Mediation increasingly is becoming part of the legal landscape.

Court systems, some more than others, use mediation to reduce docket load and make breakthroughs in deadlocked cases. Parties on their own increasingly use mediation to resolve divorce, business, employment, contract and other conflicts.

Mediation, unlike litigation, has the potential not only to resolve disputes but to address underlying issues that create conflict.

“Transformational mediation,” for example, can help individuals and organizations that will continue to have ongoing contact, such as neighbors, divorcing parents, or employers and employees, find common ground and work cooperatively in the future.

However, in most cases, even when transformation of attitudes and achievement of mutual understanding are important goals, money often matters. In many cases, financial issues may be the stumbling block that prevents the mediation from being successful.

In some cases, financial issues may be the only thing that matters to the parties. If this is the situation, a CPA can be helpful because finance is the CPA’s area of expertise.

CPAs can assist attorneys representing clients in cases or conflicts that are being mediated in several ways. First, the CPA can assess conflicts and proposed solutions in terms of the financial impact. While attorneys are accustomed to recognizing – and pointing out to clients – the potential dollars at stake, CPAs may provide perspectives that only accountants can provide.

For example, if asset A is worth $10,000 and asset B is worth $10,000, on its face the assets would seem to be of equal value. However, suppose asset A is an asset that likely will depreciate, such as a car, and asset B is an asset that likely will increase in value, such as savings bonds. A CPA can calculate the likely relative value of the assets three years from now, providing a perspective on value from an accountant’s point of view.

Similarly, an accountant can offer advice about, and calculate the tax consequences of, proposed solutions to conflict. In the example of assets A and B that appear to be of equal value, if the sale of A will result in a taxable gain and the sale of B will result in a deductible loss, the assets are not equal in value when the tax consequences of converting the asset to cash are taken into account.

CPAs know there are three parties to every transaction – the two parties selling or buying and Uncle Sam. Therefore, CPAs also may be able to spot creative solutions to problems that draw upon tax knowledge.

In the examples below, assume wife and husband are divorcing and wife seeks money from husband:

• If wife receives support in the form of property or child support, the transfer is not a taxable event.
• If wife receives alimony, it is deductible by the husband and treated as income to the wife. Depending upon the parties’ respective taxable incomes, both could benefit from the husband paying alimony in lieu of something else that might be due, such as child support or division of property.
• Although wife has custody of the children and is entitled to the dependency exemption for them, depending upon incomes, both parties may find it advantageous for the husband to pay a little extra to the wife in exchange for the right to claim the exemptions.

What applies in divorce disputes applies even more strongly in business disputes. Information is power. Having the financial and tax perspective of a CPA available when mediating a solution to conflict provides attorneys with more information to broker a compromise that best serves their clients.