How Do We Determine Our Net Worth?

How Do We Determine Our Net Worth?

ADD:

• Cash in Banks and on Hand:   Determine total amount of cash that you have on deposit in banks including Certificates of Deposit. Also include any currency held in safe deposit box or on hand.
• Stocks, Bonds & Other Investments: Determine the total value of these types of investments at their Fair Market Value. This means the value they are worth today as listed though your brokerage or the stock market.
• Real Property: This is usually the most valuable asset held by an individual or couple. Add the value of your home at the amount that you most likely be able to sell it at present. Also include any additional properties that you may have at today’s value such as rental properties, vacation homes or timeshare units.
• Value of your Business: This can be the most complicated asset for attempting to put a value on it. Many businesses are valued by adding net asset value less liabilities. Determine amount of cash held. Add amount of accounts receivable, and the current value (If you had to sell it today) of hard assets such as equipment, computers, etc. Subtract any liabilities such as accounts payable, credit card balances and tax liabilities.
• Other Assets: Add the current value of any additional assets such as jewelry, artwork, furniture and electronic items. Include any cash surrender value of life insurance policies.

SUBTRACT:

• Mortgages and Home Equity Credit Lines:  Subtract principal balances of mortgages or equity lines of credit on your principal home or other real properties owned.
• Installment Loans:  Subtract principal balances on automobile loans or similar types of collateralized debt.
• Credit Card and Store Credit Balances: Subtract the balances owed on credit card and store credit accounts.

What Does a Forensic CPA Do in a Divorce and Do I Need One?

What Does a Forensic CPA Do in a Divorce and Do I Need One?

The definition of the word forensic is “to seek the truth.” Generally speaking, that is a fair representation of what a forensic CPA does. The forensic CPA may assist the divorce attorney or may be hired directly by a divorcing spouse to help untangle an intertwined and complicated financial situation. Some of the types of tasks that a forensic accountant would typically assist with:

• Determining which assets or liabilities of a divorcing couple are non-marital and developing a plan of dividing the assets and liabilities in an equitable manner.

 

• Determining the true cost of a couple’s lifestyle and how a soon-to-be single spouse will be able to continue to live as they have become accustomed to.

 

• Determining the true income of each spouse. This amount can then be used to calculate alimony and/or child support payments that may be necessary.

 

• Determining the true value of a closely held business.

 

• Assisting the divorce attorney in requesting the proper financial documentation in order to provide these services.

 

• Due to the adversarial position of the couple, a spouse may not always provide the opposing spouse with accurate financial information. There are a number of ways that a forensic CPA can determine what is correct and what is inaccurate.

 

• Determine the correct value today of a divorcing spouse’s future pension benefits.

 

• Determine if a spouse is hiding assets or income.

Why is the Divorce Process so Expensive?

The Process in General:

There are many facets and stages to the divorce process. If a couple cannot agree on the terms of the ending the marriage, the legal system steps in and makes a decision for them on these issues of disagreement. Each party in this situation must hire a divorce attorney to protect their interests. The attorneys themselves often must engage the services of various experts and professionals to assist in one aspect or another of the divorce.

Equitable Division of Assets and Liabilities:

By law, the assets acquired by a couple during their marriage are subject to an equitable distribution, which can be a 50/50 split, but not always. The identification, verification and valuation of these assets and liabilities can be time consuming and ultimately costly. In addition, time must be spent insuring that assets have not been hidden or dissipated by the other spouse.

The Discovery Process:

The legal process of accomplishing this is a huge and formalized undertaking. Since the parties are in an adversarial position, the Divorce Court dictates the procedures of formal requests for financial and other documentation from the opposing spouse. These documents, referred to as “Discovery” must be identified, verified and organized. Often, significant time is spent going through documents that have little or no impact on issues of the divorce. However, this can be less costly than having something of significant financial importance overlooked.

Child Custody Issues:

The most important issue of a divorcing couple is the welfare of the children born of the marriage. Some of the most contemptuous battles during the divorce process center on children and custody issues. Children are often used as “pawns” during a divorce. Agreement on visitation by the non-custodial parent is a rare occurrence.

