Page 36 - Family Law Services

statements; and loan and credit applications. All of these documents should be cross-checked with one
another, and any discrepancies should be investigated. For example, the Form K-1 for a spouse’s part-
nership may show that his or her ownership went from 50 percent to 25 percent during the pendency of a
matrimonial action, but a review of the business’ tax returns indicates a steady 50-percent split in profits,
and a review of a recent loan application shows no change in ownership.

Tracing Ownership of Closely Held C Corporations

Tracing ownership of closely held C corporations can be more difficult than the previously mentioned
pass-through entities because the spouse’s ownership interest is not reported within his or her personal
income tax return. Reviewing the income reported on the parties’ income tax returns and determining
the sources of wages, interest, and dividend income may lead to uncovering an ownership interest in a
closely held C corporation that a spouse is trying to conceal. In addition, reviewing documents such as
personal financial statements and loan and credit applications could also uncover an ownership interest
in a closely held C corporation. If counsel requests a more in-depth investigation, a detailed analysis of
bank and brokerage accounts (as described in the "Bank and Brokerage Accounts" section that follows)
may further assist in uncovering an ownership interest in a closely held C corporation.

Tracing Income of Nonowner Employees and Executives

In a marital dissolution, a spouse’s income is used for many purposes including, the determination of an
equitable property division and support.

In some cases, there may be an allegation that a spouse has been hiding a portion of his or her income
for a period of time. In those instances, it may be necessary to verify that all income, for a given period
of time, has been accounted for. It is up to the CPA to know what documents to ask for and analyze in
order to determine whether the allegation has merit.

Documents that may be requested include

• wage statements;

• 1099s;

• commission reports;

• year-end compensation and benefits summaries (these are prepared in many large corporations
and financial institutions for all employees);

• personal bank and brokerage accounts;

• personal credit card statements and personal financial statements;

• loan and credit applications; and

• any retirement or deferred benefits statements or summaries.

It is not uncommon for some employees to "forget" they have benefits such as stock options, restricted
stock, or deferred income accounts that may have been omitted from their financial disclosure statement

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