A prior article addressed the principles governing whether the appreciation in value of business interests, stocks, mutual funds, bonds, and similar investment holdings, brought into a marriage by a spouse constitute marital property subject to equitable division on divorce, or a spouse’s separate, non-marital property.(1) This article discusses the burden of proof connected to that determination, and its implications.

Characterizing an asset brought into a marriage by a spouse as nonmarital or marital, for purposes of equitable division on divorce, requires an analysis of two determinative factors: a) the asset’s increase in value, if any, during the marriage; and b) whether any such gain resulted from spousal effort, either separately or in conjunction with the other spouse.(2) In order to calculate what, if any, amount of appreciation occurred during the marriage, a trial court must be able to determine the value of the asset both on the date of marriage and on the date of divorce.(3)

“The party seeking the equitable division of the appreciation has the burden to establish the [asset’s] true market value at the time of marriage and at the time of divorce.”(4) Failure of the party to meet his/her burden results in ownership of the asset (including its appreciated value) remaining as it existed before trial.(5)

Where the asset under consideration is a spouse’s ownership interest in a closely-held corporation, the value of the spouse’s ownership interest at the time of the marriage cannot be established through expert testimony estimating the basis of the spouse’s shares on the date of the marriage, because an individual’s basis in a stock share of a closely-held corporation does not necessarily reflect that share’s market worth on any particular date.(6) Nor can the value of the spouse’s shares on the date of marriage be calculated by reference to the amount the spouse received for selling a portion of his shares within a year after the marriage, at least absent evidence that the price the spouse received was representative of the shares’ true market value at the time of the sale.(7)

Instead, expert witnesses (typically forensic accountants) will employ one of three principle methods to value ownership in a closely-held business: a) the income or capitalized earnings method, under which an expert capitalizes indicated earnings at a reasonable return on investment based on relative risk and current interest rates; b) the market approach method, under which an expert performs a comparison with price earnings ratios of publicly traded companies in the same or comparable industry; and c) the cost approach method, under which an expert appraises all underlying assets, tangible and intangible, with adjustment for existing liabilities.(8) In an appreciation in value case, the expert naturally will have to prepare two valuations: one at the time of the parties’ marriage and the other at the time of the divorce. Provided the expert submits proof of values by any techniques or methods which are generally acceptable in the financial community and otherwise admissible in evidence, the valuations should pass muster in calculating the appreciation in value of a closely held business interest.(9)


(1) See Classification of Stocks, Mutual Funds and the Like for Equitable Division on Divorce. (2) Sullivan v. Sullivan, 295 Ga. 24, 757 S.E.2d 129, 132(1) (2014). (3) Id. (4) Id., citing Barber v. Barber, 257 Ga. 488, 489(3), 360 S.E.2d 574 (1987). (5) See Barber, supra, 257 Ga. at 489(3). (6) Sullivan, supra, 757 S.E.2d at 132(2). (7) Id., at 133(2). (8) Miller v. Miller, 288 Ga. 274, 275, 705 S.E.2d 839 (2010), citing Steneken v. Steneken, 183 N.J. 290, 873 A.2d 501, 505(II) (2005). (9) Id.

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