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Cite as 313 Neb. 779

Cynthia A. Parde, appellant, 

v. Arlan D. Parde, appellee.

___ N.W.2d ___

Filed March 17, 2023. No. S-21-497.

1. Divorce: Child Custody: Property Division: Alimony: Attorney 

Fees: Appeal and Error. In a marital dissolution action, an appellate 

court reviews the case de novo on the record to determine whether there 

has been an abuse of discretion by the trial judge in his or her determinations regarding custody, child support, division of property, alimony, 

and attorney fees.

2. Evidence: Appeal and Error. In a review de novo on the record, an 

appellate court is required to make independent factual determinations 

based upon the record, and the court reaches its own independent conclusions with respect to the matters at issue.

3. Judges: Words and Phrases. A judicial abuse of discretion exists if the 

reasons or rulings of a trial judge are clearly untenable, unfairly depriving a litigant of a substantial right and denying just results in matters 

submitted for disposition.

4. Divorce: Property Division: Equity. Neb. Rev. Stat. § 42-365 (Reissue 

2016) authorizes a trial court to equitably distribute the marital estate 

according to what is fair and reasonable under the circumstances.

5. Divorce: Property Division. In a marital dissolution action, the purpose of a property division is to distribute the marital assets equitably 

between the parties.

6. ____: ____. In a marital dissolution action, there is no mathematical 

formula by which property awards can be precisely determined, but as 

a general rule, a spouse should be awarded one-third to one-half of the 

marital estate, the polestar being fairness and reasonableness as determined by the facts of each case.

7. ____: ____. The appreciation or income of a nonmarital asset during 

the marriage is marital insofar as it was caused by the efforts of either 

spouse or both spouses.

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

03/17/2023 08:05 AM CDT
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8. Divorce: Property Division: Presumptions. Accrued investment earnings or appreciation of nonmarital assets during the marriage are presumed marital unless the party seeking the classification of the growth 

as nonmarital proves: (1) The growth is readily identifiable and traceable to the nonmarital portion of the account and (2) the growth is not 

due to the active efforts of either spouse.

9. Divorce: Property Division. Any given property can constitute a mixture of marital and nonmarital interests; a portion of an asset can be 

marital property while another portion can be separate property.

10. ____: ____. The original value of an asset may be nonmarital, while all 

or some portion of the appreciation of that asset may be marital.

11. ____: ____. In a marital dissolution action, the equitable division of 

property is a three-step process. The first step is to classify the parties’ property as either marital or nonmarital, setting aside the nonmarital property or nonmarital portion of the property to the party 

who brought the property to the marriage. The second step is to value 

the marital assets and marital liabilities of the parties. And the third 

step is to calculate and divide the net marital estate equitably between 

the parties.

12. Divorce: Property Division: Real Estate. Whether appreciation in real 

estate is active or passive depends on the facts and circumstances of 

each case.

13. Divorce: Property Division: Proof. The burden is on the owning 

spouse to prove the extent to which marital contributions did not cause 

the appreciation or income.

14. Divorce: Property Division: Equity. The equity in property at the time 

of marriage is a nonmarital asset which, if established, should be set 

aside as separate property.

15. Divorce: Property Division: Presumptions: Gifts. Gifts and inheritances, even when received during the marriage, are presumed to be 

nonmarital.

16. Evidence: Appeal and Error. When evidence is in conflict, the appellate court considers and may give weight to the fact that the trial court 

heard and observed the witnesses and accepted one version of the facts 

rather than another.

Petition for further review from the Court of Appeals, 

Moore, Riedmann, and Arterburn, Judges, on appeal thereto 

from the District Court for Gage County, Ricky a. Schreiner, 

Judge. Judgment of Court of Appeals affirmed as modified, and 

cause remanded with directions.
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John W. Ballew, Jr., and Steven D. Burns, of Ballew Hazen, 

P.C., L.L.O., for appellant.

Terrance A. Poppe and McKynze P. Works, of Morrow, 

Poppe, Watermeier & Lonowski, P.C., L.L.O., for appellee.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, 

Papik, and Freudenberg, JJ.

Cassel, J.

