Outside Net Worth
In the Bukers Taxanalysis PFS Module
When spreading personal financial statements from a client, do you ever find the asserted values over-inflated? The net worth that is calculated when you spread the client’s personal financial statement into the Bukers Taxanalysis software is the client’s perception of his/her net worth. Is that the same as the lender’s perception of net worth? Probably not, so Bukers created an Outside Net Worth line item in the Personal Financial Statements (PFS) module. This allows you to adjust the client’s perception of his/her net worth and create the lender’s perception of net worth.
Automated Adjustments
Once you have spread your client’s personal financial statements, scroll down to Statement 21 in the PFS module to begin working on their outside net worth. Then, click on the magnifying glass for the year you would like to adjust.
The first line shows the Net Worth per the Personal Financial Statement (PFS). This is the client’s perception of their net worth. The software then starts adjusting out the ‘fluff’ through automated adjustments for the following items:
Assets:
- Nonlisted Stocks & Bonds – if they are not publicly traded, what is the true ascertainable value?
- Notes Receivable From Related Parties – is that note from the nephew actually collectable?
- 50% of IRA/Keogh/Other Retirement Account Balances – if you have to go after that, you may lose half to taxes and penalties.
- Investments in Closely Held Businesses – what is the true value?
- Personal Property – do you really want a jet ski as collateral?
- Other Assets – do you actually want to include those miscellaneous assets in the client’s net worth?
Liabilities:
- Notes Payable to Related Parties
Making Custom Adjustments
If you’d like to make additional custom adjustments to your borrower’s net worth calculation, the software has two places where you can make these adjustments – one in the Assets section and the other in the Liabilities section. Simply go to “Other Adjustments” in one or both of these sections and click on the magnifying glass. This allows you to enter the adjustment and the value you want to give that item. Click “Add to List” and the adjustment will populate at the top of the screen. Enter as many adjustments as you need, the software will add those adjustments together and adjust the Outside Net Worth accordingly.
When finished, click the OK button to return to the PFS Recap screen. To see the results of the Outside Net Worth adjustments on Total Assets and Total Liabilities, take a look at the Key Balance Sheet Information at the bottom of the recap screen for Adjusted Assets and Adjusted Liabilities, as well as other pertinent information.
If you have any questions or would like to discuss this section, please feel free to give us a call at 503.520.1303 or submit your question online.