Forensic Accounting

We provide forensic accounting in divorce litigation and divorce mediation matters at CROSSCOR Valuations & Forensics Inc. Forensic accounting or financial forensics is a highly specialized practice among CPAs, which means there are much more tax CPAs than forensic CPAs. Divorce litigation is a sub-specialty of forensic accounting that even fewer CPAs in Orange County and Southern California have the specific expertise and knowledge. A forensic accountant is required when the forensic accounting issues concerning Income and Property are complex. So, by Simplifying the Complex, we make the forensic accounting issues much easier for attorneys and non-accountants to understand. Though our forensic accounting work may never be used in court, we nevertheless make certain that it is suitable for court.

Forensic accountants calculate the gross “income” of the husband, wife or parent over a representative period, which will be the basis for the Court’s order for spousal support, child support or both. Spousal support is also called alimony and spousal maintenance. Our gross income for support calculations is also used for permanent support modifications (post-judgement). At its most basic, CA Family Code Section 4058 defines gross income as income from “whatever” source derived. While reported wages and dividends are unambiguous sources of income, the “true” income from a business is often less obvious and very controversial. For example, for S corporations, the K-1 or pass-through income may not be the same as the cash distributed to its owner. In fact, they are rarely equal. Business may also have unreported income or understated income especially in businesses that accept cash. They may also have overstated expenses, which are often personal expenses deducted as business expenses.

The retirement plans, business and real estate (which is often the marital home) are the three most valuable “properties” or assets of the community. The main property issues are characterization and division. The character of an asset may be separate property (acquired before the date of marriage), community property (acquired during marriage) or quasi-community (out-of-state) property. A mixed property is the result of transmuting or comingling originally separate property with community property or vice-versa.

A QDRO is used to divide retirement plans, which are often mixed property because of retirement contributions before and during marriage. If a business was acquired or formed before the date of marriage and the business appreciated in value during marriage, then the separate property is generally apportioned using Pereira Van Camp, which are really two distinguishable cases. If the marital home was acquired before the date of marriage and it appreciated in value during marriage, then the community property is “generally” allocated using Moore-Marsden, which are also two distinguishable cases. Refinancing separate property and re-titling it to community property may change the character of the appreciation during marriage (Marriage of Branco).

“To be persuasive we must be believable. To be believable we must be credible. To be credible we must be truthful.” (A quote from Edward R. Murrow posted in the vestibule of Judge James Waltz, Orange County Superior Court)