In 2002, the Supreme Court of Mississippi ruled on Singley v. SingleySingley established the treatment of goodwill in business valuations attendant with divorce cases.  Under Singley and subsequent rulings, goodwill is excluded from the fair market value of a business owned by one or both parties.  In its ruling, the Court cites an Illinois case (Marriage of Zells) – “goodwill in professional practice is not marital property, but is an aspect of income potential to be considered in maintenance and support.”  Cases subsequent to Singley extended this treatment to virtually all sorts of business enterprises.  In an environment where permanent maintenance / support arrangements are commonplace, this treatment is reasonable.

However, chancellors are becoming increasingly reluctant to award alimony.  How then should goodwill be treated?  Goodwill can be significant; and if alimony is not awarded, one can certainly argue that excluding goodwill from asset division is not equitable.  Currently, most states make a distinction between professional (or personal) goodwill and corporate (or enterprise) goodwill.  These states include corporate goodwill in and exclude professional goodwill from the marital estate.  The presumption is that all corporate goodwill is transferable, and that no professional goodwill is transferable.  As with most absolutes, these are both patently false.  A wealth of data is available to show that personal goodwill is sold with medical and dental practices.  As for corporate goodwill, financial reporting standards require that such goodwill be assessed periodically and written down should the realizable value fall below the recorded value.

In McReath v. McReath, the Wisconsin Supreme Court found that “saleable” or transferable goodwill is marital property.  In McReath, the Court ruled that the presumed personal goodwill of an orthodontist was saleable as evidenced by Dr. McReath’s acquisition of his practice, in which 89% of the purchase price was allocated to goodwill.  Business valuators are uniquely trained to assess the transferability of goodwill.  It is time to put this expertise to use and include transferable goodwill in the marital estate.

Charles P. Rafferty, CPA, CFE, CVA, ABV, CFF

Charles P. Rafferty, CPA, CFE, CVA, ABV, CFF is a member with GranthamPoole PLLC and a recognized leader in the fields of business valuation, litigation services, and forensic accounting.  He has written, taught, and spoken extensively on these topics locally and nationally.  He has served on the Ethics Oversight Board of the National Association of Certified Valuators and Analysts (“NACVA”), as president of the Mississippi Chapter of NACVA, and as Chairman of the Business Valuation Committee of Mississippi Society of Certified Public Accountants.  Please contact Charley at,, or 601-499-2400. CPA license # R2608

***The above does not represent tax advice.  Each situation is fact-dependent, and you should seek the advice of a competent advisor. GranthamPoole PLLC is a provider of tax, accounting, advisory and strategic services, partnering with clients across a broad spectrum of industries and sizes.

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