As bankruptcy lawyers, we’re required to collect them from our clients and funnel them to the trustee.
But, are you reading them?
Often, as a former employee used to say, they’re dry as dinosaur bones.
But almost as equally, they provide new information or clues about assets and activities of your client not previously disclosed.
Found in the tax return
Let’s start a list of things you might find perusing your client’s 1040:
- Interest income- does the list of payors match the scheduled accounted or accounts closed in the last year?
- Distributions from retirement accounts
- Gains or losses from sales of stock
- Total income for the year for the SOFA entry
- Investment real estate
- Charitable contributions- useful perhaps for means test purposes, and for SOFA transfers
- Business expenses – useful in projecting net income; remember to exclude depreciation for bankruptcy purposes
- Interests in partnerships or estates
- Form 1099 from debt settlement or foreclosures
- Business assets subject to depreciation
- Dividend income
- Student loan interest
The plot line in a tax return doesn’t usually make scintillating reading, but it’s worth doing. There’s no feeling quite as foolish as encountering questions at the 341 meeting that the trustee got from reading the return when you haven’t.
Image courtesy of Makuahine Pa’i Ki’i