n e w s l e t t e r
association of certified family law specialists
Debra s. Frank, cfls, editor
Summer 2001, no. 2
THE DIFFERENCE BETWEEN GROSS
INCOME AND GROSS CASH FLOW
BY MARK KOHN, CPA , CVA , ABV
T
here are many experts in Los Angeles County who
entitle their reports regarding spousal and child support as “Gross Cash Flow Available for Support”.
There are other experts, including myself, who use
the title of “Gross Income Available for Support”. In practice,
neither position follows their title in all situations, but their
titles do indicate their general thinking. This article will
explain the differences of opinion.
Family Code 4058, in discussing child support, uses the term
“gross income” or “income” several times, and does not use the
term “cash flow” even once.
Family Code 4320 uses the
terms “earning capacity” and
“earned and unearned income”,
but again, no mention of “cash
flow”. Therefore, all other considerations being equal, the proper terminology would be gross
income rather than gross cash
flow, simply because that is the
language used by the legislature.
The concept of income alone being
used to calculate support often creates very unfair situations, as will
be explained shortly. This caused
some experts to use cash flow.
However, as will be explained shortly, the concept of cash flow alone
being used often creates unfair situations as well. This convinced other experts to remain with the
legislature’s term of gross income. Both groups of experts then
address each unfair situation in their own way, as will be
explained shortly.
INSIDE:
The Difference Between Gross
Income and Gross Cash Flow..1
by Mark Kohn, CPA, CVA, ABV
From the Editor....2
The Evolution of ACFLS....3
It is common for people
by David J. Borges, CFLS, President
who own an interest in a
ACFLS’ Annual Holiday
real estate partnership to
Party....6
receive K-1s each year
Fraud Oversight: Hidden
that reflect a loss. Year
Assets....7
after year, they receive
ACFLS Seminar Pictorial....9-11
these reports of losses,
Temporary Custody,
and yet they do not
In Move-Away Cases....15
by Robert A. Roth, Esq.
invest any additional
funds into the partnerAsk The Expert –When Do You
ship to cover the losses.
Consider A Stock Option In
Similarly, many people
Calculating Support?....17
by Nancy A. Kearson, CPA, CVA
have investments in
Amicus Brief (Harris v Butler).....18
other types of partnerships that send them KACFLS Directors 2001....19
1s reflecting income,
Upcoming Calendar of
year after year, but the
Events....19
investors never receive
any funds from the
partnership. The real estate losses arise from depreciation
of the originally acquired real estate and do not require an
actual new outflow of funds. The partnership therefore has
losses but may even have positive cash flow. The other
types of partnerships may have positive cash flow, and
income, but the general partners choose to keep the
money in the partnership to provide capital for the growth
of the business. Therefore, even though there is income,
there are no distributions to the partners. The investor in
the above partnerships may therefore have losses without
any negative cash flow, or the investor may have income
without any positive cash flow.
To the gross income purist, the above creates a very unfair situation. The real estate investor will report a loss to the court,
and will ask for a reduction in support owed (this article
FROM
DEBRA
n e w s l e t t e r
SUMMER 2001, no. 2
ASSOCIATION OF CERTIFIED
FAMILY LAW SPECIALISTS
NEWSLETTER EDITOR
Debra S. Frank, CFLS
NEWSLETTER EDITOR ELECT
Linda N. Wisotsky, CFLS
PRINTING
Jack Lamp Graphics
The ACFLS Newsletter is a publication of the
Association of Certified Family Law Specialists.
Send your submissions in
WordPerfect or Word on disk to:
Debra S. Frank, A PROFESSIONAL LAW CORP.
Newsletter Editor
2049 Century Park East, Suite 2050
Los Angeles, CA 90067
310-277-5121 Fax: 310-277-5932
Or, e-mail a WordPerfect or Word
attachment to: [email protected]
This newsletter is designed to provide
accurate and authoritative information in
regard to the subject matter covered and is
distributed with the understanding that
ACFLS is not engaged in rendering legal,
accounting or other professional service.
If legal advice or other expert assistance is
required, the services of a competent
professional person should be sought.
PRESIDENT
David J. Borges, CFLS
ADMINISTRATOR
Patricia A. Parson
1884 Knox St., Castro Valley, CA 94546
(510) 581-3799 • Fax: (510) 581-8222
VISIT OUR WEB SITE:
www.acfls.org
CONTACT US BY E-MAIL:
[email protected]
I
t continues to be a great honor to
serve as your Newsletter Editor for
the calendar year 2001. This
Newsletter edition provides us
with very interesting and insightful
articles.
Robert A. Roth, Esq., Certified
Appellate Specialist, has provided us
with an article entitled "Temporary
Custody in Move-away Cases: Frontier
Justice? He has graciously offered to
make himself available
with appellate perspectives on family law
issues and will be providing us with a regular column. He is also
available via e-mail or
telephone to discuss
family law appellate
issues that may arise in
your practice. We
thank him for his
generous assistance.
Our President, David
Borges reminds us of
the transformation of
ACFLS into a truly
statewide association
which provides our
members with Annual
Spring Seminars, an
Annual Holiday Party,
Fall Seminars, Quarterly
Newsletters, an
Annual Referral and
Membership Directory,
Statewide Networking,
and more. He attended our Annual
Spring Seminar in Monterey, finding it
stimulating and challenging. Programs
Nancy Kearson, CPA, CVA, has edited
included various cutting edge topics:
an excellent article entitled "Fraud
Retroactivity of Pendleton and Other
Oversight: Hidden Assets", condensed
Premarital Agreement Issues, Including
from the California Society of
Interim Developments, by D. Thomas
Certified Public Accountants 2000
Woodruff and Dawn Gray; Critical
Family Law Conference PresenFinancial Errors in Divorce by Carol
tation. The article analyzes methods to
Ann Wilson, a
determine whether, in
Certified
fact, a spouse is hiding
ACFLS provides
Divorce Planner,
assets and the role of the
our members with Annual
from Boulder,
Internal
Revenue
Spring Seminars, an
Colorado;
Service in performing a
Estate Planning
Financial Status Audit.
Annual Holiday Party,
Knowledge for
Nancy has also offered
Fall Seminars,
Family Lawyers
to provide us with a
Quarterly Newsletters,
by Mary-Lynne
quarterly column and
an Annual Referral &
Fisher; and
herself available
Membership Directory, and make
Discounts for
for questions on an asStatewide Networking
M i n o r i t y
needed basis. She also
B u s i n e s s
provided an additional
Interests by Frieda Gordon. I
article entitled, "When Do You
encourage all of you to attend our
Consider a Stock Option in Calculating
seminars and become active in this
Support?" – another hot topic in this
organization.
field. Nancy was formerly a partner at
Miod and Company and has recently
Mark Kohn, CPA, CVA, ABV, graciously
started her own private practice. She
provides us with an interesting article
Page 2
The Evolution of
ACFLS
discussing the technical differences
between gross income and gross cash
flow.
Continued on page 18
Summer 2001
PRESIDENT’S SOAPBOX
THE EDITOR
S. FRANK, CFLS
ACFLS Newsletter
David J. Borges, cfls, President
I
just completed my “A MESSAGE FROM THE
PRESIDENT” statement for the upcoming annual
Referral and Membership Directory which will be
released in the near future. A number of my thoughts in
that statement are also reflected in this article for this issue of
the ACFLS Newsletter.
Our Association has come a long way since its inception in
1980. From a much smaller organization with membership
concentrated in northern California, ACFLS has transformed
into what is truly a statewide association which provides our
membership with the following:
• Annual Spring Seminars in
desirable locations.
• Annual Holiday Party which is
usually in San Francisco.
• Fall Seminars on issues such as
technology specifically for family
law practices, and successfully
operating a family law office as a
business.
• Quarterly Newsletters which
address current developments in
family law.