I. INTRODUCTION

We granted further review of a Nebraska Court of Appeals 

decision 1 applying the active appreciation rule to agricultural land in a marital property division. We agree that the 

rule applies to such land and that the owning spouse failed 

to show the appreciation in value of the land was not caused 

by the active efforts of either spouse. We affirm the decision 

of the Court of Appeals as modified and remand the cause 

with directions.

II. BACKGROUND

Arlan D. Parde and Cynthia A. Parde (Cindy) married in 

April 1994. It was a second marriage for both parties. In 

January 2019, the parties separated and Cindy filed a complaint 

for dissolution of the marriage.

The district court conducted a trial in February 2021. The 

court received over 80 exhibits and heard the testimony of four 

witnesses: Cindy, Cindy’s daughter, Arlan, and Arlan’s sister. 

Our inquiry upon further review is focused on the nonmarital 

and marital portions of various parcels of agricultural land.

1. Farming Operation

The evidence established that both before and during 

the marriage, Arlan maintained a farming operation. Over the 

course of the parties’ 26-year marriage, Arlan and Cindy both 

contributed to the farming operation.

1 Parde v. Parde, 31 Neb. App. 263, 979 N.W.2d 788 (2022).
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An agricultural balance sheet from January 1994 showed 

that Arlan had assets of $715,336, including land, and liabilities of $393,989. Several months after the marriage, Cindy 

signed a financing statement and security agreement obligating 

her for all of Arlan’s bank loans. Throughout the marriage, 

the parties had one checking account which they used for the 

deposit of all proceeds from the sale of cattle, crops, machinery, and property disposed of during the marriage. They paid 

farming operation expenses from the checking account.

On a balance sheet near the date of separation, the parties 

listed their net worth as approximately $1.6 million. With 

updated real estate values, their net worth was over $2 million. When Arlan’s counsel asked if the increase in wealth 

from $400,000 to about $2 million came from anywhere aside 

“from the land, the dairy, the farm operation, the things that 

not only [he] had before the marriage but the two of [them] 

worked at during the marriage,” Arlan added that he started 

“trucking.” Arlan did not provide any additional testimony 

regarding the increased value or appreciation in value of the 

land or farming operation.

2. Parcels of Property

The dispute centers on the marital portion of five properties. 

We set forth the evidence related to each parcel.

(a) Fertilizer Plant

Prior to the marriage, Arlan bought the land called Fertilizer 

Plant, consisting of approximately 113 acres of dry cropland, 

for $90,720. At the time of the parties’ marriage, Fertilizer 

Plant was worth approximately $70,000. Arlan testified that 

he “paid off” this property prior to the marriage, but Cindy 

testified that they eliminated the debt during the marriage. 

Arlan sold 19 acres between 1993 and 2000. The money from 

the sales went into the farming bank account to pay loans. 

At the time of the parties’ separation, Fertilizer Plant was 

worth $403,750.
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(b) Home Place

In 2002, the parties built a house on 5 acres of Fertilizer 

Plant and called it Home Place. The house and land were 

appraised at $385,000. The parties stipulated that the land had 

a value of $25,000. A 2016 survivorship warranty deed conveyed the property to Arlan and Cindy as joint tenants.

(c) Lenard’s Farm

Arlan purchased property called Lenard’s Farm, consisting 

of 160 acres of dry cropland, for $42,000 in 1991. On Arlan’s 

1994 agricultural balance sheet, he listed the property’s value 

at $64,000. At the time of marriage, he owed $40,000 for 

the property.

Within 2 weeks of the marriage, Arlan presented Cindy with 

a promissory note for $60,000 and asked her to sign it. The 

promissory note included $40,000 from the initial Lenard’s 

Farm loan, plus an additional $20,000. The parties paid off the 

note during the marriage. Throughout the marriage, portions 

of the land were sold and the funds were deposited into the 

marital checking account. In 2002, the parties sold a portion 

of Lenard’s Farm, along with other farmland, and purchased 

property called Holmesville Farm in a “1031 exchange.” Arlan 

explained a 1031 exchange as a way to avoid paying capital 

gains tax when “you sell . . . a piece of property, and you 

transfer the proceeds from that to another piece of property that 

you’re purchasing within a certain time.”

