New Tennessee Law on Discount for Lack of Marketability in Tennessee Divorce Valuation

The use of a marketability discount in Tennessee divorce valuations has been a source of some confusion based on court rulings. A recent amendment to the Tennessee Code will provide clarity to business valuators who prepare divorce valuations in Tennessee.

The 110th Tennessee General Assembly passed House Bill 348 during the 2017 session  which  will take effect July 1, 2017 for all actions filed on or after that date.. As enacted, the law requires courts in making an equitable distribution of marital property to consider all relevant evidence, including valuation methods typically used with regard to such assets without regard to whether the sale of such asset is reasonably foreseeable, in determining the value of an interest in a closely held business or similar asset. This would include the consideration of the use of a discount for lack of marketability , discount for lack of control, and a control premium if relevant and supported by the evidence.

This new law appears to take aim at a 2007 Tennessee Court of Appeals decision in Bertuca v. Bertuca in which the court rejected the use of a discount for lack of marketability
because the owner-spouse did not indicate an intention to sell his interest in a business.

Should you need business valuation assistance or have questions, please call one of our credentialed professionals at (615) 822-8342 or contact us via email.

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