New Mexico Divorce Business Valuation: Pereira vs. Van Camp Methods

When a spouse owns a business in a New Mexico divorce, the core question is not whether the business itself gets divided — it is how much of the business's value belongs to the community. If the business was started during the marriage, it is 100% community property. But if one spouse owned it before the wedding and grew it during the marriage, the court must separate the community's contribution from the separate property baseline.

New Mexico uses two apportionment methods — Pereira and Van Camp — to make that split. Which one applies depends on why the business grew.

The Mitchell v. Mitchell Foundation

Under the landmark Mitchell v. Mitchell ruling, the labor of both spouses during the marriage is a community asset. This means that if a separate-property business grows because the owner spouse worked in it during the marriage, that growth belongs to the community. The owner's daily labor — managing operations, building client relationships, developing products — is treated the same as wages from a job. Those wages would have been community property, and the business value created by that labor is too.

Pereira Apportionment: Labor-Driven Growth

The Pereira method applies when the business's growth was primarily driven by the owner spouse's personal labor and talent — not by passive market forces or external capital.

How it works:

1. Establish the business's value at the date of marriage (the separate property baseline)
2. Apply a conservative, reasonable rate of return to that baseline value for the duration of the marriage — typically 3% to 5%, representing what the capital would have earned passively in a bank or conservative investment
3. Everything above that reasonable return is classified as community property

Example: A spouse owned a consulting firm worth $100,000 at the time of marriage. Over a 10-year marriage, the firm grew to $500,000. Applying a 4% annual return to the separate baseline:

• Separate property baseline with passive return: approximately $148,000
• Community property share: $500,000 minus $148,000 = $352,000
• Non-owner spouse's share: $352,000 / 2 = $176,000

Pereira favors the non-owner spouse because it attributes most of the growth to labor (community) rather than capital (separate). Courts use it when the owner was deeply involved in day-to-day operations and the business's success is tied to their personal effort.

Van Camp Apportionment: Market-Driven Growth

The Van Camp method applies when the business appreciated primarily due to market forces, capital investments, or external factors — not the owner's daily labor.

How it works:

1. Determine a reasonable market-rate salary for the owner's services to the business
2. Calculate the total value of that salary over the marriage
3. Deduct any family expenses the business paid during the marriage (housing, car payments, insurance, etc.)
4. The remaining "salary equivalent" is the community's share — everything else is separate property appreciation

Example: Using the same $100,000-to-$500,000 growth, but in a real estate investment company where the market did most of the work:

• Reasonable annual salary for the owner's role: $80,000/year x 10 years = $800,000
• Family expenses paid by the business: $600,000
• Community property share: $800,000 minus $600,000 = $200,000
• Non-owner spouse's share: $200,000 / 2 = $100,000

Van Camp typically produces a smaller community share because it treats the owner's labor as already compensated through salary equivalents.

Which Method Applies

The choice between Pereira and Van Camp is fact-specific. Courts look at:

• How involved was the owner? If they worked 60 hours a week building the business, Pereira is more appropriate. If they delegated operations to employees and the business ran on its own momentum, Van Camp fits better.
• What drove the growth? A tech startup built on the founder's patent portfolio looks like Pereira. A rental property portfolio that appreciated with the housing market looks like Van Camp.
• Was the owner compensated? If the owner spouse drew a fair market salary from the business during the marriage, Van Camp's logic is already partially accounted for. If they took minimal salary to reinvest profits, Pereira captures the deferred community value.

In practice, most small businesses in New Mexico — restaurants, professional practices, service companies — end up under Pereira because the owner's personal labor is the primary growth engine.

Getting the Valuation Done

Business valuation in a divorce typically requires a professional appraiser (a Certified Valuation Analyst or an ASA-credentialed appraiser). They will use one or more of three standard approaches:

• Income approach: Values the business based on its expected future earnings
• Market approach: Compares the business to similar businesses that have recently sold
• Asset approach: Values the business based on its tangible and intangible assets minus liabilities

The appraiser's report becomes the foundation for applying either Pereira or Van Camp. Without a credible valuation, neither method can produce reliable numbers.

The New Mexico Divorce Financial Split Guide includes a business valuation worksheet that helps you organize the financial records an appraiser needs and understand how the apportionment methods affect your settlement.

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