On Friday, I blogged on the judicial estoppel aspect of the Romano case decided last week by the Appellate Division. While that was the major issue in that case, there was another part of the case that jumped out at me, when I read this line related to the court’s valuation of the husband’s business and calculation:

John also maintains that Judge Becker should not have accepted Dana’s expert testimony with regard to the value of his business and the income it generates. John did not provide sufficient reliable information to allow Dana’s expert to use valuation techniques based on tax reporting, so the expert was forced to consider the family expenses as a means to gauge the income generated by the business.

This scenario is not uncommon in divorce matters where a sole proprietor provides neither complete business records nor reliable Internal Revenue Service filings. We defer to Judge Becker’s fact-findings concerning the value of the business and its revenue.  (Emphasis added).

Unfortunately, when dealing in cases with small (and some times not so small) businesses, this is a common occurrence.  Often, it becomes a game of "tell me how much you can find and I tell you how much I have."   In this case, the non-owner has the laboring oar to try to reconstruct the exact income.


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There is a case in New Jersey called Sheridan v. Sheridan,247 N.J. Super. 552 (Ch. Div. 1990), that requires trial judges to report evidence (usually after a trial or hearing) of any illegal activity to the proper authorities.  It most cases, it comes up in the context of unreported or under reported income cases, affectionately known as "Sheridan cases."  That said, I have often joked that this is like Bigfoot or the Loch Ness Monster, that is, we have all heard about the legend, but no one has actually seen it.  I have even tried cases where a party testified about cash and employees who were "off the books", and other cases where the excess perks paid through the business were massive, with no referral to the IRS, etc. 

However, in the last two months, I have seen two unreported Appellate Division decisions which noted that the trial court made a Sheridan referral. 


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Mark Ashton, a partner in our Exton (Chester County), Pennsylvania office and the editor of our Pennsylvania Family Law Blog, wrote an interesting post entitled "The Owner Know Thy Business" on that blog.

To read the complete post, click here.
 

EDITORS NOTE:  Mark’s post leads to a discussion of several interesting issues that are frequently encountered in matrimonial

Sometimes, despite all of the parties’ best efforts – or in other cases, where one or both parties have no desire to settle, a case has to be litigated.  Trials are costly, for reasons you would think of, and also, for reasons that most people don’t consider.  A good rule of thumb is that for