Certified Valuation Analyst (CVA) Practice Exam

Which of the following standards of value is most commonly used in divorce cases?

1. Fair market value

2. Investment value

3. Liquidation value

4. Book value

The correct answer is: Fair market value

Fair market value is the standard of value most commonly used in divorce cases because it reflects the price that a willing buyer would pay to a willing seller in an open and competitive market, without any undue pressure on either party. This standard aims to provide a realistic assessment of the value of assets in a separation context, ensuring that both parties receive a fair distribution of marital assets. It accounts for both tangible and intangible assets and considers the economic conditions and opportunities that would exist in a hypothetical transaction. Other standards, such as investment value, liquidation value, and book value, serve different purposes. Investment value pertains to the value of an asset to a specific investor based on their unique circumstances and investment criteria, which may not reflect the fair market conditions relevant in a divorce. Liquidation value focuses on the net amount that could be realized if an asset were sold in a forced sale, which often does not provide a fair market perspective. Book value is primarily based on the balance sheet value of assets and may not accurately represent the current market conditions or true economic value, making it less appropriate for determining equitable distribution in divorce proceedings.