12 Steps to Locating Hidden Assets using a personal tax return

1. 12 Steps To
Locating Hidden
Assets
Presented by
John J. Gorman, CPA
State Bar of Arizona
“For Better Or For Worse”
January 23, 2004

2. Review Loan Applications
• Compare older financial statements with
latest financial statements
– If a decrease in assets, review reasons why.

3. Review Schedule A on
Personal Tax Return
Review Interest Paid &
Real Estate Taxes

4. Review Schedule B on Personal
Tax Return

5. Review :
Interest Income
Dividend Income
Foreign Accounts

6. Review Schedule C on Personal
Tax Return
Income from Unincorporated Businesses
Keogh Plan

7. Review Schedule D on Personal
Tax Return
Sales of Stocks & Bonds
Where did the proceeds go?

8. Review Schedule E on Personal
Tax Return
Partnership Income / Investments
Get K-1’s and full Tax Returns for Entities
Tax Basis may not be Fair Market Basis

9. Determine Real Fair Market Value of
Closely Held Business
•Any Excess Accumulation of Earnings?
•Adjust for Reasonable Compensation
•Adjust for Fair Market Value of:
Assets: Real Estate, Accumulated depreciation, Intangible Assets
•Personal Expenses Run Through Business – Subpoena Store Records
•Consider Industry Information
•Adjust For Barter Transactions
•Adjust for Fictitious Payables, Fictitious Employees
& Over Billing Schemes

10. Consider if Options Exist
•Unexercised Options Can have Value
•Options Could Include Land Deals, Stock

11. Consider if Compensation Has Been
Deferred
Examples:
1) Delaying Raises
2) 401K’s
3) Taking Investment Ownership For Commission

12. Determine if Cash Has Been Hidden
• Review Bank Statements
– Analyze Deposits and Withdrawals
– Determine if there are large payments to any
related individuals
– Request copies of suspicious checks
• Review Checks for Deposit Information including
Routing # and Account #

13. Consider If There Are Any Unique
Personal Assets
• Examples:
– Antiques
– Jewelry
– Art
– Rugs
– Coins
– Stamps
– Classic Cars
– Cash Surrender Value of Insurance Policies

14. Determine If Taxes Have Been Overpaid

15. What to Review / Request:
• Loan Applications
• 3 Years Personal Tax Returns – or further if marriage has been on rocks earlier
• 3 Years Bank Statements
• 3 Years W-2’s
• 3 Years K-1’s and full tax returns for investments
• Business Tax Returns
• Paycheck Stubs – Show periodic contributions by employee
• Brokerage Account Statements
• Personal Financial Statements
• Contents of Safety Deposit Boxes
• Employment Contracts
• Insurance Policies
• Passports
• Telephone Records – Home & Cell
• Computer Data- Old Backups, Quick Books Files, Current Computer Hard Drive

16. How to Find More:
• Public Records Search:
– www.Maricopa.Gov
• Arizona Corporation Commission:
– Search for Company Names and Agents
http://www.cc.state.az.us/corp/starpas/index.htm
• Use Search Engines for all Names and Companies:
– Google.com, Dogpile.com, Many Other!
– Try nicknames, family members and close friends
• On-Line Data Services:
– www.knowx.com
• Follow any lead to the end!

17. Other Items to Consider:
• Ramifications of unreported income
• Standard of Living Test
• Commingling of Sole and Separate Property
• Interviews of Disgruntle Employees