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Income from Assets

Client Info > Income & Expenses > Income from Assets

In General

On this screen you can enter income from assets, and also expenses associated with debts.

You can also enter payment associated with assets, such as contributions to 401(k) accounts and life insurance premiums.

Entering Income with the Associated Asset, or Without

There are two ways to enter income from assets:

1. At the top of the screen, you can enter it on lines for interest income, dividend income etc. This is entering income without the associated asset.

2. Below that, on lines for each asset type. This is entering income with the associated asset.

Please be careful not to enter any income twice.

If you enter it without the asset at the top of the screen, do not also enter it with the assets below.

If you did enter it twice, it would be double-counted on the financial affidavit, Budget Report and financial reports.

We suggest that you use the second approach, and enter all of the income from assets with each individual asset.

This takes a little time, but there is a payoff:

When you allocate the asset to one party or the other, the software will also automatically allocate the income associated with that asset.

Suppose you have a Vanguard Mutual Fund which pays an annual dividend of $1,000.

If that Vanguard Mutual Fund is allocated to Party A, then Party A will also have the $1,000 flowing to his or her financial affidavit and Budget Report.

If you switch the allocation to Party B, then Party B will have the $1,000 flowing to his or her financial affidavit and Budget Report.

That way, you can instantly see the impact on the cash flows of the parties of dividing income-bearing assets between them.

To specify whether investment income is interest income or dividend income, you can do that on the “more info” screen. This will have an impact on taxes, although it is usually very small.

By default, the software assumes that all of the items you entered are equity securities, and so all the income is dividend income. You can change that on the “more info” screen.

Note that business assets are an exception to this rule. For business assets, there is a separate entry to allocate income from the business. This is because it is often the case for businesses that the ongoing business income is allocated differently than the business ownership percent.

Also please note that all of the asset types entered here may also be entered on the Assets & Debts screen. The information at the top level will differ between the two screens. On this screen, the information at the top level will focus on the income from the asset. On the Assets & Debts screen, the information at the top level will focus on value and allocation of the assets. But the “more info” screens for the assets are the same at each location.

Income Entered Without the Associated Asset

In this section, you can enter various forms of asset-related income for each party: interest income, dividend income, etc.

This is the “quick and dirty” way of entering asset related income.

If the ownership of the underlying asset changed, this number will not change.

Business Income

You can enter business assets here, and specify the value and cash flow of the business.

If you click “more info” you can enter everything about the business, including whether it qualifies as a pass-through entity.

The Net Annual Cash Flow is the net cash flow of the business. For this purpose, do not count depreciation as an expense.

The software will use this number in its tax calculations. So, effectively, the software is assuming that there is no depreciation.

Because of the current generous expensing associated with Internal Revenue Code section 179, this is generally true for most small businesses.

If depreciation is significant, you will want to override the taxable income from the business shown on Forms & Reports >View/Edit Taxes.

If you wish to enter gross income and then itemize the expenses of the business, you may do that on the “more info” screen.

You must specify the percent of cash flow that is being allocated to each party. That is how the software knows how much of the income should flow to the financial affidavit of each party.

In some states, you will see footnotes labeled “Asset” and “Income.” If you see that, then the information you enter with the Asset footnote will flow to the financial affidavit where the asset is entered, and to the Marital Property Division report. The information that you enter with the Income footnote will flow to the financial affidavit where the income flows, and to the Budget Report.

Rental Income

Every real estate property will be listed here, whether it is a rental income property or not.

That is because the software wants to give you the opportunity to specify any property as a rental income property.

If a property is not a rental income property, just ignore it when you see it in this section. As long as you do not enter any rental income, it will not be listed on the financial affidavit or anywhere else as a rental income property.

To specify a property as a rental income property, click the “more info” link for the property, and, at the top of the screen, click the button to indicate that it is rental property.

You must specify the percent of cash flow that is being allocated to each party. That is how the software knows how much of the income should flow to the financial affidavit of each party.

Income from Investments and Accounts

By default, all investment income counts for the child support calculation.

If you want it not to count, in some states, there is a checkbox to omit investment income for purposes of the child support guideline calculation.

If you do not see the checkbox, and you want to omit investment income for the child support calculation, then create a separate file in which the investment income is zero, and use that file for the child support calculation.

Pension Income

If a pension is currently in pay status, click the “Retired” checkbox.

Otherwise, specify who owns the plan and click “more info.”

Based on the information you enter, the software will value the pension.

If you already have a valuation from an outside pension appraisal firm that you want to use, enter the owner of the plan, click “more info,” then “Outside Valuation” at the top of that screen.

Debt Payments

Enter the balance in the monthly payment on each debt.

Also enter the interest rate.

If you are doing cash flow projections, the software will automatically amortize the debt.

It is also important to enter the percent of the debt that will be paid by each party.

The software will multiply the monthly payment by the percent paid by the party, and carry that amount to the financial affidavit.

For example, if there is a $3000 debt with monthly payments are $150, and the debt is being paid 50% by each party, then $75 will go to each party’s financial affidavit.

If the entry with respect to the percent paid by the party is blank, then it none of the payment will flow to the financial affidavit.

Life Insurance Premiums

This is where you enter premiums paid by each party.

Unlike other expenses, you do not enter a total and allocate by percentage, but you enter the amount paid by each party.

This is because that is how life insurance policies tend to work. One party or the other is responsible for the premiums.

IRA/401(k) Contributions

In this section of the screen, you may enter annual contributions made by each party.