Einhorn Barbarito Partners Co-Author New Jersey Law Journal Article on Impact of Phantom Income on Child Support

Partners Matheu D. Nunn and Gary R. Botwinick  co-authored the New Jersey Law Journal article “Phantom Income/Retained Earnings and the Potential for Inflated Support,” in the publication’s special coverage on Family Law.

Phantom income is taxable income that must be reported without receiving actual cash. While reporting this type of income is required by federal and state tax laws, problems can arise when courts include it in alimony and child support calculations without carefully assessing if the income is available for payments. The result can be unsustainable financial obligations. The authors note that “…the consequences of a litigant involved in a divorce can result in a harsh outcome, particularly when the actual cashflow does not align with reported income.”

The article outlines the key types of phantom income that arise in matrimonial litigation including pass-through entities and retained earnings, debt forgiveness, and accrual accounting, and provides an overview of gross income, specifically related to retained earnings, to better outline how divorce settlements can define and structure income to avoid the improper inclusion of phantom income in support awards.

Nunn is a Partner and Board Member of the firm and co-chairs the firm’s Family/Matrimonial Practice and Appellate Practice. He represents individuals from all fields – including athletes, business owners, entertainers, executives, lawyers, physicians, police officers and teachers – in family law matters.

Botwinick is Co-Managing Partner and Co-Chair of Einhorn, Barbarito, Frost, Botwinick, Nunn & Musmanno’s Wills, Trusts & Estates and Taxation practice groups. He counsels businesses and individuals on unique family challenges, business succession, wealth transfer, and premarital planning, while helping navigate the ever-changing tax landscape.

You can read the full article here. (Subscription may be required.)