TAKING PROTECTIVE MEASURES
Credibility is an all important aspect of dealing with clients, and when we feel they are not credible, we tend to be a bit more suspicious of their statements and representations. We were investigating an appliance repair operation where the husband’s business was servicing a lot of the neighborhood homes (what got him in trouble was that he was servicing more than just the appliances). Everything that we did relevant to reviewing lifestyle strongly suggested there was unreported income. We questioned the husband about his business, and asked him whether he had any cash income (from our review of the bank records, we already knew no cash was deposited). He explained to us that he was concerned for his safety, and thus refused to accept cash. That perhaps would have been somewhat believable had the husband not been 6’4”, 250 lbs. – and servicing (as we said in more ways than one) an upper class clientele
Friday, February 18, 2011
Wednesday, February 9, 2011
Tax Tip of the Week*
PAYING ALIMONY TO OTHERS
Most of the time, alimony is paid directly to the ex-spouse, even if it means going through a probation department. However, payments to third parties on behalf of the ex-spouse can also be considered and treated as alimony. For instance, paying the rent on the ex-spouse’s apartment, or paying for an auto lease – these can be considered as deductible alimony to the payor and taxable to the recipient. In order for that to be the case, the obligation to make those payments must be explicitly stated in writing. By the way, paying the mortgage on jointly owned property does not qualify as alimony because, from a tax point of view, you are merely paying your own existing liability (i.e. your mortgage).
Most of the time, alimony is paid directly to the ex-spouse, even if it means going through a probation department. However, payments to third parties on behalf of the ex-spouse can also be considered and treated as alimony. For instance, paying the rent on the ex-spouse’s apartment, or paying for an auto lease – these can be considered as deductible alimony to the payor and taxable to the recipient. In order for that to be the case, the obligation to make those payments must be explicitly stated in writing. By the way, paying the mortgage on jointly owned property does not qualify as alimony because, from a tax point of view, you are merely paying your own existing liability (i.e. your mortgage).
Tuesday, February 1, 2011
Kal's Kweries**
KWERY:It is very likely that I or my wife will be filing for divorce pretty soon. My wife has a business, and I have always been kept out of the loop. I am not confident that she will cooperate in producing records, or may alter them. What can I do to protect myself?
RESPONSE:
Being prepared is always good advice for just about anything. See what you can do about getting copies of various documents – such as tax returns and investment statements – as soon as possible for as long a timeframe as possible. If you have access to these types of records, especially as to business records, copy what you can before the action starts so that you’ll have a greater comfort level of having at least some information.
RESPONSE:
Being prepared is always good advice for just about anything. See what you can do about getting copies of various documents – such as tax returns and investment statements – as soon as possible for as long a timeframe as possible. If you have access to these types of records, especially as to business records, copy what you can before the action starts so that you’ll have a greater comfort level of having at least some information.
Anecdote of the Week
YOU CAN CALL ME JOHNSON
Obviously, in doing divorce work, both of the litigants have the same last name (in about 95% of our cases). However, it’s far less customary for us to have a case where the attorneys also have the same last name. And, to take that one step further, imagine the confusion when we have a case where not only do the husband and wife of course have the same last name, and the attorneys have the same last name, but it’s all the same last name. Further, the husband was represented by a male; the wife by a female. Even the Mr. or Ms. designation didn’t alleviate the confusion.
Obviously, in doing divorce work, both of the litigants have the same last name (in about 95% of our cases). However, it’s far less customary for us to have a case where the attorneys also have the same last name. And, to take that one step further, imagine the confusion when we have a case where not only do the husband and wife of course have the same last name, and the attorneys have the same last name, but it’s all the same last name. Further, the husband was represented by a male; the wife by a female. Even the Mr. or Ms. designation didn’t alleviate the confusion.
Tuesday, January 18, 2011
Tax Tip of the Week*
ALIMONY AND CASH
The word cash here is not intended to mean Mr. Green, but rather the economic form of the payment. In order for alimony to be treated as such (deductible to the payor and taxable to the recipient), it must be made in cash or the equivalent. For instance, checks, cash, money orders, etc. What that also means is that if payment is made in the form of a note, or property (think in terms of transferring a car), that is not allowed to be treated as alimony.
The word cash here is not intended to mean Mr. Green, but rather the economic form of the payment. In order for alimony to be treated as such (deductible to the payor and taxable to the recipient), it must be made in cash or the equivalent. For instance, checks, cash, money orders, etc. What that also means is that if payment is made in the form of a note, or property (think in terms of transferring a car), that is not allowed to be treated as alimony.
Monday, January 10, 2011
Kal's Kweries**
KWERY:
My husband is proposing that as part of our divorce agreement I receive alimony stated as a percentage of the net income of his business. I’m not sure if that’s a good idea.
RESPONSE:
Generally speaking, it’s not a good idea, unless you have a very high level of comfort as to the integrity and reliability of the reported net income. In a sense, net income of the business can be anything that your husband (or his accountant) wants it to be (obviously within reason and limits). My point here is that unless you clearly define how you get to net income (and even then this is questionable), any such arrangement is fraught with a multitude of problems.
My husband is proposing that as part of our divorce agreement I receive alimony stated as a percentage of the net income of his business. I’m not sure if that’s a good idea.
RESPONSE:
Generally speaking, it’s not a good idea, unless you have a very high level of comfort as to the integrity and reliability of the reported net income. In a sense, net income of the business can be anything that your husband (or his accountant) wants it to be (obviously within reason and limits). My point here is that unless you clearly define how you get to net income (and even then this is questionable), any such arrangement is fraught with a multitude of problems.
Anecdote of the Week
TURNABOUT IS FAIR PLAY
On behalf of a husband client, we had to investigate his wife’s retail business. He advised us he was concerned about our doing a complete job. Because his wife was beautiful, he did not want any male accountants on the assignment – whoever investigated the business had to be a female. We did not view that as the type of prejudice that rises to the level where you tell somebody to take his business elsewhere, so we accommodated our husband/client. He was absolutely right – his wife was beautiful. It turns out, she was also gay
On behalf of a husband client, we had to investigate his wife’s retail business. He advised us he was concerned about our doing a complete job. Because his wife was beautiful, he did not want any male accountants on the assignment – whoever investigated the business had to be a female. We did not view that as the type of prejudice that rises to the level where you tell somebody to take his business elsewhere, so we accommodated our husband/client. He was absolutely right – his wife was beautiful. It turns out, she was also gay
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