Unreported Income and Hidden Assets

Unreported income and hidden assets are often alleged in divorce proceedings, with the spouse who is not running the business claiming that unreported income should increase both the spousal support award and the valuation of the family business. In civil litigation, it is often a partner or shareholder that is alleging that someone in his business is hiding income. The process of finding and proving unreported income or hidden assets is often one of the most difficult assignments of a forensic professional, and the costs must be weighed carefully against the potential benefits. However, in some cases, the process is much easier than one might think, as the following case histories illustrate.

Example: Unreported Beer Sales

A large restaurant sold Southern food and beer, with the beer being sold in a prominent part of the restaurant. The beer sales were a major part of the business. The owner reported approximately $50,000 of annual income from the business, and yet he and his wife, drove expensive cars, their children attended private schools, and he was buying significant amounts of real estate.

Records of the local beer distributors were subpoenaed. Those records detailed exactly how much beer, and what types of beer (kegs, bottles, etc.) were sold to the restaurant during the prior two years. A member of our firm went to the restaurant, ordered a drink at the bar, and took note of all of the prices of the beer by type (Bud, Miller, regular, light, etc) and size (8 oz, 12 oz, etc.). The amount of beer purchased per the subpoenaed records of the beer distributor was then priced out. For example, if 1,000 cases of Miller ten ounce light were purchased each year, and each case held 24 bottles, and that item would sell in his restaurant for $2.00, then the sales for that item would amount to $48,000 per year.

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For more information, contact the Family Law Offices of Renee M. Marcelle at (415) 456-4444, or online at http://www.familylawmarin.com/




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