference between the present value of lifetime earnings of a similarly situated law firm associate and that of an employed person (of the same race and gender) with a bachelor’s degree. Next, the court determines the enhanced earning potential created by the license. To determine this, the court subtracts the median income of an average attorney admitted to the bar the same year the spouse was from the actual earnings of the spouse that are beyond the reasonable compensation of an attorney practicing for the same amount of time in a similar area of the law. These numbers are projected forward and then reduced to present value. To avoid duplicative awards, however, the court must deduct the income used in determining the value of the practice from the calculation of future enhanced earning capacity due to the license. After all of this is completed, the court adds the value of the “bare” license to the enhanced earnings potential to reach a final value for the license.
New York’s approach to the valuation of marital assets for the purposes of equitable distribution is very unique. It treats an interest in both a law firm and a law license as marital property subject to division. This approach often leads to valuations that overvalue the spouse’s actual worth. While the case law suggests that a court must be careful to avoid a “double count,” the potential for inequity is always present due to the speculative nature of the process of valuation. In addition, there is no generally accepted valuation method accepted by either the legislature or the courts. Thus, the court must frequently choose between valuations conducted by experts that are often far from independent.
North Carolina takes a very conservative approach to equitable distribution by
limiting the number of assets it subjects to equitable distribution. Unlike New York, North Carolina does not consider professional licenses and degrees, even if acquired during the marriage, marital property subject to equitable distribution. However, like most states, North Carolina courts have held that a spouse’s interest in a professional practice, including its goodwill, is a marital asset subject to equitable distribution. The value of this interest is measured as of the date of the separation of the parties.
The division of marital property is accomplished by using the net value of the property (market value), less the amount of any encumbrance serving to offset or reduce market value. Determining this value is somewhat difficult to accomplish. Time and again, courts have reiterated that there is no single best approach in valuing a professional association or practice and that various approaches can and have been used. Experts are used to assist the trier of fact in determining the value of these assets. The determination of the admissibility of expert testimony is within the sound discretion of the trial court and the standard is whether the expert’s testimony will be “helpful” to the trial court in determining value.
The determination of whether the approach used by an expert is appropriate is a question of fact to be determined by the trial court. A number of valuation methods have been found appropriate for making this determination, including methods set out in partnership agreements, an earnings or market approach based on the market value, a comparable sales approach, as well as a combination of these approaches. The trial court is vested with wide discretion in making this determination and will be overturned only if the appellate court finds that the approach accepted by the trial court did not reasonably approximate the net value of the partnership interest. While the valuation of the individual practice will depend upon the particular facts and circumstances of the case, the court should always consider certain financial characteristics of a practice.
An important component of the value of a professional practice is its goodwill. Determining whether goodwill exists and its value is a question of fact to be determined by the court with the aid of expert testimony. The Court of Appeals has voiced its concern in valuing goodwill, stating that courts should value goodwill “with great care, for the individual practitioner will be forced to pay the ex-spouse ‘tangible’ dollars for an intangible asset at a value concededly arrived at on the basis of some uncertain elements.” There is no generally accepted method for determining the value of goodwill, however, the Court of Appeals have listed a number of factors that should be considered by the trial court. Various approaches used by experts have been accepted by the trial courts including market value, capitalization of excess earnings, average gross annual income, and comparable sales. The appellate courts require only that the valuation measure “the present value of goodwill by taking into account past results, and not the postmarital efforts of the professional spouse.”
North Carolina trial courts are granted with a tremendous amount discretion in
determining the proper value of a spouse’s interest in a professional practice. The valuation methods employed by the trial court are generally not questioned so long as they use a generally accepted standard recognized by financial experts. The trial court is, however, encouraged to “clearly indicate the evidence on which its valuations are based, preferably noting the valuation method or methods on which it relied.” Only in the event that there is a “clear abuse of discretion” such that the trial court’s decision was “so arbitrary that it could not have not have been the result of a reasoned decision” will the trial court’s decision be reversed. While a trial court is generally the best arena to decide issues of fact, North Carolina takes a risk in granting the trial court with so much discretion in determining the proper valuation. Because the courts generally rely upon the expert testimony presented by the parties to make its determination, the case often comes down to a battle of the experts. While the North Carolina Rules of Evidence provide for the appointment of an independent court-appointed expert, this method is not utilized enough. As such, the parties’ expert opinions often greatly differ and too often the party employing the better known expert will prevail.
Equitable distribution statutes were enacted to remedy the inequities that often resulted when a marriage dissolved by way of divorce. It is a reflection of the idea that marriage is a partnership in which the husband and wife are equal partners. Upon dissolution, the marriage should be treated as a partnership is treated, with both partners taking equally. Equitable distribution divides “marital property” acquired during the marriage while property acquired before and after the marriage is excluded. A majority of states, including New York and North Carolina, recognize that a spouse’s interest in a law firm is “marital property” subject to equitable distribution. Nonetheless, both states have struggled in determining the proper value. There is no generally accepted method of valuation among the states as well as within the states. Adding to this confusion, there is no consensus among financial experts. Courts generally accept numerous methods, the determination of which method to use being dependent upon the particular facts and circumstances of the case.
