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A USPAP-Certified Appraisal Trumps a Non-Certified Appraisal in North Dakota Supreme Court Case

August 16, 2012

A divorce case in the North Dakota Supreme Court last year highlights the importance of working with a certified appraiser rather than someone who is not certified. The primary issue before the Supreme Court of North Dakota was the value of the husband’s orthodontic practice, in addition to spousal support issues. The court preferred the testimony or valuation estimate of a certified appraiser over the testimony of a business broker, an attorney who conducted appraisals for the brokering sales of dental practices.

The district court found the appraisal from the husband’s expert, the certified appraiser, more accurate than the appraisal from the wife’s expert, the business broker. In making its findings on the value of the orthodontic practice, the district court relied on the certified appraisal and made a few adjustments. The court stated that it considered the husband’s appraisal more accurate because the appraiser was a certified appraiser who performed the appraisal in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP).

The certified appraiser testified the Uniform Standards of Professional Appraisal Practice are consistent with Internal Revenue Service rulings on valuing closely held businesses, like the orthodontic practice. Using an income approach, his valuation provided a fair market value of the stock of the orthodontic practice, which is organized as an S Corporation. He considered the tangible and intangible assets, earnings, and debt of the practice to complete a stock valuation.

The court considered the appraiser’s method of determining the value of intangible assets a critical factor in finding his appraisal more accurate. The court found the prior sale was a “truly comparable sale” because it was an arm’s-length transaction, with a willing seller and buyer of the same practice in the same market. The court found the amount the husband paid for the practice’s intangible assets could be relied upon to accurately determine their fair market value.

Chances are you’ll need an appraisal conducted at some point in the near future; make sure it will stand up to scrutiny by courts and other government agencies. Contact the NEBB Institute, if you need to find a certified appraiser in your area.

The NEBB Institute endorses and strives to observe the highest standards of professional ethics to preserve the public trust inherent in the professional appraisal practice. The Institute provides initial and monthly comprehensive education, ongoing support, and a dynamic international network, and certifies professionals in the art of machinery/equipment appraisal and brokerage.

By: NEBB Institute


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