When Is A Community Property Business Valued For Division In A Divorce?
Generally speaking, all assets, including businesses, are valued as close to the date of trial as possible, not the date of separation. That is the default time used, and what is set out in the California Family Law Code in section 2552.
There are some times when the business may be valued at a different time, and the burden will on the party asking for that alternative time to be used to show why it is appropriate. The two main reasons for a different valuation time are cases where a business grows significantly AFTER the separation and the growth is attributable to one party’s efforts, rather than market forces, normal growth, or other factors. The other is when the party in control of the business intentionally devalues the business to try to drive down the equalization payment.
The actual code section reads as follows:
Family Code Section 2552
(a) For the purpose of division of the community estate upon dissolution of marriage or legal separation of the parties, except as provided in subdivision (b), the court shall value the assets and liabilities as near as practicable to the time of trial.
(b) Upon 30 days’ notice by the moving party to the other party, the court for good cause shown may value all or any portion of the assets and liabilities at a date after separation and before trial to accomplish an equal division of the community estate of the parties in an equitable manner.
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