How They Stash The Cash in Ontario! Part Two

How They Stash The Cash in Ontario! Part Two

One thing is for sure:  your spouse might be hiding assets, money and investments in your separation or divorce.

Hi, my name is Thomas O’Malley.  I’m an experienced family lawyer in Durham Region and the GTA.

Let’s look at what happened to Jack.  Jack owned a small manufacturing company in his city. 

The company paid Jack approximately $80,000 a year to run the business.  It was clear that there was unreported income because the home mortgage was $45,000 a year, property taxes were $12,000 and home utilities were $8,0000, equaling $65,000 in home expenses-or approximately 81% of Jack’s gross salary before withholdings. 

This is far outside the norm.

In fact, Jack gave his wife, Sara, $10,000 to buy a really expensive watch.  Sara also found $50,000 hidden in their house shortly after she started family court proceedings. 

This was just the beginning.  More purchases surfaced, showing more and more that $80,000 a year of reported incomed was far below Jack’s real income.

When he was asked to explain how his personal expenses vastly exceeded his income, Jack explained that his income had come from loans from family overseas.  

He produced loan documents that appeared to be fake and he claimed he had made no attempts to repay any amount, including interest.

When you reviewed Jack’s business tax returns, you see that his gross profit percentage was approximately 15%, meaning that the sales less the cost to make those sales was 15%. 

For every dollar of sales, the business, allegedly spent 85 cents to pay for what it sold, reflecting a cost of sales of 85%. 

However, a statistical review of comparable business showed that the typical cost of sales was 70%, not 85%.  A review of the accounting books for the business revealed that alleged business checks cashed at the check-cashing service were fake payments.

Jack benefited by having much larger expenses on his books than his real expenses, and they were supported with phony invoices.  Since his business expenses were artificially high, his net business profit was artificially lower, given Jack lower income tax.

Here are the two main lessons from Jack’s story: (1) If the facts do not make sense, keep digging.  The discrepancy between Jack’s low annual salary or income and his extravagant lifestyle was glaring, and his explanation of many loans from overseas relatives did not seem real.  (2)  Investigate cost-sales rations in detail, checking everything possible to figure out the difference between the company ratios and industry ratios.

If you have any questions about your separation, divorce or family law case and you would like our help, there’s a few ways to contact our office.  

You can leave a message on my Facebook law office page, visit my website at www.canadiandivorcelegaladvice.com, or call me directly at 905-434-8837. 

We would be happy to speak to you.

Oh, by the way, did you know you can protect your family law rights and get essential information on settling your family law issues with your former spouse with the daily indispensable family law advice and tips at my FREE Facebook group? 

Click here to find out more: Durham Region Separation and Divorce Legal Support Group  

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