250 November 29, 2023 No. 611

IN THE COURT OF APPEALS OF THE 

STATE OF OREGON

In the Matter of the Marriage of

Michael BARZILAY,

Petitioner-Respondent,

and

Edith BARZILAY,

Respondent-Appellant.

Multnomah County Circuit Court

17DR15209; A175355

Patricia L. McGuire, Judge.

Argued and submitted August 1, 2022.

Andrew W. Newsom argued the cause and filed briefs for 

appellant. Also on the opening brief was Holtey Law, LLC.

Peter Bunch argued the cause for respondent. Also on the 

brief was The Law Firm of Peter Bunch, LLC.

Before Ortega, Presiding Judge, and Powers, Judge, and 

Hellman, Judge.

ORTEGA, P. J.

Property division reversed and remanded; otherwise 

affirmed.
Cite as 329 Or App 250 (2023) 251

ORTEGA, P. J.

In this domestic relations case, wife appeals from a 

judgment of dissolution, challenging the trial court’s property division. The trial court had held a dissolution trial 

to resolve specific issues that the parties could not resolve 

by stipulation. Months after that trial concluded, the court 

issued a first letter opinion with a property division that 

resulted in an equalizing judgment against wife in the 

amount of $13,234.50. After husband filed a letter objecting to the opinion, to which wife responded, the trial court 

issued a revised letter opinion that altered the property 

division, resulting in an equalizing judgment against wife 

in the amount of $92,954.97. Wife raises four assignments 

of error on appeal.

In her first assignment, wife challenges the trial 

court’s decision to revise its opinion, arguing that it violated Multnomah County Supplementary Local Rule (SLR) 

5.045, which provides that judges will not entertain motions 

for reconsideration. Wife requests as relief that we direct 

the trial court to enter a judgment consistent with its first 

opinion. We reject that assignment of error, because even 

if the court violated the rule, we would not grant the relief 

requested by wife.

In her next three assignments of error, wife challenges three aspects of the trial court’s property division. 

First, we grant limited de novo review of the characterization of property located in Peru and find that wife acquired 

that property by gift and continuously held it separately. 

We further conclude that, on this record, the trial court is 

required to award the property to wife as her separate property. Second, we agree with wife that the trial court erred in 

considering the potential tax liability husband may have in 

the future to recapture depreciation on the two rental properties awarded to him in the property division, because it 

was mere speculation whether the taxable event of a sale of 

either property would occur. Third and finally, we conclude 

that the trial court did not abuse its discretion in equalizing $20,000 in debt that husband incurred for their child’s 

school expenses. Accordingly, we reverse and remand the 

property division and otherwise affirm.
252 Barzilay and Barzilay

I. FACTUAL AND PROCEDURAL BACKGROUND

Except with respect to one factual dispute, the parties do not request that we conduct de novo review. ORS 

19.415(3)(b) (discretion to review equitable actions de novo); 

ORAP 5.40(8)(c) (we will exercise our discretion to review 

de novo only in exceptional cases). As to that factual dispute, which relates to whether real property located in Peru 

(the Carapongo property) was a gift to wife, we exercise our 

discretion to take limited de novo review, which we explain 

in our analysis. For purposes of this section, we set out the 

competing evidence adduced below on that issue to provide 

context for that analysis. In all other respects, “we are bound 

by the trial court’s express and implicit factual findings if 

they are supported by any evidence in the record,” Morgan 

and Morgan, 269 Or App 156, 161, 344 P3d 81, rev den, 357 

Or 595 (2015), and we state the facts consistently with that 

standard.

A. Overview

Wife and husband were married in July 2002 and 

have one child together, who was 12 years old at the time of the 

dissolution. Wife and husband separated in February 2015, 

and husband filed for dissolution in 2017. The parties resolved 

many issues by stipulated order and held open specific, unresolved issues for trial. The trial court held the dissolution 

trial over three days in August and October 20191

 and issued 

a letter opinion five months later in March 2020 (the first 

opinion). After husband filed a letter objecting to that opinion, to which wife responded, the trial court revised its letter 

opinion in April 2020 (the revised opinion). After failing to 

respond to further letters from the parties that the court had 

invited, the court entered the judgment of dissolution consistent with the revised opinion in December 2020. Wife’s appeal 

challenges the trial court’s decision to revise its opinion and 

also three aspects of the trial court’s final property division. 

For purposes of this opinion, we set forth only the facts relevant to those four challenges.