At the time of separation, Lenard’s Farm consisted of 36 

acres and was valued at $153,000. Arlan asserted that he 

should be awarded the property at a value of $40,000, representing the amount that he owed on Lenard’s Farm at the time 

of marriage.

(d) Grandma’s Farm

In September 2003, Arlan and Cindy purchased property 

called Grandma’s Farm, consisting of 160 acres of dry cropland, from Arlan’s mother. The joint tenancy warrant deed 

showed consideration of $80,000. Internal notes from the 
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parties’ bank reflect that on September 29 the bank advanced 

$80,296 for the purchase. The loan was to be paid over the 

course of 15 years.

Arlan testified that after purchasing the land for $80,000, 

his mother wrote him a check for $20,000—25 percent of 

the purchase price—as an inheritance. Arlan’s sister testified 

that she also received $20,000 at that time from their mother. 

Arlan claimed that he applied the $20,000 to the purchase 

price of Grandma’s Farm and borrowed the rest from the 

bank. He did not have a copy of the check he claimed to have 

received from his mother. Bank records show normal monthly 

payments and do not reflect a $20,000 payment toward 

the loan.

Cindy testified that the parties paid $80,000 to the bank 

“and then we received $20,000 credit” from Arlan’s mother. 

Cindy’s counsel asked, “So to clarify this: Perhaps, the ground 

was supposed to be sold for $100,000, and instead it was sold 

for 80 and you went to the bank and got the bank note to pay 

the 80?” Cindy answered, “Correct.” She did not recall that 

they received a check. She testified that Arlan’s three siblings 

“received $20,000 credit” and testified “[t]hat came out of the 

[$]80,000 that was paid is the way I understood it.” Cindy felt 

the $20,000 was a gift to both of them.

At the time of separation, Grandma’s Farm had a value of 

$236,000 and 68 acres remained from the original purchase. 

Arlan claimed that 25 percent of its appraised value was nonmarital, because he bought it from his mother for $80,000, but 

received $20,000 back from her.

(e) Holmesville Farm

During the marriage, the parties purchased property called 

Holmesville Farm, which is irrigated cropland, for $249,000. 

As noted earlier, in 2002, the parties purchased Holmesville 

Farm in a “1031 exchange.”

Arlan claimed that 61 percent of the purchase price was 

nonmarital, because they purchased it with $32,000 related 
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to the Lenard’s Farm sale and with $121,500 of sale proceeds from property called Rademacher Farm. At the time of 

marriage, Arlan valued Rademacher Farm at approximately 

$70,000 with debt of $27,500. Thus, at the time of marriage, 

Arlan’s equity in Rademacher Farm was $42,500. In 2002, 

Arlan sold Rademacher Farm for $149,000.

During the marriage, a storm damaged an irrigation pivot 

and the equipment was replaced through insurance funds. 

Holmesville Farm was valued at $734,000 at the time of separation. Arlan contended after reducing that amount by 61 percent, the marital value of the property was $286,260.

3. District Court’s Decree

The district court found that Arlan met his burden of proof 

“with respect to property owned by [Arlan] prior to the marriage and . . . with respect to the tracing of the proceeds from 

the sale of portions of property that [he] owned prior to the 

marriage.” The district court did not mention appreciation or 

cite any case law discussing it.

The district court approved Arlan’s proposed division of the 

land. Thus, it awarded Fertilizer Plant to Arlan and did not 

include any of the property’s value as marital property. After 

setting aside nonmarital portions, the court awarded Arlan as 

marital property Home Place valued at $361,000, consistent 

with Arlan’s proposed division of property listing that number 

along with “$386,000.00 [-] $25,000.00.” It awarded Arlan 

Lenard’s Farm valued at $40,000. With respect to Grandma’s 

Farm, the district court found that Arlan’s mother “gifted back” 

to him $20,000 and that he should receive credit for that gift. 

It awarded him the property with a marital value of $177,000, 

which we observe to be 75 percent of $236,000. The district 

court found that placing a marital value on Holmesville Farm 

of $286,260 was appropriate, citing a 2007 decision by the 

Court of Appeals. 2

2 Shafer v. Shafer, 16 Neb. App. 170, 741 N.W.2d 173 (2007), modified on 

denial of rehearing 16 Neb. App. 327, 743 N.W.2d 781 (2008).
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The district court divided the net marital estate equally. 

