Couples must work through numerous negotiations on the path toward divorce. Factors such as visitation and support often take center stage, but the division of property and debts plays a crucial role in each partner’s financial future. When one party attempts to hide assets, however, it can derail the process entirely.
For many people, the concept of hidden assets might seem like the act of tucking away physical property such as cash, gems, jewelry or gold in safe deposit boxes akin to buried treasure. In truth, hidden assets often refer to funds, false debt or falsely-diminished value. One key bit of research that can be accomplished focuses on tax return data, including:
- Investigate itemized deductions: When completing tax return paperwork, an individual must report assets or sources of income. On Schedule A, people can list items that were not covered anywhere else on the return. This is a good starting point to uncover the existence of hidden property.
- Compare interest and dividends: On Schedule B, individuals must identify assets that generate interest and dividends. Individuals can compare items listed on this schedule to a list of known assets and property to ensure everything matches.
- Verify business profits and losses: Additionally, individuals might examine Schedule C of the tax return paperwork to investigate the presence of business assets. For example, one spouse might not admit the existence of a secondary warehouse, but claim a depreciation on the secondary warehouse on Schedule C. Both cannot be true.
When divorcing, the couple must take the time to divide asset ownership and debt responsibility so it is fair for both parties. Too often, one spouse might attempt to hide an asset or property while at the same time claim a loss taking advantage of the tax benefit. It is important that both parties adopt an attitude of honesty and transparency throughout the process.