1 There was an additional hearing day in November 2019, during which the 

court accepted the parties’ stipulated parenting agreement. However, all the 

trial matters, including closing arguments, concluded in October 2019.
Cite as 329 Or App 250 (2023) 253

B. Depreciation Recapture Taxes on Oregon Properties

The parties owned three residential real properties 

located in Oregon: (1) the 181st property, (2) the Gerhard 

property, and (3) the 174th property. They agreed that 

the three houses were marital assets; that wife would be 

awarded the 181st property, which was the marital home; 

and that husband would be awarded the Gerhard property 

and the 174th property, which were rental properties.

A disputed issue at trial was whether husband could 

reduce the net value of the two rental properties awarded 

to him by subtracting the “depreciation recapture taxes.” 

Depreciation is taken over time on rental property, which 

lowers the tax burden of the person filing. Husband’s expert, 

LaJoy, testified that the depreciation recapture tax is under 

section 1250 of the Internal Revenue Service (IRS) code and 

is incurred when you sell rental property by “break[ing] out 

what that depreciation is, and it’s taxed at a higher tax rate 

than a capital gain[s] tax rate[.]” LaJoy explained that, as 

long as the code does not change, you will have to pay the 

depreciation recapture tax unless the property is sold at 

a loss or exchanged for other property under section 1031 

of the IRS code. LaJoy assumed a property sale as of the 

time of trial at the stipulated fair market value and, based 

on prior tax returns, calculated those taxes as $27,990 for 

the Gerhard property and $15,010 for the 174th property. 

Husband testified that he had not decided whether he would 

sell or keep the Gerhard property going forward and that he 

did not intend to sell the 174th property.

C. Real Property in Peru

During the marriage, wife acquired ownership 

interests in properties located in Peru, where her parents 

live. The only property at issue on appeal is the Carapongo 

property.

Wife’s parents purchased the Carapongo property 

in 2009 for $21,516.50, when it was bare land. In 2012, they 

began construction of a residence and moved into that residence in about December 2018, while continuing to build 

on the land. The parties stipulated that, as of trial in 
254 Barzilay and Barzilay

October 2019, the Carapongo property had a fair market 

value of $175,000.

Wife acquired sole title to the Carapongo property 

in January 2014, while she and husband were in Peru. 

However, husband first learned of wife’s ownership of the 

Carapongo property through discovery before the dissolution trial. The document memorializing the transfer stated 

that wife, with a marital status of “single,” purchased the 

property on January 7, 2014, for $8,000 US. The document 

provided that the money was paid in cash before the document was signed and with no proof of payment other than 

the execution of the document. The document also included 

a sworn statement from wife’s parents that “we are selling 

the property for an amount lower than that for which it was 

acquired because the purchaser is our daughter.”

Husband testified that, on the trip to Peru when the 

transfer occurred, he noticed that wife had brought more 

cash with her than she normally would have. Wife testified 

that she did not pay any money for the property. Wife also 

produced her bank records for a six-month period before 

their trip to Peru, which did not reflect any large withdrawals of cash.

Wife’s mother testified about the transfer, calling it 

“a symbolic sale.” Wife’s mother explained that the sale did 

not involve the exchange of money, but a verbal agreement 

that wife and wife’s sister would share in the property after 

wife’s parents died, and that wife’s mother intended to live 

on the property until her death. Wife’s mother testified that 

they transferred the property to wife because both she and 

her husband were sick—she testified that “I thought I was 

going to die any moment.” She also testified that she used 

the form for the transfer which reflects a sale because she 

was advised to do it as a sale.

D. Husband’s Debt for Child’s Private School Tuition

During the pendency of the dissolution case, the 

parties’ child was attending private school. In 2017, the 

court entered a stipulated order for temporary relief that, 

among other things, addressed school tuition. The order 

stated that the temporary relief in the order was “without 
Cite as 329 Or App 250 (2023) 255

prejudice to either party as to the final disposition of any 

issues addressed in this Order.” With respect to tuition, the 

order provided:

“Until further order of the court or the written agreement of the parties, effective October 1, 2017, [w]ife shall 

pay $474.50 for tuition and childcare directly to the [private school], with [h]usband paying the remaining costs, 

taking into account subsidies from his parents.”

At some point wife stopped paying her share of school 

expenses before the dissolution trial. Husband also testified 

that his parents had stopped contributing to school expenses 

three and a half years prior to the dissolution trial.

At trial, husband testified that he had inherited 

$100,000 from his aunt’s estate during the pendency of the 

case and that he took out a line of credit against the inheritance. He used part of that money to pay approximately 

$20,000 toward the child’s private school expenses. He testified that tuition was about $16,000 per year and that, 

including other school expenses like aftercare, it was closer 

to $20,000 per year. Husband argued that the trial court 

could consider the diminishment of the inheritance in the 

final “just and proper” division and provided an exhibit of 

bank accounts to show the amount by which his inheritance 

had diminished.