• Annual Referral and Membership
Directory.
• Successful statewide networking.
I encourage all of our members to seriously consider attending the next annual seminar which should be an historic
10th Annual Seminar.
Finally, while I intend this to be a brief article, I have to
mention our Association’s involvement in filing Amicus
Curiae Briefs on important Family Law issues. Generally, I
find that most individuals or organizations which desire to
file an Amicus Curiae Brief in an appellate matter generally
request leave of the Court. ACFLS was specifically requested
to file an Amicus Curiae Brief by the Court of Appeal, State of
California, 4th Appellate District, Division One in the Harris
matter. All of our members should be proud that ACFLS has
credibility to the extent that a Court of Appeal specifically
requested our opinion and viewpoint. As we continue to
upgrade our Association’s Web Site over time, I hope that this
brief, and other past Amicus Curiae Briefs submitted by
ACFLS, will be readily available for our members to further
our Mission Statement which is set forth hereinbelow.
ACFLS Mission
Statement
IT
IS THE MISSION OF ACFLS TO
P R O M O T E A N D P R E S E R V E T H E FA M I LY
L AW S P E C I A LT Y. T O T H A T E N D , T H E
A S S O C I AT I O N W I L L S E E K T O :
I encourage our current ACFLS members to become more
involved in our Association. I just returned from the ACFLS
9th Annual Seminar which took place at the Casa Munras
Garden Hotel in Monterey, California. The Seminar was a
tremendous success, not only because of the beautiful setting, but also due to the quality of the presentations which
were at an experience and intellectual level that was stimulating and challenging for Certified Family Law Specialists.
ACFLS Newsletter
Page 3
1.
2.
3.
4.
Advance the knowledge of Family Law Specialties;
Monitor legislation and proposals affecting the field
of family law;
Promote and encourage ethical practice among
members of the bar and their clients; and
Promote the specialty to the public and the family
law bar.
Summer 2001
THE DIFFERENCE BETWEEN GROSS INCOME AND
GROSS CASH FLOW
MARK KOHN,
CPA, CVA, ABV
Continued from page 1
assumes that the payor is the investor), when the “loss” is
really a theoretical concept that has no bearing to the payor’s
wallet. On the other hand, the investor in the other incomeearning partnership will also face an unfair situation. He will
have to report income from that partnership, and pay support
because of that income, without actually receiving any cash
from the partnership with which to pay the support.
MARK KOHN, CPA, CVA, ABV
became a Certified Public Accountant
in 1984, a Certified Valuation Analyst
in 1994, and was awarded an
Accreditation in Business Valuation
from the American Institute of
Certified Public Accountants in 1999.
Since 1985 Mr. Kohn has specialized
in forensic accounting, primarily in
the area of Family Law.
To resolve this dilemma, the gross income experts decided to
get away from gross income in its purity, and in situations like
the above, they use cash flow – even though their reports use
the terms “gross income”. Their heading really means: gross
income except where that is unfair, in which case we mean
gross cash flow.
to the vendors who provided the personal expenses. So it
The gross cash flow experts have their own problems. Assume
becomes an “as if” he received the cash situation.
that the property division has taken place, and the husband
received the business and the wife received the mansion with
The gross income purist has no problem with perquisites. An
no debt. After the property division, the husband uses the
analysis of the business would reflect that there are $100,000 of
business line of credit to borrow $300,000 which he immedi“expenses” that are not really expenses, and so those “expenses”
ately distributes to himself. Assume for the year that his salary
would be added back to income. The resulting gross income
was $200,000 and the line of credit funds were $300,000. The
available for support would be the salary of $100,000 with
cash flow purists recognized that from a cash flow perspective,
another $100,000 of income net earned by the business.
they would have to report $500,000 of cash flow to the
husband, which they intuitively recognized was unfair.
This leads us to another example. Imagine an incorporated
Similarly, if the wife refinanced the mansion and borrowed
lawyer with gross receipts of one million dollars, real expenses
$750,000 from the equity, the cash flow purists recognized that
of $500,000, and who then pays himself a salary of $300,000 –
it was somehow unfair to say
leaving $200,000 in the business. The cash flow purist
that the wife’s cash flow was
must admit that the cash flow to the lawyer is only
$750,000 while the husband’s
$300,000. It is the lawyer that is ordered to pay the supwas $500,000 and that the Both opinions have obvious
port, not his corporation, and he received as pure cash
wife would therefore owe the
flow only $300,000. The cash flow purist would then be
problems,
which
they
husband support.
forced to say that if the lawyer’s corporation retained
skirt by simply joining the
profits that it could have distributed, then it is “as if”
To resolve this dilemma, the
those profits were paid out as cash flow to the shareother
team
whenever
it
is
cash flow experts decided to
holder lawyer.
get away from cash flow in its convenient.
purity, and in situations like
The gross income purist would have no problem with
the above, they use gross
the retained profits in the corporation. Gross income means
income – even though their reports use the terms “cash flow”.
the increase in the net worth of the person, and that would
Their heading really means: gross cash flow except where that
include the increase of the net worth of his major asset, which
is unfair, in which case we mean gross income.
would be his corporation.
So far, it looks like the matter is balanced. Both opinions have
obvious problems, which they skirt by simply joining the other
team whenever it is convenient. However, there are various other
issues that come up that make the dispute more complicated.
A simple example would be perquisites. An owner of a business earns an annual salary of $100,000. His business pays for,
and deducts as business expenses, various personal expenses
that add up to another $100,000. From a cash flow perspective, the business owner received only $100,000 in cash. To
that, the cash flow purist would say that the business owner
sort of received the second $100,000 as well, because it is as if
the business paid him the cash, and he then forwarded the cash
Summer 2001
time ago at $5 a share. He therefore sold 250 shares (20,000
every whim. (The yacht is used by the business on a regular
divided by 80) at a profit of $18,750 (250 times 75). The cash
basis to entertain corporate clients; the son gets to use the
flow purist would say that his cash flow is a positive $18,750
yacht when it is not being used by the business.) He is pro(or perhaps $20,000 as will be
vided with free access to use the corporate jet, so long as
discussed shortly). The gross
it is not needed, so that he often flies to and from New
income purist would be faced
York for the weekends. While in New York, he stays at
with a real dilemma. This How can he report a gain
the company’s suite, fully stocked. Entertainment is
person just lost almost five
provided by tickets that were given as gifts to the comin divorce court when his
million dollars in net worth,
pany by corporate clients. To the cash flow purist, the
but he will report a gain of net worth just dropped by
son did not receive any cash except for his salary, and
$18,750 to the taxing authorthe above benefits face even more problems than the
five million?
ities, and maybe to the
typical perquisites. In this situation, most of the expensdivorce court as well. He
es are perfectly legitimate expenses of the father’s busiwon’t report any loss because
ness. The costs of the yacht and the jet are necessary
he only sold 250 shares. How can he report a gain in divorce
business expenses. The staff on the yacht are year-round
court when his net worth just dropped by five million? True,
employees and would be paid whether the boat is at the dock
the market may go back up, but until then, how can the court
or at sea. The real perquisite might only be the cost of the fuel
ignore the massive unrealized loss? On the other hand, what
and the cost of the food eaten by the son, a cost paid by the
number should be used? Given the very frugal lifestyle, this
business. To the gross income purist, the company’s yacht and
person can hold on to his stock for a long time. To report a
plane are legitimate business expenses of the father’s business.
gain is contrary to the concept of gross income, since he actuTheoretically, it seems illogical to add to the son’s income a
ally lost a tremendous amount, but to report a loss is contrary
bona fide expense of another entity. On the other hand, the
to what might be the ultimate reality.
son has frequent all-expense paid vacations, as well as free
travel and entertainment during the year. Were he to pay for
The above, of course, leads us yet to another example. Imagine
all that, it might cost him $100,000 per year. To ignore that
a simple situation where in 1991 a person acquired 10,000
benefit seems unfair -- illogical to include it, unfair to ignore it.
