Net-Worth Method
Apply a net-worth method reconciliation to supplied changes and sources.
Description
The net-worth method reconciles wealth changes, expenditures and known funding sources.
The net-worth method reconciles wealth changes, expenditures and known funding sources. A residual depends on completeness of the inputs.1
Apply a net-worth method reconciliation to supplied changes and sources.
When to use Net-Worth Method
Use this tool to apply a net-worth method reconciliation to supplied changes and sources.
Prepare the documented facts, aligned totals or expected/observed evidence labels requested. Choose applicable requirements and thresholds separately before interpreting a planning screen.
How to use Net-Worth Method and understand its results
- Prepare the documented facts, aligned totals or expected/observed evidence labels requested. Choose applicable requirements and thresholds separately before interpreting a planning screen.
- Enter openingNetWorth, closingNetWorth, nondeductibleExpenditures, knownNontaxableSources, reportedTaxableIncome using the field table and calculation rules, then run the tool.
- Read netWorthIncrease, impliedTaxableIncome, unexplainedIncome. The explanation below defines the units, signs, ordering and any flags or placeholder values.
- If the tool reports an input issue, correct the values and run it again. Apply the stated assumptions when interpreting a successfully returned result.
| Input field | Meaning | Value type; see rules below | Requirement |
|---|---|---|---|
| openingNetWorth | Opening net worth | number | Required |
| closingNetWorth | Closing net worth | number | Required |
| nondeductibleExpenditures | Nondeductible expenditures | number; minimum: 0 | Required |
| knownNontaxableSources | Known nontaxable sources | number; minimum: 0 | Required |
| reportedTaxableIncome | Reported taxable income | number | Required |
Enter finite signed net-worth/income and nonnegative expenditures/nontaxable sources; return increase/implied income/residual.
implied=closing−opening+expenditures−nontaxable; unexplained=implied−reported Units, indexing, boundary conditions and exceptional cases are defined in the calculation rules above.
| Output field | Meaning | Value type |
|---|---|---|
| netWorthIncrease | Net-worth increase | number |
| impliedTaxableIncome | Implied taxable income | number |
| unexplainedIncome | Implied minus reported income | number |
{
"input": {
"openingNetWorth": 1000,
"closingNetWorth": 1400,
"nondeductibleExpenditures": 200,
"knownNontaxableSources": 100,
"reportedTaxableIncome": 450
},
"output": {
"netWorthIncrease": 400,
"impliedTaxableIncome": 500,
"unexplainedIncome": 50
}
}Limitations and assumptions
No taxable-income determination, asset verification or misconduct finding is made.
Numeric inputs, where present, must be finite. Follow the calculation-specific rules for overflow, underflow and exceptional cases. Missing required fields, extra fields, wrong value types and violations of the calculation rules are input errors.
Alternative or Complementary methods
Use Lifestyle Cash-Flow Analysis: Reconcile documented sources and observed uses of funds without inferring misconduct. For a complementary task, use Hidden-Asset Search Coverage: Audit hidden-asset search source coverage.
References
-
Net-Worth Method — tool.io
Similar or alternative tools
- Lifestyle Cash-Flow Analysis
Reconcile documented sources and observed uses of funds without inferring misconduct.
- Hidden-Asset Search Coverage
Audit hidden-asset search source coverage.