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MegaWith the Mega Millions Jackpot climbing to $970,000 million as of yesterday we couldn’t resist asking what would you do with your winnings?  A question you may have for us is would I have to share my winnings with my spouse?  As with so many things in life – timing is everything.

If you win the Mega Millions prior to filing a Complaint for Divorce the winnings are subject to equitable distribution – this means you have to share with your spouse.  How much you have to share with your spouse varies from state to state.  Under the Windfall legal theory your Mega Millions winnings would be shared equally.  The idea being you won the Mega Millions as the result of plain old good luck and not the effort of either party, therefore the winnings should be shared equally.  This is not the legal theory followed in New Jersey.  New Jersey addresses lottery winnings just like any other unearned income or asset.  It does not mechanically divide assets equally.  New Jersey reviews a series of equitable distribution factors and divides assets based on the actual needs of the parties.  Every case is unique.  However, you would still have to share.

If you win the Mega Millions after the filing of the Complaint for Divorce you should be in the clear as far as sharing the winnings.  Although your alimony obligation might go up because you would be potentially earning millions of dollars a year in interest income.

If you have any questions regarding lottery winnings, equitable distribution or alimony in New Jersey please call the attorneys at Iandoli & Edens at (908) 879-9499.

So back to the original question:  What would you do with your Mega Millions winnings?

BUSINESS

Professionals across the board are struggling to determine what changes the Tax Cuts and Jobs Acts (TCJA) which was signed into law on December 22, 2017 will have on their businesses and their client’s businesses. The TCJA is 479 pages long and the IRS is still writing regulations as to how they are going to interpret it.  Simply put this is going to be a long process.

An issue of particular importance to business owners going through a divorce is what effect the TCJA will have on any business evaluation that might occur as part of the divorce. Often a business is the largest asset in a marriage.  Getting a proper value of that asset is essential.

The TCJA has changed not only the tax laws, but how business appraisers are going to perform their appraisals. Some of the provisions in the TCJA for businesses are permanent; and some are temporary.  Knowing which ones are permanent; or temporary is vital.  The TCJA brought numerous changes to how businesses are taxed which effects how they are valued.  One of the largest changes is the reduction of the effective tax rate for corporations and small and medium pass through entities.  The TCJA also changed the calculation of taxable income for businesses.  These two changes together can be significant if a business evaluation is being performed using an Income Approach.  In theory there should be more income for businesses.  Does this equate to a higher value?  Maybe yes, maybe no.

Also of concern is not all companies are treated the same under TCJA. For example, many professional service companies lose out under TCJA when compared to other businesses because the deductibility of qualified business income phases out.  Once it phases out they are taxed at a higher rate.  Professional service companies are any business who provide professional services such as:  lawyers, accountants, doctors and performing arts to list a few.  The type of business being appraised is a significant factor in its value.  An appraised value for an accounting practice with $315,000 in income could be vastly different than an appraised value for a construction company bringing in the same income, even if they are both LLCs.

This is the tip of the iceberg that attorneys and business appraisers are facing for their client’s in having businesses valued under the TCJA. The best way to protect yourself with regards to a business evaluation is to retain not only an attorney well versed in the issues involved, but a business appraiser who is familiar with the new tax law.  If you have questions regarding business appraisals please contact the attorneys at Iandoli & Edens, LLC at 908-879-9499.