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Nebraska Supreme Court Advance Sheets

304 Nebraska Reports

WHITE v. WHITE

Cite as 304 Neb. 945

Ann Coyle White, appellee and cross-appellant, 

v. Timothy Vincent White, appellant 

and cross-appellee.

___ N.W.2d ___

Filed January 31, 2020. No. S-19-047.

1. Divorce: Child Custody: Child Support: 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. This 

standard of review applies to the trial court’s 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. Under Neb. Rev. Stat. § 42-365 (Reissue 

2016), the equitable division of property is a three-step process.

5. ____: ____. The first step in the equitable division of property is to classify the parties’ property as marital or nonmarital, setting aside the nonmarital property to the party who brought that property to the marriage.

6. ____: ____. All property accumulated and acquired by either spouse 

during the marriage is part of the marital estate, unless it falls within an 

exception to this general rule.

7. ____: ____. The marital estate does not include property that a spouse 

acquired before the marriage, or by gift or inheritance.

8. ____: ____. 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.

Nebraska Supreme Court Online Library

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

02/07/2020 09:05 AM CST
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9. ____: ____. The original capital or value of an asset may be nonmarital, 

while all or some portion of the earnings or appreciation of that asset 

may be marital.

10. 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.

11. Divorce: Property Division: Words and Phrases. Appreciation caused 

by marital contributions is known as active appreciation, and it constitutes marital property.

12. ____: ____: ____. Passive appreciation is appreciation caused by separate contributions and nonmarital forces.

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. 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.

15. Divorce: Property Division. Separate property becomes marital property by commingling if it is inextricably mixed with marital property or 

with the separate property of the other spouse.

16. ____: ____. If the separate property remains segregated or is traceable 

into its product, commingling does not occur.

17. ____: ____. The second step in the equitable division of property is to 

value the marital assets and marital liabilities of the parties.

18. Divorce: Property Division: Appeal and Error. As a general principle, 

the date upon which a marital estate is valued should be rationally 

related to the property composing the marital estate.

19. Divorce: Property Division. The third step in the equitable division 

of property is to calculate and divide the net marital estate between the 

parties in accordance with the principles contained in Neb. Rev. Stat. 

§ 42-365 (Reissue 2016).

20. ____: ____. The ultimate test in determining the appropriateness of the 

division of property is fairness and reasonableness as determined by the 

facts of each case.

Appeal from the District Court for Douglas County: Leigh 

Ann Retelsdorf, Judge. Affirmed as modified.
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WHITE v. WHITE

Cite as 304 Neb. 945

Anthony W. Liakos and, on brief, Pamela Hogenson Govier, 

of Govier, Katskee, Suing & Maxell, P.C., L.L.O., for appellant.

Paul M. Shotkoski and Michael F. Coyle, of Fraser Stryker, 

P.C., L.L.O., for appellee.

Miller-Lerman, Cassel, Stacy, Funke, Papik, and 

Freudenberg, JJ.

Cassel, J.

I. INTRODUCTION

Timothy Vincent White (Tim) appeals from a decree dissolving his marriage to Ann Coyle White. Ann cross-appeals. 

The main issue is whether the growth in value of one investment account, derived from a nonmarital source, was properly 

classified as marital property. Under the active appreciation 

rule, Tim had the burden to prove that the growth was not due 

to the active efforts of either spouse. Under the specific facts 

here, he failed to do so. But he established that part of another 

investment account was nonmarital, and we modify the decree 

accordingly. Upon de novo review, we find no abuse of discretion regarding the court’s valuation date, division of a tax 

liability, and order for an equalization payment. As so modified, we affirm the decree.

