Baseball team owner won't dodge tax bill after divorce

Minnesota residents often associate summer with three things: mosquitoes, going "up north" and baseball. Though excitement usually gathers as the baseball season heats up, one former team owner is not exactly celebrating as federal authorities are looking to investigate his family's finances.

Frank McCourt, former owner of the Dodgers, and his wife have been going through a very public divorce and financial scandal, which will likely resulted in a prolonged round of complex asset division. Since filing for personal bankruptcy and relinquishing ownership of the baseball team, it was revealed that the McCourt and his family used revenue from the team to finance their personal expenses, without reporting any of that money as income. Not only does this raise ethical issues for the couple, but it also raises serious legal questions.

According to divorce documents, Frank McCourt indicated he would take responsibility for any unpaid tax liabilities. This may become an issue for the former business owner, especially since he and his family used over $180 million of the baseball club's money to finance a lavish lifestyle. Since the McCourts didn't pay federal or state taxes between 2004 and 2009, and failed to report the team's funds as income, it looks as though he will have an incredibly large tax bill to settle with the Internal Revenue Service.

While most ever Minnesota couple or business owner going through divorce is not facing a federal investigation for tax fraud and evasion, this case reveals aspects of asset division that are worth noting. Not only are a couple's martial assets included in the division process, but so are their liabilities. Outstanding loans or tax bills are subject to being included in a divorce settlement, making one or both spouses responsible for payments.

Knowing that an individual could be potentially responsible for paying back debt acquired during the course of a marriage. In order to make sure assets and liabilities are fairly split between spouses, it is important to try to work together toward an equitable settlement. Having a trustworthy legal advocate at your side during a divorce will not only ensure that your interests are fairly represented, but it can also help streamline the process.

Source: Bloomberg Businessweek, "Feds ask for documents from McCourts," Greg Risling, May 31, 2012

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