Community Property: Case Analysis
Community Property
July 1994 #1
California (CA) is a community property state. All property acquired by spouses during marriage is presumptively the spouses’ community property (CP), while all property acquired before marriage or upon divorce or after permanent separation is presumed to be the acquiring spouse’s separate property (SP). In addition all property acquired by a gift, devise, and descent or through inheritance is presumed to be the acquiring spouse’s SP. However, the spouses may change the character of an item of property by an agreement (such as premarital agreement or transmutation).
1. Compuco
Source rule
Sue started Compuco, a sole proprietorship that sold computer equipment, in 1986, during her marriage with Tom using community property savings. Under the source rule, property acquired by one of the spouses using CP funds is a CP of both spouses.
Thus, Compuco is a CP asset, and must be divided equally unless one of the spouses rebuts the presumption of equal division.
Sue’s arguments
Sue will argue that even though Compuco was CP at the beginning of its acquisition, however after Sue and Tom separated in May, 1993 all her earnings became her SP. Sue will argue that the marital community between her and Tom was ended when Tom moved his belongings from home in May, 1993. That will trigger the necessity to use either Van Camp or Pereira to accomplish the division of Compuco as Compuco, CP asset increased its value after Sue and Tom separated with Sue’s labor which will afterwards be considered to be her SP.
Van Camp
Van Camp is used when the main reason of increase of the business is the value of the business, not the personal skills and efforts of the spouse who manages the business. According to Van Camp the community share of the asset will be calculated based on this formula: reasonable not the actual salary of managing spouse minus family expenses will be CP, the rest will be the managing spouse’s SP.
Pereira
Under Pereira,
July 1994 #1
California (CA) is a community property state. All property acquired by spouses during marriage is presumptively the spouses’ community property (CP), while all property acquired before marriage or upon divorce or after permanent separation is presumed to be the acquiring spouse’s separate property (SP). In addition all property acquired by a gift, devise, and descent or through inheritance is presumed to be the acquiring spouse’s SP. However, the spouses may change the character of an item of property by an agreement (such as premarital agreement or transmutation).
1. Compuco
Source rule
Sue started Compuco, a sole proprietorship that sold computer equipment, in 1986, during her marriage with Tom using community property savings. Under the source rule, property acquired by one of the spouses using CP funds is a CP of both spouses.
Thus, Compuco is a CP asset, and must be divided equally unless one of the spouses rebuts the presumption of equal division.
Sue’s arguments
Sue will argue that even though Compuco was CP at the beginning of its acquisition, however after Sue and Tom separated in May, 1993 all her earnings became her SP. Sue will argue that the marital community between her and Tom was ended when Tom moved his belongings from home in May, 1993. That will trigger the necessity to use either Van Camp or Pereira to accomplish the division of Compuco as Compuco, CP asset increased its value after Sue and Tom separated with Sue’s labor which will afterwards be considered to be her SP.
Van Camp
Van Camp is used when the main reason of increase of the business is the value of the business, not the personal skills and efforts of the spouse who manages the business. According to Van Camp the community share of the asset will be calculated based on this formula: reasonable not the actual salary of managing spouse minus family expenses will be CP, the rest will be the managing spouse’s SP.
Pereira
Under Pereira,