II. BACKGROUND

Ann and Tim were married in September 1990. In May 

2017, Ann filed a dissolution action. There were no minor children, alimony was not contested, and the parties mostly agreed 

to the division of property. On appeal, the parties dispute only 

the marital or nonmarital characterization of two investment 

accounts: the Waddell & Reed 6300 account (6300 account) 

and the Charles Schwab account (Schwab account), the valuation date for the two accounts, the allocation of the 2017 tax 

liability, and the amount of the equalization payment. We begin 

with the accounts.
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1. Inheritance and Gifts

In 2008, Tim’s mother died. As an inheritance, he received 

4,900 shares of ConAgra stock and $100,000. In April 2012, 

he used the $100,000 to purchase mutual funds and transferred 

the funds to open the 6300 account. He then used the 4,900 

shares of ConAgra stock to open the Schwab account. From 

that point on, the accounts differed.

(a) 6300 Account

Regarding the 6300 account, Tim never made any deposits 

or withdrawals from the account. The account was solely in 

Tim’s name. Ann was aware of the account but unaware that it 

was in his name. Tim testified that he told Ann he would take 

the $100,000 and diversify it into mutual funds. Because Tim 

is a licensed financial advisor, he allocated the investments 

using “modern portfolio theory”—which he used for all his 

clients. Each year, he reinvested any income earned on the 

account. Tim presented evidence that the balance of the 6300 

account as of June 30, 2017, was $338,852. Tim’s valuation 

date represented the parties’ separation date. Ann presented 

evidence that the balance of the 6300 account as of July 31, 

2018—a date close to trial—was $357,213.

In the district court’s decree, it found that June 30, 2017, 

was the valuation date for the marital estate “as that date is best 

supported by the evidence and represents the separation of the 

parties[’] working finances.”

Further, the court recognized that the account was created 

with Tim’s inherited funds and was opened solely in his name. 

The taxable income derived from the account, the court noted, 

was reported on the parties’ joint tax returns. It found that the 

parties discussed the management of the account—specifically, 

the diversification of the money into four mutual funds. The 

court reasoned that Tim made a marital contribution to the 

appreciation, because “there clearly [was] a causal connection 

between [Tim’s] investment strategy and the growth in value.” 

It awarded the initial $100,000 investment as a nonmarital 
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asset to Tim. It then classified the appreciation as a marital 

asset and awarded it to Tim.

(b) Schwab Account

Tim opened the Schwab account with the 4,900 shares of 

ConAgra stock. After this account was opened, Tim’s father 

gave 38,000 shares of ConAgra stock to Tim by two direct 

transfers into the account. Throughout the parties’ marriage, 

they had received gifts of ConAgra stock. All previous gifts 

were deposited into the parties’ joint account. Tim testified that 

“I was going to keep it separate from our joint account, which 

was a margin account, because we had blown through all of 

those assets on margin living beyond our means.”

Tim managed all withdrawals and deposits from the Schwab 

account. In 2013, Tim transferred funds from the Schwab 

account to purchase a new marital home. About $240,000 of 

marital funds were transferred from the joint account to the 

Schwab account. Tim diversified the Schwab account and sold 

shares of ConAgra to purchase shares in four other companies. He then purchased several units of exchange trade funds 

(ETF’s) with proceeds from ConAgra stock and marital moneys in the account. Throughout the marriage, Tim withdrew 

money from the Schwab account for household expenses, trips, 

major repairs, and remodeling the marital home. Neither party 

deposited any income into the Schwab account.

Tim presented evidence that the value of the Schwab account 

on June 30, 2017, was $1,432,796. According to evidence Ann 

submitted, the value of the Schwab account on July 31, 2018, 

was $1,648,705.

In the district court’s decree, it reasoned that no evidence, 

other than opening the account in his name, supported an intent 

to treat the Schwab account differently from previously gifted 

assets. After reviewing the evidence regarding the Schwab 

account, the district court reasoned that the difference in the 

purpose, management, and utilization of the Schwab account, 

in contrast to the 6300 account, resulted in the entire account 

being a marital asset. The court stated:
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[T]he totality of evidence before the Court makes it clear 

that both parties intended the [Schwab account] as a “nest 

egg” for the parties’ future and the entirety of the account 

should be treated as a marital asset, as valued on June 30, 

2017, at $1,432,796. This amount is ordered to be equally 

divided between the parties.

