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  • Writer's pictureJason Soman

Reviewing Debt and Cash on a Business Tax Return

How can a business tax return tell a family lawyer that there is more discovery juice to be squeezed?


One way is when you see the balance of mortgage debt go up on Schedule L (balance sheet).


This indicates a debt refinancing... which means mortgage applications and appraisals which can be a juicy source of information!


So in the example below, the owner of a property that originally cost $120k with a $100k mortgage, refinanced to a $750k loan (+$650k). In this instance the cash infusion of $650k was retained the company instead of distributed.


For my family law connections in states such as NY, where there isn't necessarily a 50/50 split of business interests, this can be crucial, and a common source of gamesmanship by the titled spouse.


This is because there is now a $650k asset on the balance sheet of a company where the split may be less than 50% to the non-titled spouse, rather than distributed to a cash account on the personal side where there would be a presumption of a 50/50 split.


So when reviewing a business tax return, make sure to always watch the debt and watch the cash, and have yourself a happy tax return Tuesday!




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