Thus, it ordered Arlan to make an equalization payment of 

$398,664.88 to Cindy.

4. Court of Appeals

Cindy appealed, assigning numerous errors. Some of the 

errors concerned the district court’s classification, valuation, 

and division of the marital estate.

The Court of Appeals recognized that we had not directly 

applied the active appreciation rule to farmland. After reviewing our decisions in Stanosheck v. Jeanette 3 and Stephens v. 

Stephens,

 4 the Court of Appeals determined that the rule should 

apply to agricultural land.

As will be discussed further in our analysis, the Court 

of Appeals disagreed with the district court’s determinations 

regarding each of the five parcels. It reversed this portion 

of the district court’s decision and remanded the cause with 

directions to equitably divide the marital estate in accordance 

with the Court of Appeals’ classifications of marital value and 

Arlan’s nonmarital value.

Arlan filed a petition for further review, which we granted.

III. ASSIGNMENTS OF ERROR

Arlan assigns five errors in his petition for further review, 

each dealing with a particular parcel of land. He assigns, 

restated and reordered, that the Court of Appeals erred in (1) 

finding that $333,750 of appreciation on Fertilizer Plant was 

part of the marital estate, (2) finding that $129,000 of Lenard’s 

Farm was marital property, (3) finding that the marital value of 

Holmesville Farm was $691,500, (4) including the value of the 

Home Place land as marital property, and (5) finding that all of 

Grandma’s Farm was marital property.

3 Stanosheck v. Jeanette, 294 Neb. 138, 881 N.W.2d 599 (2016).

4 Stephens v. Stephens, 297 Neb. 188, 899 N.W.2d 582 (2017).
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IV. STANDARD OF REVIEW

[1] In a marital dissolution action, an appellate court reviews 

the case de novo on the record to determine whether there has 

been an abuse of discretion by the trial judge in his or her 

determinations regarding custody, child support, division of 

property, alimony, and attorney fees. 5

[2] In a review de novo on the record, an appellate court 

is required to make independent factual determinations based 

upon the record, and the court reaches its own independent 

conclusions with respect to the matters at issue. 6

[3] A judicial abuse of discretion exists if the reasons or rulings of a trial judge are clearly untenable, unfairly depriving a 

litigant of a substantial right and denying just results in matters 

submitted for disposition. 7

V. ANALYSIS

[4-6] Neb. Rev. Stat. § 42-365 (Reissue 2016) authorizes a 

trial court to equitably distribute the marital estate according 

to what is fair and reasonable under the circumstances. 8 In a 

marital dissolution action, the purpose of a property division is 

to distribute the marital assets equitably between the parties. 9

There is no mathematical formula by which property awards 

can be precisely determined, but as a general rule, a spouse 

should be awarded one-third to one-half of the marital estate, 

the polestar being fairness and reasonableness as determined 

by the facts of each case. 10

[7] Prior to our decision in Stephens, we treated separate 

property as remaining nonmarital unless both of the spouses 

5 Simons v. Simons, 312 Neb. 136, 978 N.W.2d 121 (2022).

6 Kauk v. Kauk, 310 Neb. 329, 966 N.W.2d 45 (2021).

7 Simons v. Simons, supra note 5.

8 Bock v. Dalbey, 283 Neb. 994, 815 N.W.2d 530 (2012).

9 See Kauk v. Kauk, supra note 6.

10 Id.
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contributed to the improvement or operation of the property 

or the spouse not owning the property or not receiving the 

inheritance or gift significantly cared for the property during 

the marriage. 11 But in Stephens, we held that the appreciation 

or income of a nonmarital asset during the marriage is marital insofar as it was caused by the efforts of either spouse or 

both spouses. 12

[8] The active appreciation rule sets forth the relevant test 

to determine to what extent marital efforts caused any part of 

an asset’s appreciation or income. 13 Accrued investment earnings or appreciation of nonmarital assets during the marriage 

are presumed marital unless the party seeking the classification 

of the growth as nonmarital proves: (1) The growth is readily identifiable and traceable to the nonmarital portion of the 

account and (2) the growth is not due to the active efforts of 

either spouse. 14 Appreciation caused by marital contributions is 

known as active appreciation, and it constitutes marital property. 15 Passive appreciation is appreciation caused by separate 

contributions and nonmarital forces. 16

[9,10] After Stephens, we have adhered to the framework that any given property can constitute a mixture of 

marital and nonmarital interests; a portion of an asset can 

be marital property while another portion can be separate 

property. 17 The original value of an asset may be nonmarital, 

11 See Van Newkirk v. Van Newkirk, 212 Neb. 730, 325 N.W.2d 832 (1982), 

abrogated, Stephens v. Stephens, supra note 4.

