New Jersey State Bar Association
Bergen County Bar Association

Imputed Income in a New Jersey Divorce


In a recent unpublished New Jersey appellate case, a defendant appealed an order arising out of a divorce trial that awarded his wife alimony, child support, and equitable distribution. He argued that the court had made a mistake in how it calculated his imputed income, and this had affected the alimony award. He also argued that it was improper for the court to order him to pay back taxes on an investment property and that two of the lower court judges were biased.

The couple had married in 1989 and had a son and daughter together. The wife sued for divorce in 2011. During the trial, the plaintiff presented testimony from her expert, a certified public accountant who’d worked on her taxes, and a forensic accountant. The first had tried to determine her income but stated that he was lacking necessary information. The defendant claimed he’d provided information to his accountant, but the accountant denied getting those documents.

The expert reviewed the defendant’s income taxes and determined much had not been reported to the IRS. He also used data from a Risk Management Associates (RMA) database, which included information collected by banks on many different industries. The expert used the RMA’s average gross profit margin for electronics retail stores that have $1 million in sales, which was 44.5% , in order to adjust the sales and net income from the husband’s business.

The defendant tried to show that the expert used the wrong RMA category during cross-examination. He claimed he couldn’t afford to pay his accountant to testify on his behalf.

After trial, the judge noted that the defendant’s daughter had testified that the family had an upper-class lifestyle and that the defendant abandoned them. The judge found the plaintiff’s expert credible and used those opinions to determine an equitable distribution of marital property and alimony. The judge acknowledged certain arguments made by the defendant that his store had different profit margins than a wholesaler would.

The judge issued an order with detailed findings. A negative inference was drawn from the defendant’s refusal to cooperate with the plaintiff’s expert. The judge also noted that the defendant’s honesty was suspect and that his offered rebuttal CPA was a ruse, since there was no evidence that the defendant had actually consulted the CPA or transferred documents to him. Only the plaintiff’s expert was credited in making determinations about alimony and distribution of property. The judge awarded $450 per week for 14 years in durational alimony, but no permanent alimony was awarded, since the wife got the marital home, business property, and investment properties in the equitable distribution.

The judge imputed to the husband an annual gross income of $95,000. The defendant said he was unemployed. The appellate court noted that it could be inferred he’d made no affirmative effort to get a wage-earning job and that a probable income amount could be determined based on the plaintiff’s expert CPA’s testimony. The expert had estimated income had been underreported for five years at $1,184,902.00.

The defendant claimed the income imputed to him was arbitrary and unrealistic. The appellate court explained that imputing income required a realistic appraisal of his capacity to earn and the availability of jobs. When a parent is voluntarily unemployed without a good reason, the court must impute income. The appellate court explained that on cross-examination, the expert had maintained he applied the correct category to adjust the profit margin, he used a lower amount within the applicable limits, and the judge had found him credible. The appellate court deferred to the lower court’s credibility determination. For this and other reasons, the lower court’s ruling was affirmed.

If you are considering divorce in Bergen County, and you need to protect your rights during the equitable distribution process, it is important to retain an experienced and aggressive equitable distribution attorney to seek an appropriate outcome. Contact the lawyers of Leopold Law at (201) 345-5907 or through our online form. We have attorneys available who can handle all aspects of a divorce.

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