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Forensic Accounting Services and Tax Advice During a Divorce

Allen Barron provides forensic accounting services and tax advice during a divorce to assess the value of assets and accounts and to find hidden or unreported assets and accounts.  The proposed tax reform changes in Washington could have a substantial impact on divorce negotiations and cases across California.  How can you ensure that your former spouse is providing a full, transparent and accurate accounting of all financial accounts and assets as required by California law?  What is the genuine value after-tax of the specific accounts and assets in your case?  What is the best way to structure your settlement and support agreements to ensure the maximum post tax financial advantage?

Allen Barron’s forensic accounting team can identify missing assets and discrepancies in complex financial reports and assets.  It is unfortunately quite common for one party in a divorce to mis-state or understate the value of an asset based upon partial disclosures or an incomplete financial picture.  We work to get to the bottom of corporate financials to assist with the valuation of business assets and financial accounts.  This is especially valuable in divorce cases involving substantial financial assets.

Forensic accounting services and tax advice during a divorce can make you a substantial amount of money while protecting your financial interests.  For example, lets say there are several investment accounts containing stocks and other financial instruments.  For the sake of this article, we will assume there are two accounts which appear to be quite similar as each has stocks and bonds with a value represented at $250,000 each.  Should you take account “A” or account “B”?  What if the tax basis in account “A” is $25,000 and has only been held for a short term?  The tax basis of account “B” is $200,000 and these instruments have been held for a much longer period of time.

Both accounts generate $250,000 once the assets are liquidated.

However, the holder of account A has experienced a short term capital gain (taxed at 33% in this example) of $225,000 ($250,000 sale price less the $25,000 tax basis) resulting in a tax obligation of $74,250.  The sale price of $250,000 less capital gains of $74,250 ($225,000 x .33) means account A is actually worth $175,750 after tax.  Account B only experiences a long term capital gain of $50,000 ($250,000 sales price less the $200,000 basis).  Long term capital gains are presently taxed at 15% resulting in a tax obligation of $7,500 ($50,000 x .15) which means account B is worth $242,500 after tax.  Which account would you want?  Do you think there’s an incentive to skew the numbers to attempt to get a spouse to take account A instead of account B?  “Hey, they’re both worth the same amount.”

Allen Barron provides forensic accounting services and tax advice to individuals during a divorce.  We invite you to review the recommendations of our clients and contact us or call 866-631-3470 for a free consultation to learn how we can help to protect your financial interests in a high asset divorce.