shares of stock for $10 a share, or $100,000. He gets divorced,
and in the year 2001, he sells the stock for $20 a share, or
Another example: A real estate developer buys some land in
$200,000. To the cash flow purist, there was a cash outflow in
year 1 at a cost of one million, builds a beautiful apartment
the year 1991, and a cash inflow in the year 2001. For support
building on it for a cost of two million, and then refinances the
purposes, one typically looks at the cash flow over the past 12
entire property in year 3 for four million. The total cost was
months. In that case, the conclusion must be for the cash flow
three million, and the refinance proceeds were four million. The
purist that this person had a positive cash flow of $200,000.
cash flow purist says that indeed, there was new cash inflow of
(In my previous example above, I used $18,750 but it probably
one million, but that was from a refinance, a loan, and loans are
really is $20,000 from a purist perspective.) To report cash
not really to be included in cash flow. A few years later, in year
flow of $200,000 is virtually impossible even for a cash flow
5, the developer sells the land and building for four million, pays
purist. They intuitively recognize the gross unfairness, and
off the loans and receives no net proceeds. The cash flow purist
acknowledge that in this case, gross income must be used
says that in year 5, there certainly was no cash inflow, since there
instead. Now there is not even an “as if”. It’s simply a matter
were no net proceeds. Therefore, there never was any cash flow
that their theoretical model fails in this situation.
available for support, even though there was a one million profit on the development project. The gross income purist points
There are other situations where the difference between
out that the above is absurd, since there was one million dollars
income and cash flow becomes apparent. Sometimes, one posiof income. The only problem is when to recognize the income.
tion wiggles their way around a theoretical problem, and ends
up using the same theory as the other side, and sometimes, the
different positions lead to different conclusions.
We therefore have examples where the cash flow purist has to
leave the purity of actual cash flow, and to resort to “as if”
thinking, whereas the gross income purist would be perfectly
happy with his theoretical model.
For example, assume that a person was informed that he would
receive $20,000 during the next year from his parents as a gift.
For the cash flow perspective, that would probably be included in the gross cash flow available for support. For the gross
income perspective, gifts are not income.
We now turn to another example, but this time in favor of the
cash flow purist. Imagine a person who owned 100,000 shares
of Microsoft, which during the last 12 months fell from over
$100 per share to under $50 per share. Assume that is his only
source of income. Assume further that he lives frugally with
his parents, and for his living expenses, he sold $20,000 worth
of stock at a price of $80 per share which he acquired a long
Finally, we come to situations where both positions theoretically collapse. Imagine a son who works in his father’s very
successful business. The son earns a respectable salary but
because he is the son, he has access to certain privileges. He
therefore is provided with the company’s yacht for several
weeks a year, fully stocked and with a full staff to serve his
Page 4
ACFLS Newsletter
ACFLS Newsletter
What Helps Make You a Great
Family Law Specialist?
Review software, services, books or other products of
interest to Family Law Specialists. Deadline for the Fall issue
is September 28, 2001. Send your submissions in
WordPerfect or Word on disk to:
Page 5
Debra S. Frank,
A PROFESSIONAL LAW CORP.
2049 Century Park East, Suite 2050
Los Angeles, CA 90067
Tel: 310-277-5121 Fax: 310-277-5932
e-mail: [email protected]
Summer 2001
In year 3, when the cash was received, there was no income on
the act of refinancing. It may even be that when the building is
sold, it will be sold at a loss. So no income is included for year
3. In year 5, there will be income reported on the tax returns of
one million dollars, but there won't be any cash. Nonetheless,
the gross income purist would most likely report gross income
of one million in year 5, because the alternative is to recognize
no income ever, and that is incorrect.
One last example. The person operates a restaurant and he
eats all of his meals there. Assume that the typical cost of a
meal of a restaurant is around 40% so that if a meat and potatoes meal sells for $20, it costs the restaurant $8 for the actual
meat, potatoes and chef’s services. Assume that the person eats
three meals a day at the restaurant – with a market value of $60
per day and an actual cost of $24 per day. The cash flow
purist would have to say that the cash flow received would be
$24 per day, because the cash spent by the restaurant on his
behalf was $24, even though that clearly seems unfair, since
FRAUD OVERSIGHT: HIDDEN ASSETS
the benefit received is $60 per day. The replacement value of
those meals is $60 per day for everyone except owners of
restaurants. The cash flow purists are therefore left with a
dilemma. The gross income purists would also have a problem. The initial reaction would be to simply add the $24 per
day to the reported net income, just as one would for all other
perquisites. However, in a typical perquisite, the cost and the
benefit are the same. One charges a personal meal as a business expense; that meal at market price is added as a perk, the
cost and the benefit are the same. Where the cost and the
benefit are very different, the gross income purist will also
face a dilemma.
From all of the above, one can see that neither position has
the upper hand from a purely theoretical point of view.
Fairness often comes in and pushes the theoretical aside. In
my opinion, that is precisely the optimum result – choose
what is truly fair, regardless of one’s theoretical perspective,
and sometimes, regardless of the legislature’s choice of words.
CONDENSED FROM CALIFORNIA SOCIETY
OF CERTIFIED PUBLIC ACCOUNTANTS
2000 FAMILY LAW CONFERENCE PRESENTATION
AS EDITED BY NANCY A . KEARSON, CPA , CVA
Nor does it guarantee that employment of any
methods will yield results. What it can be is a
starting point in the maze that this type of work
can become. As in the real world, there can be
more than one approach to solve the problem.
Therefore, the methods discussed herein
should be considered a supplement to other
methods and should be tempered with the common sense of cost vs. benefit.
Presented at the
2000 Florida Conference:
Indicators of Fraud and Missing Assets
The spouse who has been planning to
hide assets throughout the marriage
has an advantage. The advantage is
that the ability to determine missing
assets by examining a change in
operating habits is lessened.
However, all is not lost. Even the
seasoned person hiding assets can be
detected with proper analysis. The first
step is to understand the type of activity which has lent itself
to abuse. The following areas/activities do not guarantee
abuse, they have just been found to be a factor and would
require further scrutiny:
Donald John Miod, CPA, ABV, CVA, CBA
Miod and Company, LLP
A
CFLS’ Annual Holiday Party
will be held Saturday, December
1, 2001, at the Crowne Plaza Union
Square Hotel, 400 Sutter Street, San
Francisco. Cocktails and dinner will
be on the 30th Floor of the hotel.
More details will follow regarding
cost, menu, entertainment, etc.
The Crowne Plaza Union Square
Hotel is located in the heart of San
Francisco, close to shopping,
theaters, cable cars, etc. The hotel is
offering ACFLS a rate of $159 single/
double, plus appropriate tax. Rooms
are blocked for Friday, November 30
and Saturday, December 1.
RESERVATION DEADLINE IS
NOVEMBER 2. To make reservations
call 888-218-0808. Block is held
under Association of Certified
Family Law Specialists Holiday Party.
DECEMBER 1, 2001
SAN FRANCISCO
We hope you will be able to come to
the Holiday Party. There will be live
music, dancing and lots of fun.
A separate flyer will be sent to all
members of ACFLS with more
specific details regarding dinner.
Summer 2001
Page 6
ACFLS Newsletter
Charles Rettig, Esq
Hochman, Salkin, Rettig,
Toscher & Perez
Justice Donald B. King
(Retired)
Retired Justice California Court of
Appeals
Commissioner James Endman
Los Angeles Superior Court
1.
Preamble
The graphic on the
cover page of this
paper depicts only
one of the many
problems which can
occur for those
who are guilty of
fraud in a marital
dissolution. It represents disclosure
of the problem in
the courtroom setting and the potential reckoning with the Internal Revenue
Service. Other problems, in addition to the IRS,
will be discussed herein. This paper is not
intended to be a complete treatise on all of the
ways one can find the problem and quantify it.
