Blog

Category: Matrimonial & Divorce

We have distilled decades of experience at the intersection of law, business and finance into a suite of articles to help our clients make sense of business valuation, forensic accounting, and litigation support. Please visit our site regularly for our latest content.

According to psychologytoday.com, most divorces are filed during the very beginning of the year. Understandably, couples considering divorce try to avoid disrupting family activities during the holidays and, instead, wait to deal with such issues until after the holiday season is over.   After children, financial matters are often the most difficult thing to address during a divorce. Gathering important financial documents at the start of a divorce proceedings can help lower the stress and confusion for counsel and their clients. To help you through the process we have compiled the list below: #1 Certified Copies of Business & Personal Income Tax Returns Most tax preparers utilize computer software to prepare income tax returns; this produces three different versions of the tax return: the government (or filing) copy, the client copy, and the preparer’s copy. The filing copy is the version that includes only those forms and schedules that are required by the taxing authorities.  The client copy includes the filing copy plus other supporting schedules that the software creates. The preparer copy includes all schedules, summaries, calculations, and analytics prepared in conjunction with the tax return.  Generally, one should request copies of the preparer copy, since this version is all inclusive and contains valuable information.  In many instances, you may also request a certified copy from the taxing authority so that you can compare what has been filed to the copy that you have been provided. Certified copies of federal income tax returns can be obtained by submitting Form […]


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Hidden Treasures in Tax Returns

Posted in Matrimonial & Divorce, on Oct 2014, By: Mark S. Gottlieb

During my first experience as an litigation support expert in a matrimonial matter, there was barely any information on the search for omitted income or hidden assets.  Much of what we now call forensic accounting was performed intuitively by those with strong auditing backgrounds. In that first case, the “money spouse” was in a family business.  Income, sales, and payroll tax returns were all filed on time and appeared to be complete and accurate.  But when the reported income was compared to the ordinary living expenses on the “non-money spouse’s” Certified Net Worth Statement, the expenses exceeded the funds earned.  Two questions emerged: (1) Were the expenses on the statement actually paid or merely a wish list?; and (2) Were other funds, such as loans, credit card debt, or gifts, etc., to account for this difference? You don’t have to be a certified forensic accountant to smell a thief.  However, to catch the culprit you need the skills of a gumshoe. Business tax returns report the assets, liabilities, equity, revenues, and expenses of an entity.  The balance sheet lists the historical cost of what the entity owns (assets) and its obligations (liabilities).  Commonly referred to as the business’s resources, assets can be cash, inventory, fixed assets, and real estate.  Liabilities represent amounts owed, such as amounts due to vendors, mortgage obligations, and other debts. One must verify that assets and liabilities are truly business related and not personal.  Some personal assets hidden within businesses are automobiles, real estate, or investments.  […]


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Cash Businesses and Divorce

Posted in Matrimonial & Divorce, on Sep 2014, By: Mark S. Gottlieb

After Colorado instituted Amendment 64 in early 2014, a profitable industry sprouted up around the legalization of marijuana. However, despite these new businesses generating roughly $3 million in state taxes in January 2014 alone, they have encountered serious problems with reliable accountability. Because marijuana still violates federal law, banks remain hesitant to associate with marijuana businesses. This has forced many Colorado shops to remain cash-only businesses which, tax collectors worry, may result in understatements of sales and income. If this occurs, Colorado could be short-changed on a large portion of taxes. In fact, most cash-only businesses lend themselves to potential fraud. This can have damaging effects not only for tax collectors, but also for litigants in a matrimonial action. While child support is calculated differently by each state, spousal support depends on a variety of factors and is often up to the court.  One key element that helps calibrate support is the spouses’ income, assets, and the total marital estate. Ideally, financial and tax records accurately reflect monetary resources and the need of both spouses. However, this is often not true—especially in cases involving cash-based businesses. Cash-based businesses are enterprises where customers make a large percentage of payments in cash. These transactions have great potential for bypassing proper documentation and taxation. Property bought with cash can also help conceal unreported income. In a divorce, therefore, the suspicion of unreported income is potentially detrimental to a non-business-owner spouse and the couple’s children, and must be investigated. The first step a non-business-owner […]


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An Attorney's Guide to Same-Sex Marriage Tax Issues