12 Stephens v. Stephens, supra note 4.

13 White v. White, 304 Neb. 945, 937 N.W.2d 838 (2020).

14 Id.

15 Id.

16 Id.

17 See, Simons v. Simons, supra note 5; Kauk v. Kauk, supra note 6; Higgins 

v. Currier, 307 Neb. 748, 950 N.W.2d 631 (2020); White v. White, supra 

note 13; Marshall v. Marshall, 298 Neb. 1, 902 N.W.2d 223 (2017).
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while all or some portion of the appreciation of that asset may 

be marital. 18

[11] The oft-cited three-step process of a marital property division 19 must account for appreciation, which may be 

treated separately from the original capital or value of an 

asset. Thus, in a marital dissolution action, the equitable division of property is a three-step process. The first step is to 

classify the parties’ property as either marital or nonmarital, 

setting aside the nonmarital property or nonmarital portion 

of the property to the party who brought the property to the 

marriage. The second step is to value the marital assets and 

marital liabilities of the parties. And the third step is to calculate and divide the net marital estate equitably between 

the parties. 20

With this refined three-step process in place, we start with 

the first step and turn our attention to whether the active 

appreciation rule should apply to agricultural land. The Court 

of Appeals cited our decisions stating that the rule applies 

equally to appreciation or income during the marriage of any 

nonmarital asset, 21 and it determined that the rule should apply 

to farmland. We agree.

In Arlan’s supplemental brief in support of his petition for 

further review, he did not contest that the active appreciation 

rule should apply to agricultural land; instead, after observing that we had not directly applied the rule to farmland, he 

contended that the Court of Appeals should have remanded the 

cause to provide him an opportunity to satisfy the two-prong 

test from Stephens. At oral argument, however, he backed 

away and contended that agricultural land should be treated 

differently, using “common sense.”

18 See Stephens v. Stephens, supra note 4.

19 See, e.g., Kauk v. Kauk, supra note 6.

20 See id.

21 See, White v. White, supra note 13; Stephens v. Stephens, supra note 4.
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But the need for an evidentiary link between the appreciation and its cause is no surprise. Although the rule’s application to agricultural land may have been novel, the rule itself 

was not.

The underlying concept of the active appreciation rule is 

not new. Forty years ago, an annotation in the American Law 

Reports stated that courts in most cases had recognized that an 

increase in value of a spouse’s separate property—unattributable to funds, property, or effort by either spouse—constituted 

separate property. 22

By the time of the trial in 2021, we had spoken on a number of occasions about how appreciation on a nonmarital asset 

should be treated. In 2015, we examined to what extent the 

appreciation in a separate premarital portion of a retirement 

account was caused by the efforts of either spouse. 23 The next 

year, we set forth the two-prong test discussed above with 

respect to investment earnings accrued during the marriage on 

a nonmarital portion of a retirement account. 24 In 2017, when 

we decided Stephens, we held that “the principles set forth 

in Stanosheck apply equally to appreciation or income during 

the marriage of any nonmarital asset.” 25 We did not carve out 

any exceptions.

Two decisions in 2020 further addressed the active appreciation rule and the need for evidence regarding causation. 26 In 

one, we discussed in detail our case law and that of three other 

states concerning active appreciation and stated that “[w]e 

adhere to the active appreciation rule articulated in Stephens.” 27

Notably, in both of the 2020 decisions, we cited the lack 

22 Annot., 24 A.L.R.4th 453 (1983).

23 Coufal v. Coufal, 291 Neb. 378, 866 N.W.2d 74 (2015).

24 See Stanosheck v. Jeanette, supra note 3.

25 Stephens v. Stephens, supra note 4, 297 Neb. at 205, 899 N.W.2d at 595.

26 See, Higgins v. Currier, supra note 17; White v. White, supra note 13.

27 White v. White, supra note 13, 304 Neb. at 960, 937 N.W.2d at 850.
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of evidence to show that the increase in value resulted from 

something other than the active efforts of either spouse.

