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The Case of the Hidden Assets-How Do You Find Them? Part 1

There are four ways people traditionally hide assets:

  1. The person denies the existence of the asset;
  2. Assets are transferred to a third party;
  3. The person claims the asset was lost or dissipated; or
  4. The person creates false debt.

Tax returns are the first place to look for hidden assets. Go back five years if you believe your spouse has been hiding assets. Then go through the complete tax return. Some suggestions:

  1. Schedule A-Itemized deductions. This form may give you clues about personal property owned because if your spouse is paying taxes on the personal property that will show up on Schedule A. This would include boats, cars, and campers. Also, any gambling losses reported here might also indicate gambling wins that you should start looking for.
  2. Schedule B-Interest and Ordinary Dividends. This should identify all investments and assets that are generating interest and dividends. Oftentimes I find assets my client didn’t know existed on this schedule because there is interest being earned from a bank account or other investment account.
  3. Schedule C-Profit or Loss from Business. I’m always curious to look at this schedule when there is a business owned by one or both spouses. Oftentimes, spouses think their business is worth more than it is. Schedule C will give you gross profits before expenses and then list out the expenses. Depreciation on Schedule C is oftentimes added back in by the judge which will increase the net income earned by the business owner. The depreciation schedule will also help you identify all assets owned by the business and give you a starting place when completing your financial disclosure statement for your attorney.
  4. Schedule D-Capital Gains and Losses. This form is used to report gains and losses from sale of stocks, bonds and real estate.
  5. Schedule E-Supplemental Income and Loss. Any income from rental property, royalties, and partnership income will be reported here. Also, look at depreciation on this form. Depreciation is an asset of the marriage as are capital losses that can be carried over from year to year. You need to list out capital losses and any carry over depreciation as an asset on your disclosure form for your divorce attorney. Otherwise, it won’t be divided as part of your divorce.

In conclusion, you should start with a review of the complete returns including all schedules and attachments which will include 1099s and W2s. Any amended returns should be compared to the original return. By starting with the tax returns this will give you a basic idea of what your assets and debts are and should help you begin to identify areas where you need to look further.

When in doubt contact a good divorce attorney at