Cash Flow Versus Income in Family Law Cases

business-income-tax-divorceThis article was originally printed in the ABA Section of Family Law eNewsletter, March 2014.

There are many different definitions of income that can be used in family law cases. Local law will play a big part in defining income, but in more complicated cases, other definitions may come into play. The financial expert can help the attorneys and the court to understand the various types of income and why they should be included or excluded from income calculations in a family law case.

The Internal Revenue Code is often a starting point for defining and quantifying income in family law cases. Experienced family lawyers know this is only the tip of the iceberg and doesn’t cover many of the unusual situations that could arise in cases with complicated financial scenarios.

In simpler cases, wage income and business income will be straightforward and will form the basis for calculating child support and spousal support. Undistributed income from a business venture may be an area of contention, but local laws often provide at least basic guidance on including such income in support calculations.

Benjamin Wey Threatens Investigative Reporter Francine McKenna

Francine McKenna is an investigative reporter who focuses her writings on the auditing profession. She blogs at re: The Auditors, and also writes for financial publications such as Forbes, The Financial Times, American Banker, and more.

In February, Ms. McKenna wrote about the auditors of AgFeed, a Chinese company involved in an elaborate accounting fraud. In March 2014, the Securities and Exchange Commission charged the company and its top executives with fraud:

With the bulk of its hog production operations in China, the executives used a variety of methods to inflate revenue from 2008 to mid-2011, including fake invoices for the sale of feed and purported sales of hogs that didn’t really exist.  They later tried to cover up their actions by saying the fake hogs died.  Because fatter hogs bring higher market prices, they also inflated the weights of actual hogs sold and correspondingly inflated the sales revenues for those hogs. 

Xyngular Works: Losing Weight Fast!

Xyngular is a weight loss MLM (multi-level marketing) company which advertises quick, sustainable weight loss using their products. Last year I wrote a lengthy article about the Xyngular products, and I came to the conclusion that the products are dangerous, the diet is a fad diet (which is almost guaranteed to be unsustainable), and promoters like Jennifer McKinney (MckMama) lie to their potential customers and recruits.

I wanted to provide an update on the Xyngular and Ignite products. My stance hasn’t changed. If anything, I am even more strongly against the products after seeing the things I’m posting here.

Jennifer McKinney is most well known for being the mommy blogger MckMama, as well as for being a serial scammer. Her exploits include fraud on the United States Bankruptcy Court, allegedly stealing money from her mother-in-law, continuing to leave creditors unpaid, and lying about her weight loss in order to recruit people into Xyngular.

Alleged Extortion of Pastor John Collins by Crystal Cox

crystal-cox-will-extort-youWorld famous extortionist Crystal Cox is allegedly at it again! Cox is most well known for her attack on Kevin Padrick and Obsidian Finance, which resulted in a $2.5 million judgment against her. But the fun didn’t stop there…

Crystal L. Cox intended to file an appeal in the case, tried to rope Attorney Marc Randazza into helping her cause, which ended (well, not really ended) with Cox extorting Randazza and his family. Of course, this wasn’t her first extortion attempt, as she did the exact same thing to Padrick and Obsidian Finance.

Her extortion scam is simple: Write horrible untrue things about business owners on the internet, then ask for money in order to clean up the mess Cox herself made. Call it all “online reputation management services” and ask for a “fee for services” and everything is kosher. Unless you’re on the receiving end of Cox’s extortion attempts.

Income Tax Information Used in Family Law Cases

This article was originally printed in the ABA Section of Family Law eNewsletter, February 2014.

Income tax returns and supporting information such as W-2s and pay stubs are the most common and basic documents which evidence income in family law cases. This article discusses the sources of income that are disclosed on a personal income tax return (Form 1040), and some ways the items can be evaluated to search for hidden income and hidden assets.

  • Wages – The figures reported on the income tax return should be matched to the W-2. The W-2 and the pay stubs will provide additional information on the employers, pay rates, total pay, certain benefits, and taxes withheld. Additional analysis may include tracing bank deposits to ensure that all wages were used for the benefit of the family.
  • Taxable Interest and Tax Exempt Interest – These items of income must be considered when calculating income available for support. They are also important because they can point to bank, investment, and brokerage accounts that may not have been specifically disclosed in the family law case.