ACFLS Newsletter
Catching the RAIDS disease during the period of the
divorce (Recently Acquired Income Deficiency Syndrome).
2. Numerous cash transactions.
3. Lifestyle in excess of reported
income.
4. Investments in art and jewelry
not supported with banking
transactions.
5. Conducting financial affairs
without traditional financing
activity such as home mortgages,
cars and other asset loans.
6. Rapid paydown or payoff of substantial mortgages, personal loans, commercial loans or other liabilities before
maturity dates.
7. Large investments made by one spouse who states the
source of money is from their family, where the family does
not appear to have sufficient assets to make such an investment.
8. Interests in partnerships and corporations where the stated interest is different than the “real interest” because the
spouse stated that some of the interest belongs to a relative.
9. Frequent travel to foreign countries.
10. A rapid, unexplained increase in net worth.
Page 7
Summer 2001
11. A rapid, unexplained decrease in net worth.
12. A safe in the home where
cash is kept.
13. Lack of traditional audit trail
such as canceled checks,
bank statements, etc.
14. Loans deposited to a losing
business from non-traditional sources.
15. Transactions involving currency levels falling just below the $10,000 currency transaction reporting requirement (to evade enforcement
scrutiny).
16. Allegations made by the other spouse.
17. Loans made to a business without usual paperwork or
meeting of terms for repayment.
18. Lack of loans, fees and costs on business loans.
19. Lack of inventory records in a business.
20. Accounts receivable in a business written off while the
company continues to do business with the customer.
21. Constant reimbursements by a business to an owner for
payments paid in cash.
22. Convoluted financial transactions involving numerous
entities with a high volume of transfers between them.
23. Cash registers in business which do not have “Z tapes.”
24. Business owner does not keep cash register “Z tapes.”
25. Business has been losing money for several years.
26. Single entry accounting system.
27. Lack of outside accountant.
28. Long delays in producing records.
29. Expenses seem out of line with industry statistics.
30. Large disbursements spread over several accounts to even
out the expense.
31. Lack of numerical control of invoices.
32. Extensive perquisites.
33. Reimbursement for entertainment which does not match
diary or calendar.
34. Lack of appointment book.
35. Barter.
36. Secondary endorsee on checks paid to owner.
37. Lack of cash dollars shown on duplicate deposit slips
when the type of business receives cash.
38. Vendors paid by company do not exist in the phone book.
39. Invoices supporting purchases or expenses are similar to
those generated by Excel, Word or Quicken.
40. Investments in stamps, coins or gold.
41. Gross rents do not match the rent roll or leases.
42. Payments made to credit card companies from unknown
sources.
43. Tax returns don’t match
books and records.
44. Lack of personal living
expenses paid from personal accounts.
Offshore Accounts
For many years promoters
have boasted of offshore bank
accounts as the only real
Summer 2001
method of hiding assets, either from a spouse or the government. Mostly sold as an incentive to avoid taxes, the lure of
having a nest egg planted without someone knowing about it
is exciting. However, things are changing. The government
does not like it just as much as a spouse who is being duped.
The first and most obvious way to determine if someone has
offshore accounts is to look at the answers to the questions on
schedule B of Form 1040 regarding accounts in a foreign country. From a practical standpoint, the person trying to avoid
having someone know about a hidden asset offshore is not
going to be a person worried about lying on their tax return.
For this reason, there is not much hope of finding anything this
way. Fewer than one in ten are honest enough to report these
accounts. However, the number of people reporting these
types of accounts (the one in ten) grew by 20% from 1995 to
1999 to 166,127.
A common method of diversion of funds to an offshore account
starts with the person visiting that country.
The
account is set up and waits
for the money to start coming in. Most often cash is
used to purchase money
orders and mailed to the
account. Also, checks can
be cashed at the same establishment that the money order is purchased and sent on its way. One such person, Susan Farbenblum
- a New York landlady, did such a thing. She took cash payments
from tenants and purchased money orders and sent them on to
the account she opened at Guardian Bank and Trust (Cayman),
Ltd. What she did not know was that the owner of the bank was
under investigation for money laundering. The owner cut a deal
with US authorities and handed over computer records of all
Guardian customers. Needless to say that Susan pled guilty to
charges of tax evasion.
ACFLS’
Ninth Annual
Spring
Seminar
May 18-20, 2001 - Casa Munras
Garden Hotel, Monterey, California
Scott Mowrey, CPA, seminar speaker.
Dawn Gray and Tom Woodruff leading the discussion
on Prenuptial Agreements.
Carol Ann Wilson, CFP, CDP addressing the attendees
on Critical Financial Errors in Divorce.
Recent trends in global financial diplomacy together with new
initiatives by the IRS are likely to make them even riskier in
years to come. The IRS sometimes discovers illegal foreign
accounts when an ex-spouse or a business partner blows the
whistle. The US Customs service routinely opens packages
going to such places as the Cayman Islands to catch drug cash
going to those places.
The Organization for Economic Cooperation and Development
two years ago launched a campaign to pressure offshore tax
havens to revise their laws so that banks there could be forced
to divulge customer information. Some of the many offshore
centers have indicated a willingness to bend on the issue.
The United States Post Office and banks issue money orders.
The maximum amount on a US postal money order is $700 and
$1,000 for a bank money order. In 1995 the Postal Service
moved to limit the use of money orders overseas. A then new
domestic money order was issued which has the words
“Negotiable only in the U.S. and its possessions” on the front
Attorneys at Work.
Attendees signing in for MCLE.
Continued on page 13
Page 8
ACFLS Newsletter
ACFLS Newsletter
Page 9
Summer 2001
Monterey . . . revisited!
Alan Tanenbaum, San Jose,
Carol Ann Wilson,
Georgette Tanenbaum,
Garrett Dailey, Oakland,
Lynn Dailey
John Horwitz of Orange County relaxing
during the coffee break.
Coffee break in the garden.
Jill Foster, Kate Horwitz, Administrator Pat Parson,
Joan Wetherell, Pleasanton
Carol Delzer, Sacramento, Vince Jacobs,
Sacramento and Adryenn Cantor, Ventura.
Don and Diane Eisenberg.
President David Borges, Teresa Borges, Frieda Gordon, Santa Monica, Joann
Myers, Sterling Myers, Arcadia, Dawn Gray, Grass Valley.
Left to right: Ron Lachner,
Long Beach, Theresa
Kovner, Carol Kearney,
Gary Kearney, Pasadena,
Linda Wisotsky,
Beverly Hills
President-Elect and Chair of Seminar
Tom Woodruff, Sacramento, and Diane Woodruff.
Summer 2001
Page 10
ACFLS Newsletter
ACFLS Newsletter
Mary Ann Kremer, Matthew Kremer, San Diego,
Len Weiler, San Ramon, Alice Collins.
Page 11
Summer 2001
of activity which have been fertile with abuse. The other strategy is to perform audits of people in such a way as to catch
them based on financial status. This will be discussed later.
FRAUD OVERSIGHT: HIDDEN ASSETS FLOW
A FAMILY LAW PRACTICE IS A BUSINESS
NOT A NON-PROFIT
CHARITABLE ORGANIZATION
ASSOCIATION OF CERTIFIED FAMILY LAW SPECIALISTS
PRESENTS AN ALL DAY FAMILY LAW SEMINAR FOCUSED ON MAKING MORE
PROFIT ($$$) BY WORKING LESS AND PROVIDING YOUR CLIENTS MORE SERVICE.
NOVEMBER 10, 2001 — OAKLAND
NOVEMBER 3, 2001 — LOS ANGELES
SEMINAR WILL INCLUDE PRACTICAL INFORMATION FOR
THE FAMILY LAW PRACTICE ON:
• HOW TO GET PAID - retainers, billing, collectibles, value billing.
