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CROSSCOR Valuations & Forensics Inc.

Expert Witness

Contact Us (949) 264-1455

Court-Appointed: Family Law & Divorce

Greg provides expert testimony in divorce litigation matters involving income and property. The income of a business is controversial when it is substantially less than the marital lifestyle. Property issues are complex when separate or community assets have been commingled or transmuted. The value of the business is only controversial when its perceived value is higher or lower than its fair value.

Personal Expenses are Never Zero

Public companies overstate their profits because it increases their market value. Enron is an example of earnings manipulation. Unlike public companies, small businesses understate their profits.  They "run" personal expenses through the business, so they pay less income taxes. Litigants are always met with judicial skepticism when they say that all their business expenses are ordinary and necessary.  This is unrealistic.  The court wants to find how much of the business expenses are personal.  The scheme to understate the profit of a business is easily uncovered when there is only one entity, the business itself.  It is more complex and will require direct tracing or "following the money" if it has two or more "shells” in the game.

Understated Profits & Marital Lifestyle

Shells include bank accounts, credit cards, aliases, related party transactions, and other entities with common ownership and control. The scheme to uncover understated profits becomes more complex when there are multiple shells. If you can't uncover the scheme because you do not have access to all the shells, then you must analyze the marital lifestyle. This analysis is called the net worth method, which was developed by the IRS to prosecute tax evaders. It is more effective when there is only one source of income. This analysis uses direct tracing and reasonable inferences.

The Value of a Business in LA & OC

The value of a business is based on profit, risk and growth. The higher the profit and growth, the more valuable the business. The lower the risk, the more valuable the business. Business valuation is not a precise science because it always includes the judgement of the expert. Ultimately, the value of a business is what is sells for.  However, it is more common for the in-spouse to keep the business.  Therefore, you need a forensic accountant, who also performs business valuations and has testified in court as an expert in this area.

Very Few Comparable Businesses

Unlike real estate, there are very few comparable businesses. When a small business sells, the business broker rarely reports the revenue, profit, assets, and selling price of the business. So, the expert has to use his professional judgement based on the best data available. It is better to use good judgement than a bad comparison. If opposing experts are objective and reasonable, then their values should be close.

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