Alimony & Child Support Issues:

Determining the Parties’ “true” income for Child Support and Alimony purposes can be a difficult and complicated task in certain situations. If either party owns an incorporated business, then it must be carefully analyzed to determine if the business pays personal expenses for the divorcing owner, as this is considered income for these purposes.

The process for determining an appropriate amount of proposed alimony for a divorcing spouse in a lengthy marriage is not simple as well.  Many factors are considered, such as the recipient’s education level, employability, work history during the marriage, etc. It is important to be able to document the recipient spouse’s need for the alimony. The ability of the opposing spouse to pay is an equally important consideration.

Revenue Procedure 2009-52 issued November 20, 2009

Revenue Procedure 2009-52 issued November 20, 2009

President Obama signed the Worker, Homeownership and Business Assistance Act of 2009 (WHBA) into law on November 6.

The Internal Revenue Service very quickly issued Rev. Proc. 2009-52 providing guidance for taxpayers electing to carry Net Operating Losses back under the provisions of the legislation.

The Act modifies the extended net operating loss carry back provisions contained in the American Recovery and Reinvestment Tax Act of 2009 (ARRT) passed in February.

The earlier tax act provided that a taxpayer could elect to carry back it’s net operating loss three, four or five years.

Significant to small business owners in the new legislation is the Act’s limitation of the net operating loss carry back in the fifth year to 50% of the taxpayer’s taxable income.

A procedural difference also exists in making the election.  Under ARRT the election was made by simply filing the application for refund.  (i.e. Form 1045, 1139, etc.)

Under WHBA, an affirmative election statement must be attached to the application.

The full text of the Revenue Ruling can be found on the IRS’ website at www.irs.gov.

President Extends Home Buyer Credit

Obama Extends Home-Buyer Credit

President Obama signed the Worker, Homeownership and Business Assistance Act of 2009 (WHBA) into law on November 6.

The new law extends the deadline for qualifying home purchases from November 30, 2009 to April 30, 2010.

The maximum credit is $8,000 for first-time buyers.  Qualifying purchasers must not have owned a primary residence for three years prior to the date of purchase.

Additionally, the new law creates a “long-time resident credit” of up to $6,500 for buyers who have owned and resided in their previous home for at least five consecutive years of the previous eight years.

Purchases consummated in 2010 may be reported on either the 2009 or 2010 tax returns.

The credit is claimed on Form 5405, First-Time Homebuyer Credit.  Copies of the form may be downloaded from the IRS website at www.irs.gov.

The credit is phased out for higher-income taxpayers and is not allowed if the purchase price exceeds $800,000.

The purchase date is extended an additional year for members of the Armed Forces.

Proper Management of Case Discovery

The proper management of case discovery can play a key role in obtaining a favorable outcome for your client.

The attorney that is successful in litigation is the one that is the most prepared. Following are some of the items that should be addressed by your discovery management process whether you do it in your office or outsource to a Forensic Accountant as some attorneys do.

The following questions should be able to be answered if your discovery management function is operating properly:

1. What have you requested from the other side, when was that request served and when is a response due back.
2. When the response is received along with the requested documents did they properly respond? What was the date of their response?  Did they address all of the items requested?  Did they actually provide all of the documents that they said they provided in their response? Have you prepared an exhibit detailing documents not provided and issues of inadequate response?
3. Scanning of documents received and provided and a proper labeling and organization is critical if you hope to be able to retrieve and review information in an efficient manner.
4. What documents do you have in inventory? Which party provided those documents and when were they provided?
5. What documents have you requested but not yet received and what was the name and date of service of the Request for Production when they were requested?
6. Specifically what documents were provided to the other side in response to their requests for production?
7. Are your documents scanned and arranged in a manner in which they are easily located when needed and can they easily be shared if needed.

How to Evaluate an Attorney

The first thing you want to consider is how experienced your attorney is in the matrimonial field. Attorneys who primarily handle divorce and family law have managed more cases and presumably have more knowledge than those who handle divorces along with everything else. They also have more connections with judges and other attorneys, and familiarity with the court process and court personnel.Schedule a free consultation with the attorney you’ve selected and consider it a job interview for the attorney. Do not be intimidated, and instead focus on asking questions and deciding if this is a person you trust and with whom you want to work. These are some questions to ask:

by Brette McWhorter Sember, JD Read the full article     http://bit.ly/1Z1osm