Case
Title: Anna Agnes Pereira, Respondent, v. Frank Pereira, Appellant
Case Cite: 156 Cal. 1, 103 P. 488
Date: June 30, 1909
Court: Supreme Court of California
This case involves an apportionment of a separate property
business interest.
Background:
Family Code ß770 states that when a spouse owns a business
at the date of marriage (or acquires one during marriage by
gift or inheritance), the business is presumed to be separate
property. Family Code ß760 states that property created by
the personal efforts of a spouse during marriage are community
property. Therefore, during a marriage, a spouse may perform
personal efforts in the operation of a separate property business
which may increase the value of that business. Because of
the aforementioned code sections, a community property interest
may be created in a separate property business. Apportionment
is one process of determining the community property interest
in a separate property business.
Pereira vs. Pereira: Prior to marriage, Frank Pereira
owned a very profitable saloon and cigar business. His original
investment in this business was $15,500. The trial court awarded
Agnes Pereira 3/5ths of the increase in the value of the business
after marriage. Frank appealed and the Supreme Court reversed
the trial court's decision, holding that Frank was entitled
to a return on his separate property capital prior to the
community property interest being calculated.
The majority of the income generated by the business was due
to the personal character, reputation, ability and capacity
of Frank Pereira. This portion of the income was undoubtedly
community property. However, without the separate property
capital, Frank could not have carried on the business. In
the absence of circumstances showing a different result, it
is to be presumed that some of the profits were due to the
separate property capital invested. There was no evidence
to show that all of the profits were due to Frank's efforts
alone. The most likely portion of the capital to the income
should have been determined from all the facts and evidence
in front of the court in the case. Because the business was
profitable, that portion would amount to at least the usual
interest on a long-term investment well secured.
The Pereira calculation is applied as follows:
Step 1: Determine the value at the date of marriage (if acquired
during marriage by gift or with separate property funds, determine
the value at the time of acquisition).
Step 2: Determine the value at the date of separation or at
an alternative valuation date if applicable.
Step 3: Apply a rate of return to the investment of the separate
property at the date of marriage or other applicable date.
This rate of return should be at least the usual interest
on a long-term investment well secured.
Step 4: Calculate the community interest by subtracting from
Step 2 the sum of Steps 1 and 3.
Case
Title: Euphrasia Van Camp, Respondent, v. Frank Van Camp,
Appellant/Euphrasia Van Camp, Appellant, v. Frank Van Camp,
Respondent
Case Cite: 53 Cal. App. 17, 199 P. 885
Date: May 26, 1921
Court: Second Appellate District, Division One
This case involves apportionment of community and separate
property interests.
Background: In March of 1916, when Frank Van Camp married
Euphrasia, he was the president and general manager of the
Van Camp Seafood Company. The court determined that he organized
this company, which was capitalized with 2,000 shares of stock
at a par value of $100 each. The court also determined that
he was a man of large means, which included cash, notes, real
estate and corporate stock, and that during his marriage he
devoted his exclusive attention to the management of a corporation
from which he received a large salary. It appears from this
statement that the court implied large salary to mean adequate
compensation. The question here is: Was the community adequately
compensated for his efforts?
In order to determine if Van Camp applies, the following steps
must be applied:
Step 1: Determine compensation of owner spouse paid from separate
property business.
Step 2: Evaluate standard or reasonable compensation of other
individuals in the same or a similar line of business.
Step 3: Subtract Step 2 from Step 1 to determine the community
interest in the business.
What is reasonable compensation? In Harrold v. Harrold
(1954) 43Cal.2d. 77, the trial court adopted husband's salary
as value of community property. Wife objected, stating the
amount was too low and asked for a Pereira calculation. The
Court of Appeals disagreed with wife and affirmed the trial
court. The Court of Appeals stated, "No fixed rule can
be laid down which would be equitable in all cases."
Other
considerations regarding Van Camp:
When using the Van Camp method, community living expenses
must be deducted from community income to determine community
interest.
The Van Camp court explicitly stated, "In the absence
of any evidence showing a different practice, ... the rule
is that the community earnings of husband and wife are chargeable
with the family support. Hence, any amounts of money expended
for such purpose by either spouse during the existence of
the marital relation are presumed to have been paid out of
the community estate."
Case
Title: In re Marriage of Schulze
Case Cite:60 Cal. App. 4th, 519, 70 Cal.rptr.488
This recent court case addresses the taxability of "employer-provided
benefits." These benefits are also referred to as perquisites
or perks.
Mr. Schulze was the recipient of approximately $1,100/mo of
employer-provided benefits in the form of $600 rental subsidy
and $500 for the use of a 1989 Mercedes company car. These
perks were utilized in calculating a family support award.
The trial court deemed these perks as non-taxable income.
The appellate court reversed the trial court's decision and
these perquisites were held to be taxable forms of compensation
based upon their potential tax liability.
On the other hand, the Court of Appeals held in In re Marriage of McQuoid
(1991) 9 Cal.App.4th 1353, 12 Cal.Rptr.737 that "so long
as the (income) tax liability is not paid it cannot be deducted
from gross income" in determining support. While that
case dealt with an individual tax protester, the concept of
taxability is entirely applicable to perquisites.
The issue becomes not whether perquisites should be taxed
under IRS tax code, but whether the perquisites should be
taxed in the context of setting temporary and permanent support
levels. We do not believe individuals should commit tax fraud
by not taxing their perquisites, but if they aren't taxing
their perquisites, the spousal support should be calculated
upon their actual taxable and nontaxable income.