Posted in Matrimonial & Divorce, on Feb 2014, By: Mark S. Gottlieb

ATTENTION MATRIMONIAL LAW ATTORNEYS Couples who are involved in a same-sex union have a number of different tax issues that must be addressed that are not applicable to heterosexual married couples. These tax issues will vary depending upon whether the individual couple lives in a state that recognizes same-sex marriage or its equivalent, or whether they live in a state that does not recognize any type of legal union for same-sex couples. When the marriage is recognized by the state, while the couple may have more tax benefits in some cases, more tax issues may arise than exist in situations where no marriage or marriage equivalent is acknowledged on a state level. Because the federal government does not recognize homosexual marriage nor any equivalent thereto as of 2011, some couples may have tax returns and tax identities that differ significantly on the state and federal level.  –Why are there tax issues for same-sex marriages? – What are the differences between federal and state income tax rules? – How should income be claimed? – Can marital assets be transferred or gifted? – How should children be claimed? Please click here to instantly obtain a free copy of this whitepaper.


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In 2010 we saw a number of high profile celebrity divorces and break ups occupying the tabloids and evening news. Tiger Woods and Elin Nordegren’s divorce was just the beginning. As the year closed we saw Sandra Bullock’s marriage crash and burn. Even Hollywood’s starlets like Elizabeth Hurley, Eva Longoria and Scarlett Johansson couldn’t avoid the hazards of matrimonial failure. In some instances these divorces may have ended inauspiciously due to a prenuptial agreement or the ability of the parties to cut ties financially without disrupting their lifestyle. For attorneys representing clients in a divorce the breakdown of this economic partnership may require a forensic accountant and business valuation expert. But how does the matrimonial practitioner use this resource to better serve their client? Here are four things to consider, along with cases that illustrate the issues. Always Use a Qualified Business Valuation Expert. In Brooks v. Brooks, the husband owned minority interests in his family’s limited liability companies (LLCs), which held commercial property. At trial, the wife presented the companies’ financial statements and a real estate expert, who appraised the LLC’s underlying property at $61 million. Notably, the expert testified that his appraisal was only the first step in a fair market valuation (FMV), which required assessing the companies’ outstanding debt and closely held stock. At the close of the wife’s case, the husband decided not to call his BV expert, saying there was “no valuation testimony” to rebut. Instead, he presented only the operative buy-sell agreements plus his tax returns, which essentially showed a […]


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If you are representing clients in divorce proceedings, innocent spouse relief can help you to protect your clients from liability for underpayment or nonpayment of taxes caused by their spouse’s dishonesty. Innocent spouse relief provides an important source of relief from tax debt, but until recently, there were significant limitations on when innocent spouse tax relief could be claimed.  The IRS recently lifted some of these limitations and the changes that were made can help you to make sure your client doesn’t become unfairly burdened with his or her spouse’s tax debts. On July 25, 2011 the IRS issued Notice  2011-70, which made a significant change to the requirements for those seeking innocent spouse relief under (IRC Section 6015(f). IRS Commissioner Douglas Shulman indicated that the change was made because “when people are in tough circumstances, we [The IRS] need to be willing to work with them.” Taxpayer Advocate Nina Olson has indicated that the change was a “a welcome occasion where everybody has emerged a winner.” The changes made by the IRS are simple – they extended the eligibility period for those seeking equitable relief, lifting the previously enforced two-year limit. Mark S. Gottlieb recently wrote a white paper entitled, An Attorney’s Guide to the Recent IRS Changes Regarding Innocent Spouse Relief.  This is a must read for all matrimonial and family law practitioners. This white paper is part of a 3 part special issue for all matrimonial practitioners. Part 1 – An Attorney’s Guide to Divorce-Related Tax Issues. Part 2 […]


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The Joint Appraiser's Role in a Divorce Action

Posted in Matrimonial & Divorce, on Feb 2011, By: Mark S. Gottlieb

In these economically challenging times, parties are increasingly seeking ways to reduce the cost and conflict of divorce. Many attempt to streamline the process by retaining a joint expert/valuator to appraise the marital business and/or business interests. Indeed, there are numerous benefits. Consider, for instance, that without a joint appraisal, many non-business owning spouses or those without direct access to marital funds would not be able to afford any expert in the case. In addition to the added financial benefit of retaining a joint expert, The evaluator is also likely to get better access to documents and other evidence than an expert who has been retained by one party or another, The evaluator can often take on the role of creative problem solver, coming up with financially efficient, resourceful solutions, The parties and their attorneys frequently view the joint appraiser as more independent and objective, and can use the joint expert to expedite mediation and settlement. Attorneys avoid any pitfalls by clearly explaining to their clients the differences between retaining a sole expert and a joint expert. This will help clients from feeling “betrayed” later on in the case—when, for example, the appraiser may spend more time with the business-owning spouse to obtain information and financial records; or when the appraiser’s opinions conflict with the owner’s perception of the business’ value. It is important for the legal practitioner to become acquainted not only with appraisers who have experience as joint experts, but also those who also have some mediation or […]