E. Proceedings Related to the Trial Court’s Letter Opinions

The trial court entered its first opinion on March 3, 

2020, about five months after the dissolution trial concluded. 

The court made the express finding that “[w]ife was generally less credible in her testimony than [h]usband. There 

were several points where her testimony was contradicted 

by other evidence.”

On the issue of the deduction of the depreciation 

recapture tax, for the Gerhard property, the court concluded 

that “LaJoy credibly testified that the depreciation recapture tax on the property will be $27,990.00. This evidence 

provided a reasonable and supportable basis for making an 

informed judgment about [h]usband’s probable tax liability.” 

The court reduced the net value of the Gerhard property by 
256 Barzilay and Barzilay

$27,990. For the same reasons, the court reduced the net 

value of the 174th property by $15,010.

On the Carapongo property, the court concluded 

that “[t]his property was gifted solely to [w]ife by her parents in January 2014 and kept separate upon receipt and 

continually thereafter. Wife’s parents live on this property. 

It is valued at $175,000.00 and awarded to [w]ife as her separate property.”

The court also concluded that the joint debts would 

be equalized, which included two accounts with stipulated balances and the cost of the custody evaluation. The 

court concluded that, with respect to other debts, the court 

awarded the debts allocated individually on husband’s 

spreadsheet without equalization.2

For the just and proper analysis, the court concluded:

“After application of the ORS 107.105(1)(f) statutory presumptions, the marital assets awarded to [h]usband total 

$412,955.00 and the marital assets awarded to [w]ife total 

$386,602.00. These assets are awarded without equalization. This slightly unequal distribution is just and proper 

under the circumstances; it preserves the assets awarded 

to each party and allows each party to be economically 

self-sufficient.

“The marital debt set forth in Section 6 ($26,469.00) is 

awarded to [h]usband, but it shall be equalized. Wife shall 

pay [h]usband $13,234.50 to equalize the marital debt.”

With respect to the payment of the child’s private school, the 

court provided that husband will pay 75 percent of the cost 

and that wife will pay 25 percent of the cost going forward, 

but did not mention any past contributions.

After receiving the first opinion, husband’s counsel 

sent a letter to the court requesting findings under ORCP 62, 

stating that “there are omissions and corrections that are 

required before I can prepare a judgment.” As relevant on 

appeal, husband largely asserted that the court failed to 

explain why it was just and proper to award the Carapongo 

2 Husband’s debts included his credit card balances, promissory note to husband’s parents, a line of credit with a balance of $36,816, and a bank loan. Wife’s 

debts included wife’s credit card balances.
Cite as 329 Or App 250 (2023) 257

property to wife as her separate property when there was evidence that wife paid $8,000 for it and failed to explain why 

debts were assigned to each party without equalization. In 

response, wife argued that husband’s letter was improper 

under ORCP 62 B because it sought different rulings and 

was an improper motion for reconsideration under SLR 5.045. 

However, if the court revisited the rulings, wife also requested 

that her credit card debt be included in the joint debts for 

equalization.

In response to the parties’ letters, the court entered 

the revised opinion on April 7, 2020. The court determined 

that, whether via ORCP 62 or otherwise, it was appropriate for husband to call potential errors to the attention of 

the court, citing Sappington v. Brown, 68 Or App 72, 682 

P2d 775, rev den, 298 Or 238 (1984). As relevant on appeal, 

the court determined that it would revise its opinion regarding the Carapongo property and the joint credit card debt, 

which in turn required a correction to the just and proper 

distribution.

On the Carapongo property, the court stated:

“The [c]ourt previously found that this property was 

gifted to [w]ife by her parents; that is incorrect. This property was acquired by [w]ife’s parents in July 2009, and [w]ife 

purchased the property from them in January 2014 for 

$8,000.00 (see Exhibit 11). While [w]ife testified that she 

did not make any such payment, her testimony is less credible than Exhibit 11 (a notarized document which refers 

specifically to that transaction). This property is not a gift, 

but rather is a marital asset subject to the presumption 

of equal contribution, and the presumption has not been 

rebutted. It is awarded to [w]ife and valued at $175,000.00 

for purposes of equalization.”

With respect to debts, the court revised its distribution, concluding that husband had joint debts to be equalized in the amount of $46,469.00, and wife had joint debts 

to be equalized in the amount of $9,206.06. The court concluded that “it is appropriate to consider the $20,000 spent 

by [h]usband on [child’s] tuition as a joint marital debt for 

equalization.”
258 Barzilay and Barzilay

Given those revisions, the court conducted a new 

just and proper analysis:

“After application of the ORS 107.105(1)(f) statutory presumptions, the marital assets awarded to [h]usband total 

$412,955.00 and the marital assets awarded to [w]ife total 

$561,602.00, for a total of $974,557.00 in assets. Husband’s 

marital debt totals $46,469.00 and [w]ife’s marital debt 

totals $9,206.06, for a total of $55,675.06 in liabilities. All 

should be equalized: Wife shall owe Husband an equalizing 

judgment of $92,954.97.”

