spouse ends up paying for financial trickery


            Posted on February 28, 2016  

              Spouse will end up paying for financial trickery


On the front page of my husband’s financial statement that he filed in our divorce case, he listed the wages from his company. But, at the bottom of another page, next to the dollar sign, he wrote “See Footnote 1”. That footnote says his other two companies paid him another $100,000.

On the page he reported the details of each rental property, he deducted usual expenses plus the principal payments on the mortgage and depreciation. Then he listed that falsely low total on the first page under other income.

His financial statement was signed by his lawyer. Do you think I can get a fair deal in court?

A. Surely that lawyer knows he or she is helping to both diminish and hide your husband’s income.

As for that other $100,000, that number should have been listed next to the dollar sign. Then, if your husband wanted to explain the source of that money, he could use a footnote to do so. To my eye, he tried to fool the court by putting the number in the footnote.

Also, principal payments on a mortgage are not business deductions. Your husband is just taking money from one pocket and putting into another. There, too, by claiming that deduction, he tried to fool the court.

While depreciation is a proper business expense on a tax return, in a divorce case that money is actually a source of tax-free cash.

Usually the first time the judge sees a financial statement is when the parties are in court talking to the judge for five to 10 minutes about how much alimony and child support should be paid. Lawyers know the judge won’t have time to carefully analyze each entry on financial statements. Usually the judge looks at the bottom line on the first page of each financial statement before deciding how much gets paid by one party to the other.

That means your lawyer needs to point out to the judge where your husband improperly deducted principal payments that reduced his income; improperly kept that $100,000 out of his income by putting the number into a footnote; and has tax free cash from depreciation.

A lawyer is obliged to tell the Judge all the things necessary for the Judge to make a fair order. In my experience, once a judge sees a lawyer playing the games you wrote about, that lawyer and that client lose credibility. While nothing may then be said, wherever the judge has to assess credibility, you should come out just fine.

Because he played with fire, at the end of the case, your husband will feel like a bagel burnt so bad that even the pigs won’t eat it.