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Category: Economic Damages

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.

Home Office Deduction Considerations During COVID-19

Posted in Economic Damages, on Jan 2021, By: Mark S. Gottlieb

  Thirty years ago, when I was a real accountant (haha), January was one of the most hectic months of the year. The preparation of annual payroll tax returns marks the quiet beginning of tax season.  You should now start to receive W-2’s, 1099’s, and other tax forms to be set aside for the preparation of your 2020 individual income tax return. Many of our regular readers are now working from home on either an intermittent or permanent basis.  For those of you in this category, you may be able to take advantage of the employee home office deduction. In the past, the standards for deducting home office use have proven notoriously prohibitive. Pursuant to the 2018 Tax Cuts and Jobs Act, requirements for W-2 wage earners clearly stipulate that for its costs to qualify, a given home office must: Be used at the convenience of the employer Constitute a specifically allocated area used expressly for work-related purposes and Have space for storing work-related materials. There are of course numerous other requirements, but historically these have proven sufficient barriers for many remote employees. But since the advent of COVID-19, two novel legislative pathways have opened up: Section 139 (Disaster Relief Payments) and Section 165 (Losses) The primary purpose of this blog post is to briefly discuss both of these two sections of the Internal Revenue Code. Section 139 (Disaster Relief Payments) Section 139 provides that any funds an individual may receive as Qualified Disaster Relief Payments cannot be included in […]


  Like you, I woke up today to numerous news programs discussing the coronavirus. Aside from the health concerns, it has become apparent that businesses, large and small, national and local, are being affected.  Some have stated that this week’s events have the potential to be the most catastrophic economic challenge in generations. With no immediate correction anticipated, business owners may be considering filing a business interruption claim. Business interruption insurance can provide much-needed assistance when disaster strikes. But filing a claim requires detailed analysis and documentation to allow the business owner to focus on recovery efforts. What’s covered? Most business interruption policies require the insured to file a detailed “proof of loss” within a short period (30 days, for example) after a loss occurs. But before estimating losses, it’s critical to review the scope of coverage. Policies typically reimburse the insured for lost business income (profits) during the loss period. Some also offer more extensive coverage.  Here are just a few examples. Extraordinary expenses. Some policies will reimburse the insured for repairing damaged inventory and equipment, as well as the cost of operating the business at a temporary location until the original location is restored. “Denial of access” losses. This can occur when a natural disaster or other incident causes governmental authorities to block access to a company’s property for security reasons, even if the property isn’t damaged. Rebuilding costs. Depending on the policy language, some courts have found that the insured should be reimbursed for the extra cost […]


  The NBA & NHL have suspended play. MLB has postponed the start of its season. Public & private schools around the country are closing. Locally, the NYC St. Patricks’ Day parade and other large public gatherings are canceled, amongst the rumors surrounding that the city will order a mandatory quarantine. These are just a few of the headlines we have heard and read this week in response to the current coronavirus pandemic. The health of our family, friends, and neighbors is paramount at this time. Still, as the stock market seems to be in freefall, one can only wonder what impact the coronavirus will have on the short-term and long-term valuation of closely-held businesses. The micro and macroeconomic communities have experienced this turmoil before. Of course, there was 911 and the financial crisis of 2008, but when was the last time the spokes on the economic wheel have slowed down or stopped because people were either too sick to work or discouraged from going to work?  Yes, many of us will be able to work from home; but let’s be honest – it will not be the same. Local restaurants and attractions expect to see a drastic decrease in business; the travel and hospitality business is flooded with cancellations, despite offering services at unheard-of low prices. (Someone told me you could fly to Florida this weekend for $50.) If you are one of our frequent readers, you are familiar with the three general methods of valuation, the asset, market, […]


Calculating Economic Damages

Posted in Economic Damages, on Oct 2014, By: Mark S. Gottlieb

In December 2013, Tippi Hedren, star of Alfred Hitchcock’s 1963 “The Birds,” received good news. After six years of litigation over an injury on the set of “Fashion House,” Hedren received a $1.5 million judgment in her favor, of which $653,708 was Hedren’s calculated lost earnings. Lost earnings must be computed in cases of personal injury, wrongful death, and employment discrimination. Forensic accountants are often brought on to accurately determine these damages. When beginning to figure losses, a worklife expectancy must first be determined. The worklife of a person varies according to age, ethnicity, gender, and education level. Once a worklife expectancy has been determined, potential lost earnings can begin to be calculated. There are two types of earnings which can be calculated: Unimpaired earnings: These are estimated earnings a claimant would receive if the incident had never happened. Impaired earnings: These are any potential actual earnings a claimant will receive if able to work in a limited capacity. If a claimant is deceased, or wholly unable to work, only unimpaired earnings will be calculated. This is done by looking at such measures as historical earnings, likelihood of future advancement, and comparable earnings of people in the same industry, among other criterion. While an individual is employed there are other assets besides base wages. These fringe benefits are sometimes employer contributions to social security, retirement plans, paid time off, and insurance premiums. These too are added to the economic losses of a claimant. Other sources of income can be affected […]


In a recent meeting with some of my colleagues in the legal community, the question came up: Why is the analysis of lost profits deferred until late in the litigation process? One colleague is of the opinion that often the financial issues associated with damages will sometimes take a back seat to liability issues because attorneys will frequently tend to focus on the legal procedures and on discovery procedures. But based on my 20+ years experience in forensic accounting, business valuation and expert testimony, early involvement by the financial expert is often crucial to an effective analysis in a lost profits case—and ensures that all aspects of the lost profits case are covered.Forensic experts are typically involved in complex commercial litigation where economic damages or lost profits are at issue. They’re also involved when a case requires forensic accounting skills such as in a fraud or embezzlement case or the value of a business is at issue such as in a shareholder dispute or marital dissolution. The forensic expert may also be called upon to explain an accounting, tax or financial issue to the judge or jury. Forensic experts often are also hired by attorneys to provide expert testimony as litigation support consultants. The expert witness can play a variety of roles in lost profits cases including performing damage calculations to coordinating complex research and analysis and creating case strategies. To do this, the forensic expert must select an approach in the pretrial planning phase that helps develop and integrate […]