Following the court’s issuance of the revised opinion, and in response to the court’s invitation to do so, both 

wife and husband filed objections and a request for corrections and additional findings. The court did not respond to 

those filings. About eight months later, in December 2020, 

the court entered a final judgment of dissolution that conformed with the revised opinion.

Wife appeals from that final judgment of dissolution, raising four assignments of error that challenge the 

court’s decision to revise its first opinion and three aspects 

of the final property division.

II. ANALYIS

Under ORS 107.105(1)(f), the trial court’s property division in the dissolution judgment must be “just and 

proper in all the circumstances.” A trial court’s just and 

proper division of marital property requires consideration of 

both the statutory factors in ORS 107.105(1)(f) and the equitable considerations that the Supreme Court has directed 

trial courts to consider “to promote consistency and predictability in dissolution decrees.” Kunze and Kunze, 337 

Or 122, 132, 92 P3d 100 (2004). We review the trial court’s 

just and proper property division for an abuse of discretion. 

Morgan, 269 Or App at 161. Under that standard, “we will 

not disturb factual findings that are supported by evidence 

in the record, and we will disturb the court’s decision only 

if it misapplied the statutory and equitable considerations 

required by ORS 107.105(1)(f).” Id. at 162 (internal quotation 

marks omitted); see also Anderson v. Sullivan, 311 Or App 

406, 413, 492 P3d 118, rev den, 368 Or 702 (2021) (“Relying 

on a mistaken legal premise when exercising discretion is 
Cite as 329 Or App 250 (2023) 259

error, regardless of whether the trial court would have had 

discretion to reach the same result based on a correct understanding of the law.”). With those legal standards in mind, 

we address each of wife’s assignments of error in turn.

A. Challenge to the Court’s Revision of its Opinion

In her first assignment of error, wife argues that 

the trial court legally erred when it reviewed and acted 

on husband’s letter, resulting in its revised opinion. Wife 

asserts that husband’s letter was a motion for reconsideration that the trial court was not permitted to consider 

under SLR 5.045.3

 For relief, wife requests that we reverse 

and remand the judgment with instructions to the court to 

enter a judgment that conforms to the court’s first opinion. 

However, even if the trial court erred in reviewing and acting upon husband’s letter because it qualified as a motion 

for reconsideration under that rule, we would not grant the 

relief requested by wife.

A trial court retains authority to change its rulings 

until such rulings are reduced to a written order or judgment. See Wrona and Wrona, 66 Or App 690, 692, 674 P2d 

1213 (1984) (“The general rule is that a statement from the 

bench does not constitute a judgment until reduced to an 

order, decree or judgment.”). Wife has not argued that SLR 

5.045 prevents the court from exercising that authority, and 

it is not readily apparent to us that it does.

Additionally, wife has not identified a legal source 

for her contention that the appropriate remedy for a court’s 

violation of SLR 5.045 is for us to direct the court to enter a 

judgment conforming to its first opinion. The rule itself does 

not provide any consequences for a court’s failure to abide by 

it, nor are any such consequences set out elsewhere in the 

supplementary local rules for the Fourth Judicial District 

Cf. Monroe v. Harmon, 158 Or App 196, 200, 973 P2d 392, 

rev den, 329 Or 126 (1999) (“Although UTCR 13.160 prescribes the time within which an arbitrator must schedule an 

arbitration hearing, it does not describe any consequences of 

noncompliance.”); Green v. Tri-Met, 93 Or App 623, 624, 762 

3 As relevant, SLR 5.045 provides that “[n]o Motion for Reconsideration on 

any pre-trial, trial, or post-trial civil or criminal matter shall be heard, reviewed, 

or considered by any judge sitting in the Fourth Judicial District[.]”
260 Barzilay and Barzilay

P2d 1067 (1988) (failure of arbitrator to file decision within 

seven days, as required by supplementary local rule, did not 

render the award void, as argued by plaintiff, noting that 

the rule does not prescribe a consequence for the arbitrator’s 

failure to comply). As a result, we reject wife’s first assignment of error.

