Complex Divorce Analysis: Business Owner Hiding Income

Tracy Coenen was retained by the spouse in a high net worth divorce who believed her husband was using his business to hide earnings and assets, and ultimately escape paying spousal support. He filed a modification action, claiming that the net income of the business was substantially lower than the net income at the time the divorce was finalized.

Sequence Inc. analyzed the accounting records of the business and found that the ex-husband was using the business bank account to pay a substantial portion of his personal expenses, and was deducting these payments as “business expenses” on the corporate tax returns. This accomplished two things: It artificially lowered the net income of the business and it reduced his need for a salary from the company. The resulting small salary and decreased business profits made it appear as if the ex-husband did not have income available for spousal maintenance.

We identified the personal expenses paid out of the business for the last three years and used this information to calculate his personal gross income from the business. This analysis of the accounting and tax records of the business proved that the income of the ex-husband was at least as large as the income stipulated to in the divorce decree, resulting in a favorable settlement of the issue for the client.