• A COMPUTERIZED PRACTICE MANAGEMENT SYSTEM FOR FAMILY LAW Don’t forget something: Manages all client & case information, phone calls, correspondence,
pleadings, calendars, appointments, to-do’s, reminders, and makes sure all tasks are billed.
• UNBUNDLING FAMILY LAW SERVICES – A NEW SOURCE OF REVENUE - How
to do it, rewards, risks, and forms.
• HOW TO TAKE A LONG VACATION AND STILL HAVE A FAMILY LAW
PRACTICE LEFT WHEN YOU COME BACK
• THE LATEST HARDWARE AND SOFTWARE FOR THE FAMILY LAWYER - work
easier and faster, be more efficient, more effective, and make more income.
• ECONOMICS OF A FAMILY LAW PRACTICE - Lower expenses without losing effectiveness - managing employees, overhead, cash flow.
• THE SPEED OF COMMUNICATIONS AND HOW TO CONTROL IT - Phones, cell
phones, pagers, faxes, e-mail, and voice recognition dictation.
• HOW TO GET THE RIGHT CLIENTS AND AVOID THE WRONG ONES Interviewing techniques, marketing, referrals, and fees.
MANAGE YOUR FAMILY LAW PRACTICE
DON’T LET IT MANAGE YOU!!
If you wish to be notified of this seminar with details for registration, fax a copy of this notice to
ACFLS at (510) 581-8222 with the following information:
NAME:__________________________________________________________________________________
ADDRESS: ______________________________________________________________________________
FAX NO.: ______________________________________________________________________________
Summer 2001
Page 12
ACFLS Newsletter
Continued from page 8
and back. The international money order is colored and highly
visible. By having these separate international money orders,
Postal Inspectors can be alerted to significant increases in money
movement out of the country through money order sales levels.
Federal regulations cover the issuance of money orders, traveler’s checks and bank checks that are $3,000 or more. The regulations state that if the purchaser has a deposit account at the
institution, then a chronological log must be kept which
records the following:
1. The name of the purchaser.
2. The date of the purchase.
3. The type of instrument purchased.
4. The serial number of each instrument purchased.
5. The dollar amount of each instrument.
Currency and Banking Transaction Reporting
Detroit is the site of the Detroit Data Center which houses the
CBRS system that collects and tracks currency transaction
reports from all federal agencies. Most, if not all, examining
agents can access this data bank for currency transaction information. The examining agent’s ability to retrieve reports of
currency and other suspicious transactions has increased
substantially. It is not uncommon for an agent to request that
the taxpayer explain specific currency transactions which the
agent discovered in a pre-audit analysis of the taxpayer’s return.
In some instances, the IRS may begin with a “compliance
check” which has arisen out of the filing of currency transaction reports and if audit potential is determined during such a
compliance check, a thorough examination will follow.
In addition, the account holder status must be verified by the
institution.
Some of the forms, which serve as a starting point for the government, are:
If the purchaser does not have an account at the institution,
then the log must contain the following:
1. The purchaser’s name and address.
2. The purchaser’s Social Security number or Alien
registration number.
3. The purchaser’s date of birth.
4. The date of purchase.
5. The type of instrument being purchased.
6. The amount of the purchase price made in currency.
7. The serial numbers of the instruments purchased.
a.
Currency Transaction Report, Form 4789
This form is filed by financial institutions reporting
currency transactions (deposits and withdrawals)
involving in excess of $10,000. Financial institutions are
also required to report all currency transactions they deem
“suspicious” regardless of the amount involved. This form
identifies the individual making the transaction, the person or organization for whom the “suspicious” transaction
was conducted and the institution reporting, as well as the
amount of the currency involved.
b.
U.S. Customs Form 4790
This form details the international transportation of
currency or monetary instruments. Persons transporting
either of these must declare themselves to the U.S.
Customs Service when leaving the United States or when
entering with funds to be declared from non-U.S.
sources. Persons who mail or ship funds must also
complete this form.
c.
IRS Form 8300
This form is required whenever cash in excess of $10,000
is received in a trade or business. This form is filed by the
business receiving the funds, and it identifies the customer, by name, social taxpayer identification number and
address, the transaction, method of payment and other
related information. The definition of “cash” for purposes
of filing this report, has included the purchase of cashier’s
checks, travelers checks, money orders and bank checks in
amounts of less than $10,000. This definition of “cash” is
aimed at detecting currency “structuring” activities (i.e.,
disguising transactions to avoid financial reporting
requirements.)
d.
IRS Form 8362
This form is completed by casinos engaged in currency
transactions with individuals.
e.
Treasury Form TDF 90-22.1
This form is required of all entities and individuals having
a financial interest in or signature authority over a foreign
In addition, the institution shall verify the identification of the
person by examination of proper documents.
The records above are kept by the financial institution for a
period of five years.
The above should give assistance in following a trail to a foreign account.
Disclosure During the Divorce
There are two basic types of cases. Those where only one spouse
had knowledge of the fraud and those where both spouses had
knowledge of the fraud. How much each had knowledge of
always seems to be a matter of debate by the parties.
The issue of who was defrauded is twofold. First there is the
defrauding of a spouse. For that the remedies can be harsh. In
those circumstances where the government, for example, has
been defrauded, the discussion takes on a whole new meaning.
Internal Revenue Service
Certainly one of the real exposures that goes beyond the disclosure in the courtroom, and the concomitant risks associated
with it, is the Internal Revenue Service and the Franchise Tax
Board. They have, for years, put procedures in place to catch
people who defraud the government. Part of their strategy is
to get people who deal with the taxpayer to report certain types
ACFLS Newsletter
Page 13
Summer 2001
f.
bank account or financial account with an aggregate value
of more than $5,000.
Report of Apparent Crime Form
Federally insured institutions are required to report to the
appropriate federal authorities any suspicious transactions
engaged in by their customers. This report consists of multiple pages and requires the identification of the customer
and a detailed description of the suspicious conduct.
These forms have been known to be filed directly with the
U.S. Attorney’s Office and CID.
Financial Status Audit Activity
The Internal Revenue Service has historically implemented its
“financial status” approach to audits when there is a reasonable
suspicion of unreported income (à la Al Capone) — as codified
in IRC § 7602. Typically, audits primarily focus on the return
itself and other issues merely become relevant to the extent
they were discovered during the course of the audit of the
return. Under the financial status approach, a taxpayer’s total
financial situation is evaluated to assure that the tax return
accurately reflects reportable income. It is an approach
designed to compare information set forth on a tax return with
the taxpayer’s financial lifestyle or business activities. It is also
an attempt by the Internal Revenue Service to increase compliance and search out potentially fraudulent situations.
The approach of auditing a taxpayer, rather than a return,
becomes more important as the government begins to implement the economic reality approach in conjunction with their
“market segment” audit approach. Under the market segment
approach, the agent focuses on tax compliance problems of a
particular industry. Agents effectively become specialists in particular industries or with respect to particular issues. As a result,
the agent gains experience in specific issues to be examined for
a particular type of business whether or not set forth in a return.
A financial status audit will generally involve a thorough
review of:
1. The taxpayer’s standard of living.
2. The taxpayer’s accumulated wealth.
3. The taxpayer’s economic history.
4. The business environment and activities of the taxpayer.
5. Non-taxable sources of income available to the taxpayer.
6. The taxpayer’s system of internal controls.
7. An effort to reveal transactions with related taxpayers.
In connection with the foregoing, examining agents employ
many different investigative techniques, including a net worth
analysis, an expenditures analysis, a bank deposit analysis,
and/or a method of determining whether the mark-up utilized
by the taxpayer in their business is within a range common for
similar businesses in the same industry and locality. Depending
upon the information developed during the course of the audit,
these audits are likely to generate increased criminal tax investigations and prosecutions.