To find active appreciation in nonmarital property, a treatise described three determinations that a court must make. 28

First, the court must find that the nonmarital property in 

question appreciated during the marriage. 29 Second, the court 

must find that the parties made marital contributions to the 

property. 30 Third, the court must find a causal connection 

between the marital contributions and at least part of the 

appreciation. 31 This is generally consistent with our twoprong test which presumes the appreciation of a nonmarital 

asset during the marriage is marital unless the party seeking 

to classify the growth as nonmarital proves: (1) The growth is 

readily identifiable and traceable to the nonmarital portion of 

the account and (2) the growth is not due to the active efforts 

of either spouse. 32

[12] Some assets are more subject to active appreciation, 

while others are more subject to passive appreciation. 33 By its 

nature, real estate is more prone to passive appreciation. 34 This 

is because real estate tends to rise and fall in value for reasons 

beyond the parties’ control. 35 However, a Tennessee court, in 

discussing a farming operation, stated:

We have no doubt that the continued profitability of a 

farm operation serves to increase the land’s value, particularly where the only apparent use of the land is farming. The routine advance of expenses for the farming 

28 See 1 Brett R. Turner, Equitable Distribution of Property § 5:56 (4th ed. 

2021).

29 See id.

30 See id.

31 Id.

32 See White v. White, supra note 13.

33 See 1 Turner, supra note 28, § 5:57.

34 See id.

35 See id.
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operation is, in our opinion, a real and substantial contribution made through the use of the [parties’] marital funds. 36

The treatise cautions that “while it is wrong to make a blanket 

assumption that all appreciation in real estate is passive . . . , 

the nature of the asset nevertheless is a significant factor in 

accurately determining the cause of any increase in value.” 37

Ultimately, whether appreciation in real estate is active or 

passive depends on the facts and circumstances of each case. 

In that regard, evidence relating to the cause of appreciation 

is key.

[13] The burden is on the owning spouse to prove the extent 

to which marital contributions did not cause the appreciation 

or income. 38 With respect to the evidentiary burden, the treatise explained why placing the burden of proof on the owning spouse was the better policy. 39 To start, it is consistent 

with the general rule that the burden of proof rests with the 

party claiming that property is nonmarital. 40 Further, it places 

the burden of proof upon the spouse who, as the owner of the 

property, has the best access to the relevant evidence. 41 Doing 

so helps to curtail abuses of the discovery process by owning 

spouses, who are sometimes reluctant or unwilling to comply 

with discovery. 42

With these principles in mind, we separately discuss the 

five parcels of property at issue, setting forth the Court of 

Appeals’ determinations before making our own independent conclusions.

36 Fickle v. Fickle, 287 S.W.3d 723, 730-31 (Tenn. App. 2008).

37 1 Turner, supra note 28, § 5:57 at 946.

38 White v. White, supra note 13.

39 See 1 Turner, supra note 28.

40 See, id.; White v. White, supra note 13.

41 See 1 Turner, supra note 28.

42 See id.
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1. Fertilizer Plant

At the time of marriage, Arlan valued Fertilizer Plant at 

$70,000. At the time of the parties’ separation, it was worth 

$403,750. The Court of Appeals determined that the appreciation on Fertilizer Plant, amounting to $333,750, was marital 

property. We agree.

Arlan satisfied the first part of the two-prong test. There is 

no dispute that the growth in Fertilizer Plant was readily identifiable to Arlan’s premarital land.

Arlan failed to carry his burden regarding the second prong 

of the test. The record contains no evidence regarding the 

cause of the appreciation. Arlan asserts in his petition for further review that the value increased due to market forces and 

not due to the active efforts of either spouse. But he provided 

no testimony or other evidence to support that assertion at trial. 

