Submitted by John Johnson on Sun, 08/07/2011 – 16:06
Having been a forensic accountant/appraiser in hundreds of matrimonial cases, there’s rarely a case involving a closely held business where the non-titled spouse doesn’t make an accusation of unreported income by the titled spouse or, at a minimum, significant personal expenses being run through the business and reported under the guise of legitimate business deductions. Such allegations are generally intended to act as leverage during negotiations and to increase the value of the underlying business for equitable distribution purposes or to increase income for child and spousal support purposes. Much to my disbelief, I have also many times witnessed such allegations becoming the subject of sworn testimony during depositions and, worse yet, trial. In rare cases, I have seen Fifth Amendment assertions by the accused. Unfortunately, invoking such constitutional protections can result in the trier of fact drawing the highest negative inference. You have heard the expression “don’t point a loaded gun at someone unless you’re prepared to pull the trigger” and deal with the consequences. The same is true about making sworn allegations of fraudulent activity in front of a judge who is a mandatory reporter of such illegalities. When I warn the non-titled accuser of the ramifications of making such allegations, I’m usually met with a response that “I’m an innocent spouse” for tax purposes. For most of us who are experienced in the matrimonial area, the term “innocent spouse” is an oxymoron. Many accusing spouses don’t meet the standards for availing themselves of that relief. As such, if the activity is significant enough, successfully playing that trump card could have serious civil and/or criminal ramifications.
About The Author
John R. Johnson, CPA, ABV, CFF, CBA, CVA, FABFA
John Johnson’s extensive experience in the specialized areas of business valuation, litigation support, taxation, and law firm management, makes him uniquely qualified as Managing Partner of SaxBST’s highly regarded Valuation, Forensic and Litigation Group. John has developed a multi-state practice and has participated in over 2,000 litigation cases as a consulting and/or testifying expert. He has performed thousands of valuations of closely-held businesses, professional practices, and conducted numerous forensic analyses and economic damage studies for a wide range of civil litigation matters, with a concentration in matrimonial matters. John has been Court appointed over 500 times throughout New York State as a financial and valuation expert. John has successfully testified in support of his opinions on numerous occasions in State Supreme Court, Federal Court and in formal Arbitration proceedings. John is affiliated with numerous professional organizations, including membership in the New York State Society and American Institute of Certified Public Accountants, Estate Planning Council of Eastern New York, The Institute of Business Appraisers, National Association of Certified Valuators and Analysts, National Association of Forensic Economics, the Executive Committee of the Family Law Section of the New York Bar Association and Charter Member of the American Academy of Matrimonial Lawyers Foundation – Forensic & Business Valuation Division. John has lectured and authored extensively on such topics as business valuation, estate planning, accounting and taxation for many publications, professional organizations such as the AICPA, ASA, ABA and NYSBA, and for the NYS Office of Court Administration Judicial Training programs (“Judges School”).