B. Challenge to the Court’s Treatment of the Carapongo 

Property

In her second assignment of error, wife requests 

that we take limited de novo review to make findings with 

respect to the Carapongo property and to conclude that the 

trial court is required to award that property to her as her 

separate property. As to findings, wife specifically requests 

that we disregard the finding in the revised opinion that 

wife paid $8,000 for the property and find, as the trial court 

initially did, that her parents gave the property to her as a 

gift. Additionally, wife requests that we find that her parents purchased the property as bare land, that they built a 

residence on the land with their own money and lived there, 

that they transferred the property to wife as part of their 

estate planning, that wife’s mother planned to live there 

until she died, that it was wife’s mother’s intent that, after 

their death, wife would share the property with her sister, 

and that, at the time of trial, the land was worth $80,453 

and the improvements were worth $94,457.

Under ORS 19.415(3)(b), we have discretion to “try 

the cause anew upon the record or make one or more factual 

findings anew upon the record.” We will exercise that discretion “only in exceptional cases.” ORAP 5.40(8)(c). Factors 

we consider as relevant to our decision, include, among others, “whether the trial court made express ‘demeanor-based 

credibility findings,’ whether ‘the trial court’s decision comports with its express factual findings or with uncontroverted evidence in the record,’ and whether the ‘finding[s] 

that the appellant requests’ this court to make are ‘important to the trial court’s ruling’ at issue on appeal.” Pulley 

v. Herndon, 324 Or App 568, 573, 527 P3d 19 (2023) (quoting ORAP 5.40(8)(d)); see also Morgan, 269 Or App at 159 

(“[A] lower court’s reliance on a crucial finding that does not 

comport with the evidence in the record can be a reason to 
Cite as 329 Or App 250 (2023) 261

exercise our discretion to review de novo.” (Internal quotation marks omitted.)).

We conclude that this is an extraordinary case in 

which we will grant limited de novo review to make findings 

of fact relevant to the disposition of the Carapongo property. 

As explained below, our decision to take this limited de novo

review is based primarily on the trial court’s revision of 

its finding—which was an important finding to the overall 

property division—goes against reason and the substantial weight of the evidence and the court did not attempt 

to explain why it so fundamentally changed its view of the 

record between the first opinion and the revised opinion. 

ORAP 5.40(8)(d)(i), (ii); Bush and Bush, 297 Or App 699, 

701-02, 444 P3d 1133 (2019) (granting de novo review where 

trial court’s finding did not comport with the testimony and 

the factual issue was important to the court’s ruling).

We first note that, although the court purported to 

make a credibility finding with regard to wife on this issue—

that she was less credible than the Carapongo property 

transfer document—that finding is not the type of demeanor-based credibility finding to which we give any weight. 

ORAP 5.40(8)(d)(i) (a relevant consideration is whether the 

trial court made “demeanor-based credibility findings”). “As 

we have explained, to the ‘extent that a credibility determination is based on a comparison of the witness’ testimony 

with the substance of other evidence, this court is as well 

equipped as the trial court to make that credibility determination.’” Dept of Human Services v. H. R. E., 297 Or App 

247, 248 n 3, 441 P3d 726 (2019) (quoting State ex rel Juv 

Dept v. G. P., 131 Or App 313, 319, 884 P2d 885 (1994)). We 

also note that the significant delay between the end of the 

dissolution trial and the court’s first opinion—a five-month 

delay—and the dramatic change in the finding one month 

later, further suggests that the court’s credibility determination was based on the written record and not any observable factors that the written record does not reflect. Finally, 

it is important here that the trial court did initially credit 

wife’s and wife’s mother’s testimony when it found that wife 

had received the Carapongo property as a gift. The court’s 

change from that initial credibility finding to the opposite 
262 Barzilay and Barzilay

one a month later was not based on any further hearings or 

new observations by the court of the witnesses’ demeanor.

Here, both wife and wife’s mother testified that wife 

did not pay any money to her parents for the Carapongo property. Wife’s mother testified that it was “a symbolic sale,” that 

they transferred the property to wife because they were both 

sick, and that she intended to live on the property until she 

died, and that she had a verbal agreement with wife that 

wife would share in the property with wife’s sister after she 

and wife’s father died. She also testified that she used the 

form for the transfer which reflects a sale because she was 

advised to do it as a sale. Wife’s mother provided a credible 

explanation as to why the transfer document recited a cash 

payment. There is also no dispute that the Carapongo property was kept separate from the marital estate at all times 

and that neither wife nor husband made any contributions to 

the property. At best, husband provided marginally relevant 

testimony that wife carried more cash with her than usual on 

the trip to Peru during which the transfer occurred. However, 

husband provided no evidence of how much cash wife had 

with her, where that cash came from, or what it was spent 

on. Moreover, the notarized transfer document itself provided 

that there was no exchange of money made in front of the 

notary, and as such, the recitation in the transfer document 

that such a transfer of money occurred is not more persuasive 

or more credible evidence than the direct testimony from wife 

and her mother. The trial court’s finding that wife paid her 

parents $8,000 for the Carapongo property goes against reason and the substantial weight of the evidence.

