Determining the parties’ income is usually one of the most important financial issues in a divorce matter.
For your typical W-2 employee, this should be straightforward. For business owners, this can get complicated quickly.
Income reported from passthrough entities such as LLCs and S-corps do not always reflect cash flow received by a party. This is often an issue when someone owns real estate entities.
An entity owning rental real estate will often generate losses or minimal income to its owners on the personal tax return, while still being cash flow positive because of non-cash charges such as depreciation, or distributions from refinancing.
Often a detailed review of additional financial information will be required to determine the parties’ true income and available cash flow. Especially real estate investors.
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