Community Property – Bar exam with
solutions
The reverse Pereira generally
The reverse Pereira formula is applied when the main
reason for the increase in the value of the CP business is
due to the skills, efforts, and talents of the managing
spouse. The community is awarded the return on
investment, at a reasonable rate of return, and the
remainder is awarded to the spouse who worked in the
business. The community is entitled to the value of the
CP business at separation plus the value of the business
at separation multiplied by a fair rate of return per year.
Formula Reverse Pereira
The formula for calculating the CP portion is: CP = Value
of the CP Business at the Time of Separation + (Value of
the Business at the Time of Separation × Fair Rate of
Return × Years of Separation). The managing spouse's SP
is the fair market value (FMV) of the business at divorce
minus the CP value. The formula for calculating the SP
portion is: (SP = FMV of the Business at Divorce - CP).
,Title presumption
There is a special presumption that the form of ownership
on the title represents the form of ownership interests of
the spouses. If title is in one spouse's name alone and
one spouse dies, the asset is considered SP if the source
of funds used to purchase the asset was SP. The
presumption may be rebutted by clear and convincing
evidence that both spouses had a different intention.
However, and importantly here, this presumption only
applies at death. At divorce, title is generally irrelevant
since courts will trace back to the source to determine its
character.
REverse Van Camp
Reverse Van Camp
If the main reason for the increase in the value of the
business can be attributed to the asset itself or to the
nature of the economy or business, then the Reverse Van
Camp formula would be applied. Under this formula, the
SP portion would equal the reasonable value of services
provided during separation minus SP expenses paid.
, Formula for reverse Van Camp
The formula for calculating the SP portion is: (SP Portion
= Reasonable Value of Services Provided During
Separation - SP Expenses Paid During Separation). The CP
portion would equal the fair market value of the business
at divorce minus the SP portion. The formula for
calculating the CP portion is: (CP Portion = FMV of the
Business at Divorce - SP).
Whenever there is labor contributed to enhance the value
of the SP business during the marriage what formula do
you apply.
The courts will use one of two formulas to determine the
community's portion of the business: the Pereira formula
or the Van Camp formula.
When is the Pereria formula used?
The Pereira formula is used when the spouse’s
management of the SP business was the primary cause of
the business’s increased value.
solutions
The reverse Pereira generally
The reverse Pereira formula is applied when the main
reason for the increase in the value of the CP business is
due to the skills, efforts, and talents of the managing
spouse. The community is awarded the return on
investment, at a reasonable rate of return, and the
remainder is awarded to the spouse who worked in the
business. The community is entitled to the value of the
CP business at separation plus the value of the business
at separation multiplied by a fair rate of return per year.
Formula Reverse Pereira
The formula for calculating the CP portion is: CP = Value
of the CP Business at the Time of Separation + (Value of
the Business at the Time of Separation × Fair Rate of
Return × Years of Separation). The managing spouse's SP
is the fair market value (FMV) of the business at divorce
minus the CP value. The formula for calculating the SP
portion is: (SP = FMV of the Business at Divorce - CP).
,Title presumption
There is a special presumption that the form of ownership
on the title represents the form of ownership interests of
the spouses. If title is in one spouse's name alone and
one spouse dies, the asset is considered SP if the source
of funds used to purchase the asset was SP. The
presumption may be rebutted by clear and convincing
evidence that both spouses had a different intention.
However, and importantly here, this presumption only
applies at death. At divorce, title is generally irrelevant
since courts will trace back to the source to determine its
character.
REverse Van Camp
Reverse Van Camp
If the main reason for the increase in the value of the
business can be attributed to the asset itself or to the
nature of the economy or business, then the Reverse Van
Camp formula would be applied. Under this formula, the
SP portion would equal the reasonable value of services
provided during separation minus SP expenses paid.
, Formula for reverse Van Camp
The formula for calculating the SP portion is: (SP Portion
= Reasonable Value of Services Provided During
Separation - SP Expenses Paid During Separation). The CP
portion would equal the fair market value of the business
at divorce minus the SP portion. The formula for
calculating the CP portion is: (CP Portion = FMV of the
Business at Divorce - SP).
Whenever there is labor contributed to enhance the value
of the SP business during the marriage what formula do
you apply.
The courts will use one of two formulas to determine the
community's portion of the business: the Pereira formula
or the Van Camp formula.
When is the Pereria formula used?
The Pereira formula is used when the spouse’s
management of the SP business was the primary cause of
the business’s increased value.