A financial/indirect methods status audit is the process by
which the IRS gathers information reflective of the taxpayer’s
actual financial or economic status. If an individual’s tax return
Summer 2001
lacks “economic reality”, the cause is believed most
likely attributable to:
1. Unreported income.
2. Overstated expenses.
3. Non-taxable sources of funds.
The “focal point” of any financial status audit is to determine
whether reported income is sufficient to support the individual’s:
1. Financial lifestyle,
2. Standards of operating/living, and
3. Expenditures and acquisitions.
Here are some of the questions an agent would be forced to
deal with:
a. What is the standard of living of the taxpayer?
1. What does the taxpayer and their dependents
consume economically?
2. How much does it cost to maintain this consumption
pattern?
3. Is reported net income sufficient to support this
standard of living? (Source of funds?)
b. What is the accumulated wealth of the taxpayer?
1. How much has the taxpayer expended in the acquisition of capital assets?
2. When and how was this wealth accumulated?
3. Has reported income been sufficient to fund the
accumulations?
4. What is the economic history of the taxpayer?
a. What is the long-term pattern of profits and
return on investment in the reported business
activity? (3-year review)
b. Is the taxpayer’s business expanding or contracting?
c. Does the reported business history match the
changes in the taxpayer’s standard of living and
wealth accumulation? (Is interest income
increasing or decreasing?)
5. What is the business environment?
a. What is “typical” profitability and return on
investment for the taxpayer’s market segment and
locality? (Trade journals)
b. What are typical patterns of non-compliance
in the taxpayer’s market segment? (Cash
transactions)
c. What are the competitive pressures and economic health of the market segment within which the
taxpayer operates?
6. Has the taxpayer made assertions to receipts of funds
which were considered to be non-taxable?
a. Do claims of non-taxable sources of support make
economic sense? (Cash hoard, credit history)
b. How credit worthy is the taxpayer in view of the
taxpayer’s assertion that funding was secured
from loans? (Credit reports)
c. In situations where the taxpayer has asserted that
funds were received from other than conventional lending institutions, what was the lender’s
source of funds? (Was it a disguised loan of funds
that originated with the taxpayer?)
Page 14
ACFLS Newsletter
Appellate Perspectives — on family law
TEMPORARY CUSTODY IN MOVE-AWAY CASES:
FRONTIER JUSTICE?
BY ROBERT A ROTH, ESQ., CERTIFIED APPELLATE SPECIALIST
I
n In re Marriage of
Burgess, the California
Supreme Court sought
to bring clarity to the
confused and controversial
interests surrounding child
custody in ‘move-away’
cases – situations where
one or both parents move
to a new community. (In re
Marriage of Burgess (1996)
13 Cal.4th 25). Burgess
endeavored to create rules that would
apply both to an initial custody decision
and also when there is a permanent custody order in place, in hopes of bringing
clarity to the “tangled web of precedent”
surrounding parental relocations. The
numerous published decisions seeking
to ‘clarify’ Burgess demonstrate the complexity of this area of law. However, one
underlying subtext has emerged from
the precedents that hearkens back to
frontier justice – “possession is 9/10ths
of the law,” and temporary custody may
make the crucial difference.
A dominant timeshare in temporary custody arrangements is frequently the tiebreaker in move-away cases. The cases
pay lip-service to the principle that a
temporary custody order is not a permanent custody order, and thus does not
trigger the ‘changed circumstances’
modification of custody test. (See, e.g.,
Montenegro v. Diaz (2000) 82 Cal. App.
4th 1, 11). Nonetheless, Burgess and its
progeny recognize that “custody lawfully acquired and maintained for a significant period will have the effect of compelling the noncustodial parent to
assume the burden of persuading the
trier of fact that a change in custody is in
the child’s best interests.” (Burgess,
supra, 13 Cal.4th at 37). This shifted
burden of proof applies to temporary
custody arrangements. Indeed, the
mother in Burgess had the dominant
ACFLS Newsletter
custody timeshare by virtue of a stipulated temporary custody order, which
was enough for the court to confer her
with presumptive move-away powers.
(Burgess, supra, 13 Cal. 4th at 32, 37).
The impact of initial temporary custody
orders is dramatically illustrated in
Lester v. Lennane (2000) 84 Cal.App.4th
536. When a Florida man learned that
he had impregnated a Sacramento
woman, he sought to obtain a custody
evaluation during pregnancy, tried to set
a long cause hearing at the anticipated
time of birth, and asked for temporary
custody with a 50 percent timeshare
shortly after birth, seeking to avoid an
adverse status quo affecting his permanent custody rights. The trial court
turned down these requests, instead
granting modest visitation pending trial,
and later awarded permanent custody to
the mother in a trial held when the child
was six months old.
The father’s decision to wait until after
the permanent custody decision to seek
appellate review turned out to be the
pivotal factor in Lester: “A noncustodial
parent who seeks to obtain custody will
often be at a disadvantage by the time of
trial if the child has bonded with the
custodial parent. The noncustodial parent’s only effective recourse is to obtain
immediate [appellate] review of any
objectionable temporary custody order
[rather than wait for a post-judgment
Page 15
appeal] while the bond
between child and custodial parent strengthens
and deepens” (Lester,
supra, 84 Cal. App. 4th at
565). The court also ruled
that temporary custody
orders are not appealable
orders, and that review
can only be obtained
t h ro u g h f i l i n g a w r i t
petition.
Moreover, Lester makes explicit that
after an award of temporary custody,
“the parties did not stand on an equal
footing at trial: rather, [the non-custodial parent] had the burden of showing
good cause to disturb the status quo…
He could not meet his burden… merely
by showing that the factors favoring custody, aside from the status quo, weighed
evenly between the parents – which, in
essence, is what the trial court found.”
(Lester, supra, 84 Cal.App.4th at 592).
A similar result is found in In re
Marriage of Condon (1998) 62
Cal.App.4th 533. In another ‘close’
decision, the mother’s status as primary
caregiver under temporary custody
orders supported a judgment authorizing the mother to move the children
to Australia. (Condon, supra, 62
Cal.App.4th at 549, 553).
In a case pending before the First
District Court of Appeal, the author represents the appellant in a ‘dual move’ situation, in which both parents left the
home community at the time of separation. While there is no case law on the
question, the dual-move scenario may
have been anticipated by Burgess itself,
where the Supreme Court held that:“in a
matter involving immediate or eventual
relocation by one or both parents, the
Continued on page 16
Summer 2001
What Do You Know
That Other Family
Law Specialists
Don’t?
Share your expertise with the State’s
top family lawyers. Don’t have time
for a long article? Send a hot tip.
Deadline for the Fall issue is
September 28, 2001. Send your
submissions in WordPerfect
or Word on disk to:
Debra S. Frank,
A PROFESSIONAL LAW CORP.
2049 Century Park East, Suite 2050
Los Angeles, CA 90067
Tel: 310-277-5121 Fax: 310-277-5932
e-mail: [email protected]
Continued from page 15
trial court must take into account the
presumptive right of a custodial parent
to change the residence of the minor
children, so long as the removal would
not be prejudicial to [the children’s]
rights or welfare.” (Burgess, supra, 13
Cal. 4th at 32). It would appear that
the non-custodial’s burden of showing
prejudice to the child is increased
under the ‘dual move’ scenario, because
the child’s ties to a home community
(which might otherwise militate against
a move) become irrelevant when both
parents are moving.
When marriages break up, it is not
unusual for a spouse to want to move
closer to family or consider potential
job transfers. The temporary custody
order in the dissolution action may be a
pivotal ‘tie breaker’ between similarly
qualified parents, in determining the
ultimate residence of children.
