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Yearly Archives: 2015
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.
Under former Attorney General Eric Holder’s leadership, the US Justice Department drastically increased its fight against fraud, bringing in more than $24 billion in penalties. This substantial sum came mainly from the department’s pursuit of big banks for financial misconduct. Yet it also increased its crackdown on smaller instances of fraud. Fraud is prevalent in many facets of life, particularly within businesses. This swindling can come in many forms and eats away at a business’s funds. According to the Association of Certified Fraud Examiners (ACFE), on average, businesses lose 5% of revenue each year to fraud. Additionally, 22% of the cases examined by the ACFE involved losses of at least $1 million. Therefore business owners, attorneys, and investigators should know what types of fraud occur, how to look for them, and how to prevent them. Asset Misappropriation Fraud To put it plainly, asset misappropriation takes place when someone steals funds from his employer. Asset misappropriation constitutes the most common type of fraud affecting businesses. What follows is a list of the most commonly encountered forms of asset misappropriation, ways to discover them, and methods of prevention. Authorized Maker An authorized maker is a person with the power to create and sign checks for a company. In this scheme, the authorized maker creates a check payable to himself, or one that pays his expenses, later altering the payee name in the accounting records to make the disbursement look like it was made to an authentic vendor. This scheme can be recognized […]
When the CEO of Continental Resources, Harold Hamm, divorced from his wife, Forbes published an article about the possible tax consequences. The settlement ordered Hamm to pay his former wife $995.5 million. Forbes asked the obvious question: with this kind of hefty transaction, the tax man must surely get his share, right? Not quite. According to law, transfers of property between spouses during a divorce are virtually tax free. Good news for the Hamms. However, there are often unseen tax burdens later on. Code § 1041 of the U.S. Internal Revenue Code lays out the rules for the taxation of marital property when it is transferred between spouses. Within the code, the “General Rule” states: “No gain or loss shall be recognized on a transfer of property” between spouses or former spouses. One can assume that during a matrimonial case, there are no worries over taxes involved in transferring property. In many cases, this is true. But there are some important things to consider before dividing marital assets. Below is an outline of some of the major issues that may cause tax consequences. For a more in-depth discussion of these issues, please follow the link at the bottom of this post to read our whitepaper. Carryover Basis Carryover basis is a method used to determine the tax basis of an asset when it has been transferred from one individual to another. In a divorce, the spouse that receives an asset also takes the carryover basis of the asset. Because the […]
5 Services Forensic Accountants Provide During a Matrimonial Dispute That May Surprise You
Posted in Divorce & Matrimony, on Feb 2015, By: Mark S. Gottlieb
Perhaps the most expensive divorce in history occurred when Russian billionaire Dmitry Rybolovlev was ordered to pay $4.5 billion to his ex-wife Elena. One of the charges Elena made against her husband was that he had attempted to hide assets in property bought hastily before his divorce. Even in cases where there is less money at stake, an attorney needs help in going through these financial matters. That is where the aid of a forensic accountant comes in. Below are five surprising services a forensic expert can offer during a matrimonial dispute. Preparation of a Net-Worth Statement A Net-Worth Statement is a detailed account of a person’s assets, liabilities, income, and expenses. The net of the assets and liabilities are often referred to as the net material asset. Assets can include: cash, investments, and property. Liabilities include mortgages and debt. Income can be wages, interest, and business income. And expenses include housing, food, and education. This seems rather straightforward. However, it can often be difficult to find accurate totals or hidden income. However, a forensic accountant has special training to not only investigate and find assets and liabilities, but also the ability to properly calculate the total net worth and determine the parties’ true and constructive income. Back-of-Envelope Analysis of Valuation of Business Because a business may be considered a marital asset, it must be accurately valuated when undergoing a matrimonial dispute. One method that can be used to begin valuating a business is a back-of-envelop analysis. This form of […]
Estate Tax Strategies for Second Marriages
Posted in Divorce & Matrimony, on Feb 2015, By: Mark S. Gottlieb
Second marriages are not only for Hollywood celebrities like Brad Pitt or Reese Witherspoon. According to the Pew Research Center, 40 percent of marriages today are second marriages. Often second marriages face many complications. Whether it is the terms of a prior divorce, finding a way to harmonize their two career paths, or children from a previous marriage, the situation can become very complex. A necessary thing to consider during a second marriage is estate planning. Usually, in a first marriage, the estate planning is straight forward. However, in a second marriage, especially one with children, this becomes complex. You want to provide for both your new spouse and your children from your first marriage, and you would like to do so with the least amount of tax impact on your estate. The good news is there are ways to reduce the tax effects a second marriage can have on your estate, and by taking some steps, you can secure the most benefits for your family when you pass. Estate Tax According to the Internal Revenue Service, the Estate Tax is “a tax on your right to transfer property at your death […] It consists of an accounting of everything you own or have certain interests in at the date of death.” This can include savings, property, investments, and business interests. It is important to remember that this estimation is not based on what the value of the assets and property were when you acquired them, but rather their current […]
Why You Should Farm Out Business Valuation to Specialty Firms
Posted in Business Valuation, on Jan 2015, By: Mark S. Gottlieb
A 2014 Grant Thornton International Business Report indicates that 29% of privately-held businesses worldwide expect to transfer ownership within the next ten years. This points to the significance of accurate business valuations. Whether or not a business anticipates a change of hands or is trying to get a better understanding of the marketplace, proper business valuation is crucial. Accounting services are often branded under a sole, universal category. Nonetheless, different levels of certification allow CPAs and specialty firms the opportunity to work together in a team-oriented fashion that helps increase efficiency for clients that are in need of business valuation services. There are several factors that limit certain CPAs’ adeptness to provide a proper business valuation. Business valuation experts enjoy the advantages of being credentialed by one or more organizations. Four of the most prominent credentials are: The Accredited in Business Valuation (ABV) – American Institute of Certified Public Accountants or AICPA, The Certified Valuation Analyst (CVA) – National Association of Certified Valuators and Analysts, The Certified Business Appraisers (CBA) – Institute of Business Appraisers, and The Accredited Senior Appraiser (ASA) – American Society of Appraisers. Appropriate credentials should be one of the top criteria considered by clients in selecting and hiring an expert. CPAs that perform traditional accounting or attestation services can be vulnerable to conflicts of interest when it comes to business appraising services. Business valuation firms, on the other hand, are independent and unattached to any side of a negotiation or litigation. In addition to training and […]