A spouse who owns a cash-intensive business reports modest income on the tax return while the household runs on considerably more. Whether the court imputes income, and how much, is a legal question. The financial evidence behind that decision comes from a lifestyle analysis, and there are three standard ways to build one.
1. Bank deposits
Add up every deposit into every account the spouse controls, then remove the ones that are not income: transfers between the spouse's own accounts, loan proceeds, gifts, tax refunds, and sale proceeds. What remains is a floor for income. The method is well documented, because every number comes from a statement. Its weakness is cash that never reached a bank.
2. Expenditures
Add up what the household actually spent: mortgage or rent, cars, tuition, travel, credit cards, cash withdrawals. Compare that total to reported income plus known non-income sources. The gap is unexplained funds. The method captures cash spending that the deposits method misses. Its weakness is debt: spending funded by new borrowing has to be netted out, which means tracking credit card and loan balances at the start and end of the period.
3. Net worth
Take a balance sheet at the start of the period and another at the end. The increase in net worth, plus living expenses, less known non-income sources, is an estimate of income. The method is powerful over multi-year periods and weak where assets are hard to value.
Cash-business specifics
Merchant processor statements, point-of-sale reports, and supplier invoices are often more revealing than the general ledger. Purchases at a known markup imply sales; that inference is an estimate and has to be labeled as one, with the markup assumption disclosed.
Presenting it
Run at least two methods and reconcile them. When they land in the same range, the estimate is hard to dismiss. When they diverge, the reason is usually a non-income source one method missed, and finding it strengthens the analysis. Expect cross-examination on every exclusion, so document each one.