Additionally, the factual finding of whether or not 

wife paid $8,000 for the Carapongo property, or whether the 

property was a separately held gift, is of particular importance in this case. The trial court’s change in its finding in 

that regard dramatically changed the balance of the property division, resulting in wife being responsible for a large 

equalizing judgment, and our determination of that fact 

provides a basis for reversing or modifying the judgment. 

ORAP 5.40(8)(d)(iv).

Based on the foregoing, we exercise our discretion 

to grant limited de novo review in this case. In alignment 
Cite as 329 Or App 250 (2023) 263

with the trial court’s initial assessment, we find that wife 

acquired the Carapongo property by gift,4

 that she did not 

pay $8,000 to her parents for the property, that, at all times, 

she held the property separately from the marital estate, 

and that neither wife nor husband made any contributions 

to the property. Having made those findings, we also conclude that the trial court legally erred in concluding that 

the Carapongo property was a marital asset subject to the 

presumption of equal contribution, ORS 107.105(1)(f)(C). 

Instead, as we have found, the Carapongo property was a 

gift continuously held separately by wife. As a result, the 

Carapongo property is not subject to a presumption of equal 

contribution, ORS 107.105(1)(f)(D), and the legal presumption is that wife will be awarded the property without equalization. Brush and Brush, 319 Or App 1, 8, 509 P3d 124 

(2022).

The remaining question is whether, under the equitable considerations identified in Kunze,

5

 the court could 

consider the property as part of the marital estate as “just 

and proper under all the circumstances.” Ordinarily, we 

would remand for the trial court to make that decision in 

the first instance. Here, however, the trial court already considered whether such equitable considerations applied when 

4 For purposes of ORS 107.105(1)(f)(D), “‘property acquired by gift’ means 

property acquired by one party through gift, devise, bequest, operation of law, 

beneficiary designation or inheritance.” ORS 107.105(1)(f)(D)(ii).

5 “[T]he factors identified by Kunze are ones that look at specific social and 

financial objectives—preservation of assets, economic self-sufficiency of the parties, and meeting the particular needs of the parties and their children—and 

whether the equities favor distributing a portion of separately held property 

to the other spouse due to how the parties treated that property in their joint 

finances.” Brush, 319 Or App at 12. 

We reject husband’s suggestion at oral argument that an appropriate equitable consideration to treat the Carapongo property as part of the marital estate 

is the bare fact that wife held gifted separate property that had a greater value 

than husband’s gifted separate property. The legislature specifically amended 

ORS 107.105(1)(f) in 2012 to provide that separately held gifts are not subject to 

the presumption of equal contribution. Husband’s proposed equitable consideration would render that legislative directive largely meaningless. It would be a 

different matter if the existence of separately held gifts of unequal value implicated one of the social or financial objectives identified in Kunze, such as economic self-sufficiency of the parties, or if that fact supported a division of marital 

assets (not including the separate gifts) that was not equal, because it would be 

equitable under the circumstances. Those arguments, however, are not part of 

husband’s argument here.
264 Barzilay and Barzilay

it issued the first opinion that characterized the Carapongo 

property as a gift and found none. Similarly, in the revised 

opinion, the court did not find any equitable considerations 

that favored distributing any portion of the other separately 

held assets or debts of either husband or wife to the other 

spouse. Finally, it is undisputed that the Carapongo property was not made part of the marital finances and that 

wife’s parents lived on the property and exercised sole control over the property. In light of that record, and in light 

of the fact that excluding the Carapongo property from the 

marital estate results in a far more equitable division,6

 we 

instruct the court to award the Carapongo property to wife 

as her separate property, because it would be an abuse of the 

court’s discretion to do otherwise.

C. Challenge to the Court’s Consideration of Depreciation 

Recapture Taxes

In her third assignment of error, wife challenges 

the trial court reducing the value of the Gerhard property 

and 174th property in the amount of the depreciation recapture tax calculated by LaJoy. Although treatment of this 

specific tax is a matter of first impression in Oregon, wife 

argues that Oregon case law has already rejected similar 

tax strategies in a property division when there is no evidence that the sale of the real property is pending or reasonably likely to occur. Wife argues that, here, the sale of the 

rental properties was entirely hypothetical, and whether or 

not husband would ever have to pay the taxes was uncertain 

because, even if he sold one or both rental properties, the tax 

can be avoided with a section 1031 exchange under the IRS 

code.