The burden of proof on Arlan was not insurmountable. For 

example, evidence that values of similar property in the same 

area had increased by a particular percentage during the marriage or evidence that the parties left the land untouched over 

the course of the marriage would have provided the district 

court with a basis to treat the appreciation as nonmarital. But 

because nothing in the record explains the increase in value, 

we agree with the Court of Appeals that the district court 

abused its discretion by treating the appreciation on this property as nonmarital property.

2. Lenard’s Farm

The record shows that at the time of marriage, Lenard’s 

Farm had a value of $64,000 and that Arlan owed $40,000 

on a note for the land’s purchase. By the time of separation, 

Lenard’s Farm was valued at $153,000. The Court of Appeals 

determined that Arlan was entitled to a setoff for $24,000, 

representing the equity he had in Lenard’s Farm at the time 

of marriage, and that the remaining value of $129,000 was 

marital property. Thus, it concluded that the district court 
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abused its discretion by including a marital value of $40,000 

for Lenard’s Farm.

[14] The equity in property at the time of marriage is a 

nonmarital asset which, if established, should be set aside as 

separate property. 43 Thus, $24,000 of the value of Lenard’s 

Farm should be set off to Arlan as nonmarital property. 

Because the record contains no evidence regarding the cause 

of the increase in value of the land, there is nothing to rebut 

the presumption that the appreciation in Lenard’s Farm was 

marital. Accordingly, we agree with the Court of Appeals 

that the district court abused its discretion in determining that 

$40,000 of Lenard’s Farm, rather than $129,000, was marital property.

3. Holmesville Farm

The Court of Appeals recognized that although Holmesville 

Farm was purchased during the marriage, part of the purchase 

entailed an exchange involving Arlan’s premarital property. 

The Court of Appeals reasoned that Arlan was entitled to a 

set off of $42,500 due to the sale of Rademacher Farm, which 

was Arlan’s nonmarital property. Because Holmesville Farm 

was valued at $734,000 at the time of separation, the Court 

of Appeals determined that the marital value was $691,500. It 

concluded that the district court abused its discretion in classifying only $286,260 as marital property.

Relying on Shafer v. Shafer,

 44 Arlan contends that the marital value of Holmesville Farm should be reduced by 61 percent to account for the nonmarital property used to acquire 

it. Shafer, a Court of Appeals’ decision, was decided 10 years 

prior to Stephens. Even though we had not yet announced the 

active appreciation rule, the trial court in Shafer made findings 

related to the rule, reasoning:

43 See Onstot v. Onstot, 298 Neb. 897, 906 N.W.2d 300 (2018).

44 Shafer v. Shafer, supra note 2.
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“There is no evidence of any substantial improvements 

to the land after its acquisition and it further appears 

that the appreciation in value of the land from the 1992 

value of $150,000.00 to the present value of $260,500.00 

is due to market forces and circumstances separate from 

any improvements made to the property by the parties. 

Upon consideration of the evidence, the court finds that 

[the wife] has established that 45.33% of the current 

value of the 160 acres . . . is attributed to her inheritance 

and that such value should be set aside as her sole and 

separate property and the same is excluded from the marital estate.” 45

In finding no abuse of discretion, the Court of Appeals noted 

the absence of evidence to show that the appreciation in 

value was the result of any substantial improvement or the 

nonowning spouse’s farming and care of the property during the marriage. In Stephens, “[w]e expressly adopt[ed] the 

active appreciation rule that does not distinguish between 

the efforts of the owning spouse and the efforts of the nonowning spouse.” 46 We disapprove of Shafer to the extent it is 

inconsistent with Stephens.

Here, Arlan failed to meet his burden with respect to the 

considerable appreciation in value of Holmesville Farm. The 

record is devoid of evidence that the increase was due to market forces and not due to the active efforts of either spouse. 

Accordingly, we agree with the Court of Appeals that the 

marital value was $691,500 and that the district court abused 

its discretion in classifying only $286,260 as marital property.

4. Home Place

In 2002, the parties built their marital home upon 5 acres 

of Arlan’s premarital land. The Court of Appeals determined 

that Home Place was marital property. It reasoned that the 

45 Id. at 173-74, 741 N.W.2d at 176.

46 Stephens v. Stephens, supra note 4, 297 Neb. at 206, 899 N.W.2d at 595.
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value of the land could not be separated from the structure and 

cited a case 47 regarding commingling of separate property with 

marital property. We agree with the Court of Appeals’ conclusion, though perhaps not its reasoning.