Included in the value of a law firm is goodwill, a component that is particularly difficult to value. It is an intangible asset that is often personal to the practitioner or practice and cannot be bought, sold, or otherwise transferred. Thus, the valuation of this asset must be based upon intrinsic rather than market value. Such a valuation is particularly susceptible to error since it is not based upon any recognized standards and requires several subjective judgments on the part of the valuator. Valuing goodwill raises a number of other concerns. Distributing goodwill, a concept measuring future expectations of profit, equally among spouses seems to violate the equitable distribution prohibition against distributing post-divorce earnings. In addition, there is also the risk that valuing goodwill will result in an unfair “double-count” in that these assets will be counted for purposes of both equitable distribution and post-divorce support.
The valuation of an interest in a law firm is an extremely subjective exercise that is particularly susceptible to error. As a result, professionals will often be forced to pay their ex-spouse “tangible” dollars for an intangible asset at a value that is based on uncertain elements. Nonetheless, courts continue to value and divide a spouse’s interest in a law firm for the purposes of equitable distribution. Due to the lack of certainty and established standards in this area of the law, a professional experiencing marital problems would be well advised to think twice before filing for divorce.
 See N.C. GEN. STAT. § 50-20(b)(1) (1981). Note that in North Carolina the date of separation (not the date of a divorce) is the ending date for the purposes of determining whether an asset is marital or separate. Thus, anything acquired by a spouse after this date is considered a separate asset and excluded from the marital estate.
 See N.C. GEN. STAT. § 50-20(b)(2) (1981).
 See Joseph W. Cunningham, Equitable Distribution and Professional Practices: Case Specific Approach to Valuation, 73 Mich. B.J. 666 (1994).
 See Alicia Brokars Kelly, Sharing a Piece of the Future Post-Divorce: Toward a More Equitable Distribution of Professional Goodwill, 51 Rutgers L. Rev. 569 (1999).
 See Jay E. Fishman and Bonnie O’Rourke, Value: More Than a Superficial Understanding is Required, 15 J. Am. Acad. Matrim. Law. 316 (1998).
 See Cunningham, supra note 4, at 666.
 Treas. Reg. § 25.2512-1 (as amended in 1992).
 See Fishman, supra note 6, at 318.
 See Estate of Bright v. United States, 658 F.2d 99 (5th Cir. 1981).
 See Richard J. Klein, Valuation of Professional Practices & Licenses, 244 PLI/Est 117 (1996). See also Cary B. Cheifetz, Valuing the Attorney’s Law Practice, C720 ALI-ABA 57 (1991).
 See Fishman, supra note 6, at 315.
 See Fishman, supra note 6, at 320.
 See Cunningham, supra note 4, at 669.
 See Cunningham, supra note 4, at 667.
 See Kelly, supra note 5, at 572.
 DONALD E. KIESO & JERRY J. WEYGANT, INTERMEDIATE ACCOUNTING 570 (3d ed. 1980).
 JOSEPH STORY, COMMENTARIES ON THE LAW OF PARTNERSHIPS § 99, at 157 (7th ed. 1881).
 See Kelly, supra note 5, at 579.
 See Kelly, supra note 5, at 611.
 See Kelly, supra note 5, at 610.
 See Kelly, supra note 5, at 610.
 See Kelly, supra note 5, at 610.
 See Kelly, supra note 5, at 611.
 See Kelly, supra note 5, at 611.
 See Harriet N. Cohen & Patricia Hennessey, Valuation of Property in Marital Dissolutions, 23 FAM. L.Q. 339 (1989).
 SHANNON P. PRATT ET AL., VALUING SMALL BUSINESSES AND PROFESSIONAL PRACTICES 212 (2d ed. 1993).
 See Kelly, supra note 5, at 587.
 See Kelly, supra note 5, at 586-87.
 See Kelly, supra note 5, at 572-73.
 See In re Marriage of Graff, 902 P.2d 402 (Colo. Ct. App. 1994).
 See Kelly, supra note 5, at 613.
 See N.C. GEN. STAT. §§ 50-20(b)(1), 50-20(b)(2) (1981). Separate assets also include assets acquired by a spouse by bequest, devise, descent or gift during the course of the marriage.
 See Alan S. Zipp, Divorce Valuation of Business Interests: A Capitalization of Earnings Approach, 23 FAM. L.Q. 89 (1989).
 See Kelly, supra note 5, at 618.
 See Jon D. Brooks, Casenote, Personal Goodwill in Illinois: Duplication of Section 503(D) of the IMDMA?, 21 S. ILL. U. L.J. 335 (1997). See also Kelly, supra note 4, at 620.
 See Fishman, supra note 6, at 322.
 See N.Y. DOM. REL. LAW § 236(B)(1)(c) (McKinney 1980) (broadly defined as “…all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held…”).