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  December is an exciting month for sports fans, particularly New York sports fans. The area’s football teams are both bidding for playoff berths; basketball and hockey fans are settling in with mixed feelings about their team’s early performance; and major league baseball’s “hot stove” league is a buzz with the potential of free agent signings. This year’s biggest baseball free agent star is pitcher Cliff Lee. And to no surprise the New York Yankees are among the few teams bidding for his affection. The Angels, Rangers, and Yankees have all reportedly “pitched” Cliff Lee and have offered him a king’s ransom to play for their team. Each of the three teams courting Mr. Lee has something different to offer. California has beautiful weather; Texas has no state income tax; and New York has an opportunity to earn millions of dollars above a baseball contract in endorsements and sponsorships. There is little doubt that in addition to his agent, family, and friends Mr. Lee is getting plenty of advice from a variety of marketing, legal, and tax professionals. Even though I have not been asked, I thought I would give my two cents to Mr. Lee’s quandary. Cliff, stay away from New York. It could be your financial ruin. Assume Cliff Lee signs with the Yankees for seven years at $25 million per year and contracts for an additional $5 million per year for marketing. It doesn’t take a forensic accountant to compute that during the next seven years he will earn $210 million.   But suppose Lee, A-Rod, and Jeter go out […]


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An Attorney's Guide To Divorce-Related Tax Issues

Posted in Matrimonial & Divorce, on Nov 2010, By: Mark S. Gottlieb

There may be no glory in being a family law attorney these days, especially when it comes to dealing with the often challenging economic consequences in a divorce action. Clients may initially contact you with one issue related to their potential divorce, but often these concerns can quickly manifest as emotions and pressures begin to develop. Perhaps the questions attorneys resist the most or feel least comfortable in answering pertain to divorce-related tax matters. Many individuals, including those contemplating divorce, will be reaching out to you for answers to a variety of tax-related divorce questions. So, this may be the best time to revisit some of the questions you may be faced with. Here are ten divorce-related tax issues that all matrimonial and family law attorneys should know. 1.       Taxability of Assets Distributed Incident to Divorce In many instances one of the most disputed issues in a divorce is the distribution of the marital assets. This is commonly referred to as “equitable distribution” or “ED”. Under the Internal Revenue Code (IRC) Section 1041 (a), no gain or loss is recognized on the transfer (acquisition or distribution) incident to divorce provided such transfer occurs within one year after the divorce or related to the ending of the marriage. The ending of the marriage is defined pursuant to a divorce or separation agreement and occurs within six years after the date on which the marriage ended. Practice Tip: Often, one of the most significant marital assets is the marital residence and/or a business. The values […]


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Since our last blog was published, the New York State Assembly gave final passage on July 1st to no-fault divorce, clearing the way for New York State to allowing couples to end their marriages quickly when one spouse believes the union is over. The new measure, which requires one spouse to swear under oath that the relationship has broken down irretrievably for at least six months, is the final piece of a legislative package enacting the most sweeping changes to the state’s divorce laws in 40 years. This final legislative approval comes after what one member of the Assembly called “an awfully long and hard battle.” The bills now await Governor Paterson’s signature. No-fault divorce has long been opposed by the Catholic Church, with the view that the legislation would make divorce easier; feminists argued that no-fault did not address the concerns of poorer women. The National Organization for Women of New York State has found itself on the same side of the issue as the Church, although the New York City chapter of NOW supports the legislation. Marcia Pappas, president of the New York State chapter of NOW, has written recently, “No-fault can take away the bargaining leverage of the non-moneyed spouse—and that is usually the woman….In fairness, any partner to a marriage should be provided with notice that the other partner wants a divorce and given an opportunity to negotiate the terms for the divorce. Often, there is fault with ‘divorce on demand,’ not only can the more moneyed […]


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