The Home Place land is 5 acres of land that was part of 

Fertilizer Plant. As discussed above, Arlan valued Fertilizer 

Plant at $70,000 at the time of marriage. In the Court of 

Appeals’ division of property, it set off $70,000 of Fertilizer 

Plant to Arlan as his nonmarital property. Thus, he has already 

received credit for the premarital value of the land that is now 

known as Home Place.

At the time of trial, the parties agreed that the 5 acres of 

Home Place land had a value of $25,000. But Arlan’s attempt 

to receive credit for the appreciation in value of the land fails. 

He did not meet his burden to show that any appreciation in 

value was not due to the active efforts of one or both of the 

parties. Accordingly, we agree with the Court of Appeals that 

the district court abused its discretion in setting off to Arlan 

$25,000 of Home Place as nonmarital property.

5. Grandma’s Farm

The Court of Appeals stated that the record showed the parties financed the full $80,296 for the purchase of Grandma’s 

Farm and did not show that the $20,000 gift from Arlan’s 

mother was used to purchase the property or was used as a payment on the loan. The Court of Appeals determined that Arlan 

failed to meet his burden of proof, that the entire $236,000 

value of Grandma’s Farm was marital property, and that the 

district court abused its discretion in classifying 25 percent of 

Grandma’s Farm as nonmarital property.

[15] Gifts and inheritances, even when received during 

the marriage, are presumed to be nonmarital. 48 The parties 

47 Osantowski v. Osantowski, 298 Neb. 339, 904 N.W.2d 251 (2017).

48 Burgardt v. Burgardt, 304 Neb. 356, 934 N.W.2d 488 (2019).
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agree that Arlan’s mother gave each of her four children 

$20,000 after Arlan and Cindy purchased this property from 

Arlan’s mother for $80,000. They dispute whether it was an 

inheritance to Arlan or a gift to both parties.

[16] When evidence is in conflict, the appellate court considers and may give weight to the fact that the trial court heard 

and observed the witnesses and accepted one version of the 

facts rather than another. 49 The district court found that Arlan’s 

mother “gifted back” to Arlan $20,000 and that he should 

receive credit for that gift. Given the conflicting evidence, we 

cannot say that this finding was clearly untenable.

But the district court did more than merely set off $20,000 

to Arlan. By treating the $20,000 gift as 25 percent of the 

property’s purchase price, the district court essentially turned 

the $20,000 gift into a $59,000 set off. It abused its discretion 

in doing so.

We conclude that $20,000 of the $236,000 value of 

Grandma’s Farm should be set off to Arlan. Accordingly, 

$216,000 of Grandma’s Farm is marital property.

6. Resolution

Upon further review, we conclude that the proper marital 

and nonmarital values of the property at issue are as follows:

Property Marital Value Arlan’s Nonmarital

Fertilizer Plant $333,750 $70,000

Lenard’s Farm 129,000 24,000

Holmesville Farm 691,500 42,500

Home Place 385,000 0

Grandma’s Farm 216,000 20,000

We affirm the Court of Appeals’ determination as so modified. We remand the cause to the Court of Appeals and direct 

that it remand to the district court for an equitable division of 

the marital estate using the above classifications.

49 White v. White, supra note 13.
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VI. CONCLUSION

The Court of Appeals properly applied the active appreciation rule to agricultural land. Because Arlan failed to show that 

the land’s appreciation was not caused by the active efforts 

of either party, we affirm the Court of Appeals’ determination 

that the appreciation on Fertilizer Plant, Lenard’s Farm, and 

Holmesville Farm was part of the marital estate. We further 

agree that the entirety of Home Place is marital property. But 

we cannot say that the district abused its discretion in finding 

that Arlan’s mother made a $20,000 gift in connection with the 

purchase of Grandma’s Farm.

We affirm the Court of Appeals’ decision as modified to 

decrease the marital value of Grandma’s Farm determined by 

the Court of Appeals by $20,000. We remand the cause to the 

Court of Appeals with directions to remand to the district court 

for an equitable division of the marital estate using marital values determined in this decision.

Affirmed as modified, and cause 

remanded with directions.