Expediting the evaluation and permanent custody trial, while helpful, may
not adequately counteract an unfavorable status quo. Immediate appellate
review of adverse temporary custody
orders by writ petition may be the only
effective strategy for a parent resisting a
proposed relocation of the child’s
residence.
evident by an unrealistically low income for the nature of the
business, bank deposits substantially in excess of reported
gross receipts, a lifestyle inconsistent with reported income, or
repeated reported business losses.
FRAUD OVERSIGHT: HIDDEN ASSETS FLOW
Continued from page 14
During the course of a Financial Status audit, an agent will
attempt to complete a Personal Living Expense (“PLE”)
checklist that includes an analysis of the taxpayer’s expenditures for food (at home and away from home), housing (if
owned by the taxpayer there will be a determination of
expenditures required for mortgage interest, property taxes,
maintenance, repairs, and insurance), utilities, clothing,
transportation (if a vehicle was purchased, the agent will
attempt to determine the deposit and finance charges, repairs
and maintenance expenses, gasoline expenditures, and expenditures for public transportation), healthcare (health
insurance, medical services, prescription drugs, and medical
supplies), entertainment, personal care, education (i.e., college
expenditures), cash contributions, personal insurance and
pension contributions.
In attempting to determine the level of compliance set forth
on a return, agents will also attempt to interview the
taxpayer. It is likely that the agent may seek to interview the
taxpayer near the commencement of the audit, before the
taxpayer has an opportunity to formulate responses for any
potentially sensitive issues. If the representative lacks firsthand knowledge, there is a strong likelihood that the agent
will seek to interview the taxpayer directly. If the request is
denied, the agent may issue a summons requiring the
taxpayer to attend.
In a business context, the agent will likely demand a tour of the
business premises to get an understanding of the scope of the
business activity or to confirm a claim on the return regarding
ending inventory, wage deductions, etc. Further, if the return
information fails to support any relatively high asset-related
deductions, the agent can be expected to inquire about the
source of the revenue that allowed the taxpayer to accumulate
the assets. In fact, several taxpayers have recently received
audit reports from the Internal Revenue Service which
included an imputed income adjustment explained as:
“From records and information available, it has been
determined that you received additional income in the amount
shown from the sources indicated.
Imputed income is based on the following facts:
Your ability to pay mortgage interest implies that you received
income from known and unknown sources. The known
sources are outlined. The unknown sources are based on the
Bureau of Labor Statistics and the Average Consumer Debt.
The computation is shown on the attached worksheet. The
imputed income is considered self-employment income and is
subject to self-employment tax.”
Even if the taxpayer’s books and records appear satisfactory
and internally consistent, Financial Status audits dictate a
further review of information relevant to the particular
taxpayer or the taxpayer’s business industry as might be
Summer 2001
ASK THE EXPERT
TEMPORARY CUSTODY IN MOVE-AWAY CASES
Page 16
Next month we’ll look at various methods used by
the IRS to indirectly reconstruct income. We’ll also
look at specialty areas of concentration.
ACFLS Newsletter
WHEN DO YOU CONSIDER A STOCK OPTION
IN CALCULATING SUPPORT?
BY NANCY A . KEARSON, CPA , CVA
W
hen stock options are part of a compensation
package and they are granted on a regular
basis, they should be considered when determining gross income available for support.
NANCY A. KEARSON,
Nancy A. Kearson is a Certified Public
Accountant and a Certified Valuation
Analyst in practice in Los Angeles.
She was formerly a Partner and the
Director of Litigation Services at Miod
and Company. She also worked for
Gursey Schneider & Co.
If the party received stock options in lieu of some portion of
“market” salary as part of a compensation package, the appreciation in the stock option over the period used to determine
gross income available would typically be considered (one to
four years). The appreciation would be calculated as the difference between the appreciation of the value of the share and
the grant price at the beginning of the period and the difference between the appreciation of the value of the share and
the grant price at the end of the period. Assuming the following scenario for 20,000 stock options the additional gross
income available for support would be $280,000 annually or
$23,333 monthly.
Jan. 1, 2000
Dec. 31, 2000
Market
Price
Grant
Price
$49 per
share
$25 per
share
$24 per
share
$63 per
share
$25 per
share
$38 per
share
Net appreciation over one year
Nancy Kearson established her own
practice in 2001. As a Forensic Accountant she has extensive specialized experience in all types of litigation related
financial appraisal and investigative analysis. She has
qualified and given testimony as an expert witness. In
addition to litigation services her background includes
auditing in accordance with generally accepted auditing
standards and business management for high net worth,
high profile individuals.
Appreciation
If you would like to submit a question to this column,
please email Nancy at [email protected].
$14 per share
The “net appreciation” method works well with stock
options that increase in value over time whether or not they
have been vested.
Smith/Ostler calculation could be made on the difference
between the market value and the grant price at the date
of grant.
In a case where stock options are granted on a one-time or
infrequent basis as compensation over and above the party’s
“market” compensation, a “Smith/Ostler” application may be
a more applicable method in determining gross income available for support. In such an application, the granting of
stock options to a party would effectively be considered a
bonus and a “Smith /Ostler” calculation would apply at the
time of grant and sale. The “Smith/Ostler”calculation would
be applied to the difference between the grant price of the
stock and the sale price of the stock. If the party earning the
options wished to hold the options instead of selling them, a
ACFLS Newsletter
CPA, CVA, DABFA
Page 17
See Us on the Web
at
www.acfls.org
Summer 2001
A M I C U S
ACFLS DIRECTORS 2001
B R I E F
President:
David J. Borges
Tulare County
559-733-0517
Fax: 559-733-0569
[email protected]
Secretary-Elect:
Frieda Gordon
Los Angeles County
310-829-7220
Fax: 310-829-2490
[email protected]
Newsletter Editor:
Debra S. Frank
Los Angeles County
310-277-5121
Fax: 310-277-5932
[email protected]
Director at Large:
Alan L. Nobler
Santa Clara County
408-287-2922
Fax: 408-287-1224
[email protected]
President-Elect:
D. Thomas Woodruff
Sacramento County
916-920-0211
Fax: 916-920-0241
[email protected]
Director North:
Athena V. Mishtowt
San Mateo County
650-574-1253
Fax: 650-574-3620
[email protected]
Newsletter Editor-Elect:
Linda N. Wisotsky
Los Angeles County
310-273-3737
Fax: 323-936-6987
[email protected]
Legislative Coordinator:
Dawn Gray
Nevada County
530-477-5574
Fax: 530-477-5578
[email protected]
Treasurer:
Alan L. Tanenbaum
Santa Clara County
408-294-3900
Fax: 408-294-0654
[email protected]
Director North-Elect:
Brigeda D. Bank
Contra Costa County
925-933-9000
Fax: 925-933-1926
[email protected]
Director at Large Sacto/NE:
H. Vincent Jacobs
Sacramento County
916-923-2223
Fax: 916-929-7335
[email protected]
Technology Coordinator:
Leonard D. Weiler
Contra Costa County
925-275-0855
Fax: 925-830-8787
[email protected]
To our interest, “LAMDA” also filed an
amicus curiae brief and treated the rights
of non-biological interested persons.
Treasurer-Elect:
Gary W. Kearney
Los Angeles County
626-796-9621
Fax: 626-796-6839
[email protected]
Director South:
Ronald K. Lachner
Los Angeles County
562-420-6164
Fax: 562-420-9984
[email protected]
Director at Large-North
Joan M. Wetherell
Alameda County
925-463-0750
Fax: 925-463-7702
[email protected]
Past President:
Vivian Holley
San Francisco County
415-474-1011
Fax: 415-441-8102
[email protected]
Dawn Gray prepared an interesting
analysis in our ACFLS brief discussing
the new Troxel case, Punsley v. Ho and
the Harris situation. Those who also
contributed to the brief were Lorraine
Gollub, Frieda Gordon and Steve
Temko.