Husband responds that the tax was not speculative 

because the tax liability existed at the time of trial and could 

be calculated because the tax rate is fixed. Husband asserts 

that, unless the IRS code changes or the properties are sold 

6 Taking into account the change in characterization of the Carapongo 

property, as well as our decision on the depreciation recapture taxes explained 

below, results in an award of marital assets to husband of $455,955 and to 

wife of $386,602—a differential of $69,353; as compared to the division in the 

revised opinion award of marital assets to husband of $412,955 and to wife of 

$561,602—a differential of $148,647.
Cite as 329 Or App 250 (2023) 265

at a loss, he will have to pay the tax, and, unlike capital 

gains taxes, the amount of the tax due is not dependent on 

a hypothetical sale amount for the property. Husband likens 

the tax to the tax liability on a retirement account, which 

courts regularly take into account in property divisions, 

because it is a tax he will have to pay eventually.

Under ORS 107.105(2), in determining the division 

of property, “the court may consider evidence of the tax consequences on the parties of its proposed judgment.” To make 

adjustments based on tax consequences, “the court must be 

presented with evidence that specifically demonstrates ‘a 

reasonable and supportable basis for making an informed 

judgment’ about a party’s likely tax liabilities.” Rykert and 

Rykert, 146 Or App 537, 544, 934 P2d 519 (1997) (quoting 

Alexander and Alexander, 87 Or App 259, 261, 742 P2d 63 

(1987)). “Where the amount of the tax consequence or the 

potential for tax liability is too speculative, the court will 

not take into account the possible effects of taxation in 

dividing property.” Id. at 544-45. “We also have consistently 

refused to consider the tax consequences of the sale of a 

marital asset unless there is evidence that a sale is contemplated or reasonably certain to occur.” Bidwell and Bidwell, 

170 Or App 239, 244, 12 P3d 76 (2000), adh’d to on recons, 

172 Or App 292, 18 P3d 465, rev den, 332 Or 305 (2001); see 

also Follansbee and Ackerman, 115 Or App 39, 41-42, 836 

P2d 763 (1992) (consideration of tax consequences is only 

appropriate “when it is reasonably certain that a sale will 

occur and there is evidence that provides a reasonable basis 

on which to make an informed judgment as to the probable 

tax liability”). Because a court cannot take into account tax 

consequences that are too speculative, which is wife’s sole 

contention on appeal, we review that legal conclusion for 

legal error. See Johnson and Price, 280 Or App 71, 84, 380 

P3d 983 (2016) (taking that approach).

Applying those standards, we conclude that the 

trial court legally erred in reducing the value of the rental 

properties to account for depreciation recapture taxes. The 

evidence established that the depreciation recapture tax 

would be due on a sale of the real properties, if the properties are not sold at a loss or exchanged for other property 
266 Barzilay and Barzilay

as permitted under section 1031 of the IRS code. The trial 

court found that LaJoy’s testimony provided a reasonable 

and supportive basis on which to determine the tax liability. 

However, the undisputed evidence was that husband was 

not contemplating a sale of either property. As explained 

above, our case law requires that a sale of the property is 

contemplated or reasonably certain to occur for a court to 

take into consideration the tax consequences of a sale of a 

marital asset.

Husband urges us to treat the deprecation recapture 

tax the same as we treat future tax liability for drawing on a 

retirement account. Husband asserts that, as with a retirement account, he will be liable for depreciation recapture on 

the properties at some point and that the amount is calculable and thus can be taken into consideration even without a contemplated sale. We reject that argument because 

it misses the point—what is speculative here is whether the 

taxable event will ever occur, not whether there is a reasonable basis on which to calculate the tax if, hypothetically, 

the taxable event did occur.

We have held that tax consequences of drawing 

on a retirement account can be taken into consideration 

when there is evidence that the tax will have to be paid 

and evidence from which a rate can be determined. See, 

e.g., Cookson and Cookson, 134 Or App 357, 363, 895 P2d 

345 (1995) (expert testimony established that “husband 

would inevitably incur tax liability on the assets when he 

receives distributions from the pension” and the current tax 

rate to apply); Alexander, 87 Or App at 261 (“[I]t is a virtual certainty that husband will not receive his retirement 

account free of income tax liability[.]”). Here, LaJoy’s testimony established no such certainty that husband will have 

to pay the depreciation recapture tax on the rental properties. Rather, his testimony established a certainty that husband will have to pay that tax if he sells the properties (and 

the sale is not at a loss or done in a section 1031 exchange). 

There was no evidence that any such sale would ever occur. 