 See N.Y. DOM. REL. LAW § 236(B)(1)(d) (McKinney 1980) (limited to “(1) property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse; (2) compensation for personal injuries; (3) property acquired in exchange for or the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse; (4) property described as separate property by written agreement of the parties pursuant to subdivision three of this part”).
 See Golub v. Golub, 139 Misc.2d 440, 527 N.Y.S.2d 946 (1988) (Court held that increase in value of wife’s acting and modeling career was marital property subject to equitable distribution.); Elkus v. Elkus, 169 A.D.2d 134, 572 N.Y.S.2d 901 (1991), appeal denied, 79 N.Y.S.2d 851, 588 N.E.2d 99, 580 N.Y.S.2d 201 (1992) (Court held that increase in value of wife’s celebrity status and career as opera singer were marital property subject to equitable distribution.).
 See Fishman, supra note 6, at 330. See also O’Brien v. O’Brien, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 489 N.E.2d 712 (1985) (first case that recognized professional licenses as marital property).
 See Marcus v. Marcus, 137 A.D.2d 131, 135 A.D.2d 216, 525 N.Y.S.2d 238 (1988).
 See McSparron v. McSparron, 87 N.Y.2d 275, 662 N.E.2d 745, 639 N.Y.S.2d 265 (1995).
 See id. at 285, 662 N.E.2d at 750, 639 N.Y.2d at 270.
 See Grunfeld v. Grunfeld, 688 N.Y.S.2d 77 (1999).
 See id.
 See Amodio v. Amodio, 70 N.Y.2d 5, 509 N.E.2d 936, 516 N.Y.S.2d 923 (1987).
 See Burns v. Burns, 84 N.Y.2d 369, 643 N.E.2d 80, 618 N.Y.S.2d 761 (1994).
 See Wadsworth v. Wadsworth, 219 A.D.2d 410, 641 N.Y.S.2d 779 (1996) (Court utilizes death benefit provision of firm’s partnership agreement to determine value of partnership interest.).
 See Wadsworth, supra note 49.
 See Grunfeld, supra note 45.
 See Rochelle G. v. Harold M.G., 170 Misc.2d 808, 649 N.Y.S.2d 632 (1996). See also Grunfield, supra note 45.
 See Grunfeld, supra note 45, at 83.
 See id.
 See Wadsworth, supra note 49, at 414, 641 N.Y.S.2d at 779.
 See N.C. GEN. STAT. § 50-20(b)(2) (1981).
 See Poore v. Poore, 75 N.C.App. 414, 331 S.E.2d 266, discretionary review denied, 314 N.C. 543, 335 S.E.2d 316 (1985).
 See Weaver v. Weaver, 72 N.C.App. 409, 324 S.E.2d 915 (1985).
 See N.C. GEN. STAT. § 50-21(b) (1981).
 See Poore, supra note 57, at 416-17, 331 S.E.2d at 269.
 See Sharp v. Sharp, 116 N.C.App. 513, 449 S.E.2d 39 (1994).
 See McLean v. McLean, 323 N.C. 543, 374 S.E.2d 376 (1988).
 See Weaver v. Weaver, 72 N.C.App. 409, 324 S.E.2d 915 (1985) (Court recognizes valuation method furnished in partnership agreement that calculates spouse’s interest as if he had withdrawn from the partnership, adding the amount in the spouse’s capital account to the remainder of the spouse’s partnership interest.)
 See id.
 See Sharp, supra note 61, at 528, 331 449 S.E.2d at 528.
 See Sharp, supra note 61, at 526, 449 S.E.2d at 46.
 See Poore, supra note 57, at 419, 331 S.E.2d at 270. The North Carolina Court of Appeals held that a trial court should always consider the following in valuing a professional practice: (1) the fixed assets including cash, furniture, equipment, and other supplies; (2) other assets including accounts receivable, and the value of work in progress;(3) goodwill, if any; and (4) liabilities.
 See Poore, supra note 57, at 421, 331 S.E.2d at 271.
 See Poore, supra note 57, at 421, 331 S.E.2d at 271 (quoting Dugan v. Dugan, 92 N.J. 423, 435, 457 A.2d 1, 7 (1983)).
 See Poore, supra note 57, at 421, 331 S.E.2d at 271. The Court of Appeal listed the following as relevant factors in determining the value of goodwill: “the age, health, and professional reputation of the practitioner, the nature of the practice, the length of time the practice has been in existence, its past profits, its comparative professional success, and the value of its other assets.”
 See McLean, supra note 62, at 558, 374 S.E.2d at 385. See also Poore, supra note 56, at 421-22, 331 S.E.2d at 271-72.
 Poore, supra note 57, at 421, 331 S.E.2d at 271.
 Poore, supra note 57, at 422, 331 S.E.2d at 272.
 White v. White, 312 N.C. 770, 777, 324 S.E.2d 829, 833 (1985).
 N.C. R. EVID. 706.