How a Lifestyle Analysis Can Be Used in a Divorce Case

A lifestyle analysis is the process of tabulating and analyzing the income and expenses of the parties. The lifestyle analysis is then used to determine the standard of living of the parties, which will influence support calculations, and possibly property division.

Calculating the lifestyle of the spouses prior to separation can provide insight into the lifestyle the married couple enjoyed and the cost of that lifestyle, as well as the income that was or is required to fund the lifestyle of the married couple. The results may be used to prove a spouse’s financial needs following divorce. In other words, a detailed analysis of the spending during the marriage can be the basis to calculate the funding the spouse needs to maintain a similar lifestyle after divorce.

Kevin Trudeau Is On His Way to Prison!

kevin-trudeau-goes-to-prisonHabitual criminal Kevin Trudeau is ending up exactly where he belongs…. in prison! Trudeau has a lengthy history of legal problems. He spent 2 years in prison in the 1990s for credit card fraud. In 1996 he settled charges that he was operating an illegal pyramid scheme called Nutrition for Life. In 1998, Trudeau was fined $500,000 for making false claims in infomercials.

Then came Trudeau’s book The Weight Loss Cure ‘They’ Don’t Want You to Know About. The problem was that he misled consumers with his infomercials, making them think his weight loss book would show them an easy weight loss method which allowed them to eat whatever they wanted when they were done. But the diet was not simple. It required colonics performed by a licensed practitioner and injection of a human growth hormone, and it never really ended. Dieters really couldn’t eat whatever they wanted, because the book said they should only eat organic food and avoid brand name foods, fast food, and meals at chain restaurants.

More on the Tim Sykes Millionaire Trading Challenge

steal-moneyIn the last couple of days, I have had an email exchange with a purported journalist who is interested in the Timothy Sykes Millionaire Trading Challenge. Because I’ve written about Tim’s Trading Challenge before, he wanted to ask me some questions. The writer is interested in doing a negative piece on Tim and students, and since I’m a forensic accountant in the trading challenge, he thought I could provide some information.

He wanted to know if I have done a formal investigation of Tim Sykes, have reviewed his brokerage statements to verify his trades, or verified the returns of Tim’s students. The answer to all of these questions is NO. Why have I not investigated Tim and his students? No one has retained me to do so.

Why Retain a Forensic Accountant in Your Divorce Case?

divorce financial analysisOne of the hot new things in the area of divorce, especially for high net worth clients, is using a law firm that has forensic accountants on staff. Sometimes the divorce attorneys themselves have credentials in the area of forensic accounting, such as a CPA license, CFE (Certified Fraud Examiner) credential, or CFF (Certified in Financial Forensics) credential.

These law firms tout a number of advantages of retaining them:

  • Expertise in financial matters, including business valuations, tax law, and forensic accounting
  • Ability to investigate the value of financial assets
  • Skills necessary to perform a lifestyle analysis

Fail to Educate Children, Get a $7.1 Million Bonus Courtesy of the Taxpayers

In what may be a flipping of the bird to Milwaukee taxpayers… Gregory Thornton, outgoing superintendent of Milwaukee Public Schools gave out $7.1 million in bonuses. $3.5 million of the loot was given to support and administrative staff in January, and $3.6 million is being given to teachers and psychologists in March. This is considered a bonus for employees, which Thornton said is to thank them for their hard work.

I have ranted at length in the past about MPS, its failure to educate students, its highly compensated teachers, and wide scale waste of resources. Despite sky-high spending per child in MPS, the district still fails to educate the children. In 2013, less than half of 4th graders and 8th graders tested proficient in math and less than half were proficient in reading. Waaaay less than half.  (And lest you buy the phony argument that the poor results are simply because these are urban kids, know that other urban school districts do quite well at educating children.)

So yes, the fact that the majority of students in MPS cannot read or do math certainly means that the administration and staff should get bonuses funded by taxpayers! That was sarcasm, in case you missed it.

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