Retirement accounts and real property are very different 

types of assets. Retirement accounts exist for the purpose 

of taking a future distribution from the account and may 
Cite as 329 Or App 250 (2023) 267

even require taking distributions at retirement age—the 

taxable event is reasonably certain to occur. Without evidence that a sale of real property is contemplated, it is mere 

speculation that the taxable event is reasonably certain to 

occur, because the trial court is left to speculate about a 

party’s future dealings with the property. Thus, the trial 

court legally erred in reducing the fair market values of the 

Gerhard property and the 174th property by the amount of 

depreciation recapture taxes calculated by LaJoy.

D. Challenge to the Court’s Equalization of Debt for Child’s 

School Tuition

In her fourth and final assignment of error, wife 

argues that the court erred in equalizing $20,000 in debt 

held by husband that he testified he used to pay for their 

child’s private school expenses. Wife argues that the evidence of the debt was legally insufficient and that it went 

against the parties’ predissolution stipulation that each 

party would be responsible for their own share of the school 

expenses as allocated in the stipulation. Wife argues that 

the trial court abused its discretion in ignoring the stipulation and sua sponte deciding to equalize husband’s debt 

without also equalizing the school expenses that wife had 

paid pursuant to the stipulation.7

 “Like marital assets, marital debt is presumptively 

evenly divided, with the ultimate division guided by consideration of what is just and proper.” Uwimana and Rwangano, 

209 Or App 693, 696, 149 P3d 257 (2006) (internal citations 

omitted). To determine whether an obligation is a marital 

debt, the court must focus on the use to which it was put. 

Cirina and Cirina, 271 Or App 161, 165, 350 P3d 504 (2015). 

“If the debt was incurred to pay family expenses, equal 

division of the debt is generally appropriate. If, on the other 

hand, the debt is properly attributed to only one of the parties, the debt should generally remain that party’s responsibility.” Christensen and Christensen, 253 Or App 634, 639-

40, 292 P3d 568 (2012). Because we do not review de novo, 

“we will not disturb factual findings that are supported by 

7 Wife also makes arguments based on her assertion that the trial court erroneously found that the $20,000 in debt was credit card debt. We do not address 

those arguments because the trial court did not make such a finding.
268 Barzilay and Barzilay

evidence in the record, and we will disturb the court’s decision only if it misapplied the statutory and equitable considerations required by ORS 107.105(1)(f).” Morgan, 269 Or App 

at 162 (internal quotation marks omitted).

We first address and reject wife’s challenge to the 

legal sufficiency of the evidence for the court to find that the 

$20,000 debt existed. Husband testified that he used about 

$20,000 from a line of credit taken against his inheritance 

to pay for the child’s school expenses and provided an exhibit 

that showed the total diminished amount of his inheritance. Husband also testified that the child’s school tuition 

was around $16,000 per year, and closer to $20,000 with 

all expenses, including aftercare. It was also undisputed 

that wife had stopped paying her share of school expenses 

that she had agreed to pay in the 2017 temporary stipulation order. Husband’s parents had also stopped helping 

with school expenses about three and a half years before the 

dissolution trial, even though the 2017 stipulation contemplated such assistance. That was sufficient evidence from 

which the trial court could find that husband had incurred 

debt to pay $20,000 toward child’s school expenses.

We also conclude that the trial court did not abuse 

its discretion in equalizing the $20,000 between husband 

and wife. Although the court entered a temporary stipulated order that allocated the child’s tuition between them 

pending the final dissolution, it is undisputed that wife did 

not continue to pay her stipulated share of those expenses. 

Additionally, the temporary order itself did not preclude the 

court from revisiting the expenses allocated in the order, 

providing that it was “without prejudice to either party as to 

the final disposition of any issues addressed in this Order.” 

See also Pollock and Pollock, 357 Or 575, 591, 355 P3d 117 

(2015) (“Although a trial court should not substitute its judgment by rejecting a settlement that falls within the range of 

what is just and proper, the court has the ultimate authority 

to arrive at a just and proper property division by determining whether a settlement falls within that range.”). We 

are also unpersuaded by wife’s arguments that the court’s 

decision to equalize that debt was not equitable. Thus, we 
Cite as 329 Or App 250 (2023) 269

conclude that the court did not abuse its discretion in equalizing husband’s $20,000 debt in the final property division.

III. CONCLUSION

In sum, we take limited de novo review with respect 

to the Carapongo property and find that it was a gift to wife 

that she continuously held separately and, based on this 

record, conclude that the trial court is required to award 

that property to wife as her separate property. We also conclude that the trial court legally erred in reducing the value 

of the two rental properties awarded to husband by the 

depreciation recapture taxes. Finally, we conclude that the 

trial court did not err in equalizing $20,000 of debt that husband incurred for the child’s school expenses. As a result, 

we remand for the court to make those corrections and to 

reconsider the final property division as is just and proper 

under all the circumstances.

Property division reversed and remanded; otherwise affirmed.