San Joaquin College of Law

Community Property--FINAL EXAM May 1995/Cartier

All of the following events took place in California.

             C.B., the owner of Classique Boutique, and Atty, a deputy district attorney, married in 1973. That same year, they arranged to purchase a family residence. Because C.B. was out of town on business when escrow closed, all title and loan documents were drawn in Atty's name alone. Atty put $10,000 of her premarital savings toward the down payment. The remainder of the $100,000 purchase price was financed with a 15-year note secured by a deed of trust. All payments on this loan were made by automatic withdrawal from Atty's earnings during the marriage.

             In 1990, C.B. inherited $25,000. He used $15,000 of this money to install a swimming pool at the family residence. The remaining $10,000 was used to pay a deficiency tax judgment owing to the I.R.S. for taxes owing on the parties' joint returns in tax years 1988-89.

             In 1990, Atty left the district attorney's office and began her own practice. When the parties separated in 1993, Atty's practice was valued at $300,000. During the past two years she has taken a number of capital cases on very high retainers. The present value of he practice is in excess of $1,000,000.       Classique Boutique, worth $200,000 in 1973, appreciated to $800,000 by 1993 when the parties separated. Since separation, as a result of various market factors, its value has declined to $600,000. Throughout the marriage, C.B. took annual draws of $80-100,000 as his salary for operating the boutique.

              In 1994, Atty paid $5,000 from her current earnings to the Franchise Tax Board for state tax deficiencies owing on the parties 1992 joint return. Also in 1994, Atty rolled-over her retirement fund account with the district attorney's office into an Individual Retirement Account in her name alone.

What are the respective legal interests of C.B. and Atty regarding the following:

             1.          the family residence, now worth $200,000? Discuss.

             2.          Classique Boutique? Discuss.

             3.          Atty's law practice? Discuss.

             4.          $10,000 used to pay I.R.S. tax deficiency? Discuss.

             5.          $5,000 used to pay state tax liability? Discuss.

             6.          the Individual Retirement Account? Discuss.

Answer according to California law.