Secretary:
Esther R. Lerner
San Francisco County
415-391-6000
Fax: 415-391-6011
[email protected]
Director South-Elect:
Donald S. Eisenberg
Los Angeles County
562-799-6457
Fax: 562-799-6458
[email protected]
Director at Large-South
Sterling Myers
Los Angeles County
626-445-1177
Fax: 626-445-2085
[email protected]
BY LORRAINE GOLLUB
T
he ACFLS has recently been
involved in two more amicus
curiae briefs:ffggffff
Montenegro/Diaz
and the Harris briefs. Leslie
Shear wrote a complex,
le n g t h y a n a l y s i s f o r
Montenegro/Diaz which concerns change of circumstances vs. best interest of
the child and reviews by
court according to the development of the child and
needs. The Harris situation
concerns grandparents who
sought more time with
t h e i r g r a n d d a u g h t e r.
Father is not dead, is however, a non-participating
parent. Mother is not unfit
and desires her privacy and believes that
her constitutional rights are violated by
the court’s intrusion. Issue that the
ACFLS was asked to address by the
Court of Appeal, Fourth District,
Division One concerns: “Where there
are no allegations of unfitness of the
custodial parent and the custodial
parent objects
to grandparent
visitation,
does the
ddbest
interest
standard set
forth
in
Family Code
Section 3104
comport with
the constitutional rights of
due p r o c e s s
a n d privacy
provide d b y
t h e United
ddS t a t e s a n d
California constitutions?”
The Harris case i s n o t y e t determined. We asked the court to consider
the right of the child to familial relationships. In this culture of re-establishing
FROM THE EDITOR
•
•
Continued from page 2
will also be available by e-mail, phone or fax to accept your
brief accounting questions.
Lorraine Gollub has provided us with a status update on
ACFLS' involvement on two amicus curiae briefs on
Montenegro/Diaz and Harris. Thanks also to Dawn Gray,
Frieda Gordon and Steve Temko for their amicus
contributions as well.
Our upcoming Fall Seminar entitled, "A Family Law
Practice is a Business Not a Non-Profit Charitable
Organization," is being held on November 3, 2001 in Los
Angeles and November 10, 2001 in Oakland. Topics are
near and dear to our heart:
• How to Get Paid;
• A Computerized Practice Management System
for Family Law;
• How to Take a Long Vacation and Still Have a
Family Law Practice Left When You Come Back;
• The Latest Hardware and Software for the
Family Lawyer;
Summer 2001
family, a child might have the right to
retain the relationship of the earlier family. Because each case is so specific, we
encouraged the court to examine the
child’s own constitutional rights of
privacy and association. This writer
hopes that the courts will have the
opportunity and use discretion in
reviewing evidence to substitute its
judgment on behalf of the child for the
parent’s decision in some circumstances. This is not a simple issue and
the thrust of the brief was to annunciate
thinking on behalf of the child.
Economics of a Family Law Practice;
The Speed of Communications and How to
Control It; and
• How to Get the Right Clients and Avoid the
Wrong Ones.
This seminar is a must for all of us to attend.
Our Annual Holiday Party will be held Saturday, December
1, 2001, at the Crown Plaza Union Square Hotel in San
Francisco. It's a great time spent with colleagues throughout the State.
Again, I look to all of you, the readers, to provide me with
articles, tips, ideas, and other topics that will be of interest
to the family law practitioner, with the goal to improve the
family law practice and advance our knowledge in the field.
Let me hear from you. E-mail your comments to me, start
discussion groups, volunteer to be a contributor on
N o rt h e r n C a l i f o r n i a i s s u e s … S o u t h e r n C a l i f o r n i a
issues…hot topics...ask questions..share varying points of
view…discuss different experts...discuss how to handle
different topics - give me your ideas; let’s enhance our
organization and meet your professional needs.
Page 18
ACFLS Newsletter
SAVE THE DATE — UPCOMING CALENDAR EVENTS:
Saturday, September 8
Hospitality Suite at State Bar
Convention for ACFLS members
and guests. Further details to
follow regarding exact location
and time.
• • •
Sunday, September 9 8:00 a.m.
Board of Directors meeting. If you wish to attend,
please notify Pat Parson.
• • •
Meeting Topic: $ocial $ecurity: Where Does it Fit?
How Does it Work?
Presented By: Etta O. Gillivan, Superior Court
Commissioner, Retired Hadden & Gillivan,
Alternative Dispute Resolution
Date: To be determined.
ACFLS Newsletter
Joint Meeting:
Association of
Family and
Conciliation Courts
(AFCC) and
Association of
Certified Family
Law Specialists (ACFLS)
Topic: Court Ordered Mediation and Counseling
for Custody Problems: How the Therapist, the
Attorney, and the Courts work together: A look
at a standardized stipulation, confidentiality
and reporting formats. Can we reduce stress by
making referrals to therapists knowledgeable
about family law.
Date: To be determined.
Speakers: David Kuroda, LCSW, Past division chief
Mediation and Conciliation Superior Court, Los
Angeles, now in private practice handling
mediation and counseling; Mary Lund, Ph.D
and Donald Eisenberg, Esq., CFLS.
Page 19
Summer 2001
It continues to be a great honor to serve as your
Newsletter Editor for the calendar year 2001. Our
President, David Borges, in this edition, reminds us
of the transformation of ACFLS into a truly statewide association.
ACFLS provides its members with significant benefits, including
Spring and Fall Seminars on provocative, hot button issues, an Annual
Holiday Party, Quarterly Newsletters, an Annual Referral and
Membership Directory, Statewide Networking, and more.
Let's
continue to enhance the benefits of ACFLS. Atttend our upcoming Fall
Seminar "A Family Law Practice is a Business Not a Non-Profit Charitable
Organization", on November 3, 2001 in Los Angeles and November 10, 2001 in
Oakland. Come to our Annual Holiday Party Saturday, December 1, 2001, at the Crown
Plaza Union Square Hotel in San Francisco. Contribute to the ACFLS Newsletter.
Provide me with your comments, articles, tips, ideas, and other cutting edge areas of
interest to the family law practitioner. Let's enhance our organization and meet your
professional needs.
ACFLS Needs
Your Input!
DO YOU HAVE
SOMETHING OF
INTEREST TO SHARE
WITH OTHER FAMILY
LAW SPECIALISTS?
Write a Letter to the Editor.
Send your submissions in
WordPerfect or Word on disk to:
Debra S. Frank, A PROFESSIONAL LAW CORP.
2049 Century Park East, Suite 2050
Los Angeles, CA 90067
Tel: 310-277-5121 Fax: 310-277-5932
e-mail: [email protected]
Debra S. Frank,
Association of Certified Family Law Specialists, Editor
MEMBERSHIP APPLICATION
Patricia A. Parson, ACFLS Administrator 1884 Knox Street, Castro Valley, California 94546
MEMBERSHIP APPLICATIONS SHOULD BE MAILED TO THE ACFLS ADMINISTRATOR AT THE ABOVE ADDRESS. PLEASE COMPLETE THE FOLLOWING INFORMATION AND ENCLOSE
YOUR CHECK PAYABLE TO ACFLS OR PAY BY CREDIT CARD AS FOLLOWS: $150 FOR SINGLE MEMBERSHIP; $100 FOR EACH SUBSEQUENT MEMBERSHIP FROM YOUR FIRM.
Name: _____________________________________________________________________________________________________
Address: _______________________________________________ City/State/Zip: ________________________________________
Telephone:_____________________________________________ Fax:_________________________________________________
E-mail:________________________________________________ Web Site: ____________________________________________
Date Certified by BLS:____________________________________ SBN: _______________________________________________
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Card No.: _____________________________________________ Expiration Date: ______________________________________
Cardholder's Name: _____________________________________ Cardholder’s Signature:__________________________________
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PAID
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91006
n e w s l e t t e r
Patricia A. Parson, ACFLS Administrator
1884 Knox Street
Castro Valley, CA 94546