2. Tax Liability and 

Equalization Payment

At trial, Tim testified that the parties always had filed a 

joint tax return. He agreed that in practice, if the withholdings 

from Ann’s salary did not satisfy the entire tax obligation, the 

balance would be paid from the Schwab account. The district 

court determined that because the valuation date of the Schwab 

account and the 6300 account was June 30, 2017, Tim would 

be required to pay the 2017 tax liability.

The district court found that the marital estate should be 

divided equally. Pursuant to the parties’ stipulations and the 

court’s division of the disputed accounts, it ordered Tim to pay 

Ann $14,373 to equalize the division.

Tim filed a timely appeal, and Ann cross-appealed. We 

moved the proceeding to our docket.1

III. ASSIGNMENTS OF ERROR

On appeal, Tim assigns that the district court erred in (1) 

finding that the appreciation in the 6300 account constituted 

marital property, (2) finding that the Schwab account was 

marital property, (3) ordering him to pay the entirety of the 

parties’ 2017 joint tax liability, and (4) ordering him to pay an 

equalization amount.

Ann cross-appeals and assigns that the district court erred 

in valuing the accounts on June 30, 2017, rather than July 31, 

2018.

1 See Neb. Rev. Stat. § 24-1106(3) (Cum. Supp. 2018).
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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. This standard 

of review applies to the trial court’s determinations regarding custody, child support, division of property, alimony, and 

attorney fees.2

[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.3

[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.4

V. ANALYSIS

[4] It is well settled that under Neb. Rev. Stat. § 42-365 

(Reissue 2016), the equitable division of property is a threestep process.5

 Because the parties’ assignments of error attack 

different steps in the process, we take up each assignment as it 

fits into the three-step framework.

1. Classification

[5] The first step in the equitable division of property is to 

classify the parties’ property as marital or nonmarital, setting 

aside the nonmarital property to the party who brought that 

property to the marriage.6 Tim makes two arguments regarding the court’s classification decisions. First, he argues that 

the appreciation in the 6300 account was nonmarital, because 

2 Burgardt v. Burgardt, ante p. 356, 934 N.W.2d 488 (2019).

3 Id.

4 Id.

5 See Dooling v. Dooling, 303 Neb. 494, 930 N.W.2d 481 (2019).

6 See id.
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it was the direct fruit of his inheritance. Second, he argues 

that the court erred in classifying the entirety of the Schwab 

account as marital property, because, he contends, the growth 

of the account was readily identifiable and traceable to the 

nonmarital property. We address each argument in turn.

(a) 6300 Account

Tim argues that the appreciation on the 6300 account could 

not be considered marital property, because he did not actively 

manage the account. His testimony showed, he contends, that 

after selecting the initial mutual funds, he relied on professional money managers to manage the funds. He contends 

that the district court’s reliance on Stephens v. Stephens 7 was 

misplaced, because the instant case involves classification 

of an inheritance and not a business interest. Additionally, 

he contends that our broad definition of active appreciation 

in Stephens, if extended to the 6300 account, would make it 

“virtually impossible . . . to retain the non-marital nature of 

a particular asset” where the inheriting spouse has “merely 

made the decision to invest in funds that happen to grow 

over time.”8

[6-9] All property accumulated and acquired by either 

spouse during the marriage is part of the marital estate, unless 

it falls within an exception to this general rule.9 The marital 

estate does not include property that a spouse acquired before 

the marriage, or by gift or inheritance.10 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.11 “Therefore, the original 

capital or value of an asset may be nonmarital, while all or 

7 Stephens v. Stephens, 297 Neb. 188, 899 N.W.2d 582 (2017).

8 Brief for appellant at 18.

9 Stephens v. Stephens, supra note 7.

10 Brozek v. Brozek, 292 Neb. 681, 874 N.W.2d 17 (2016).

11 Stephens v. Stephens, supra note 7.
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some portion of the earnings or appreciation of that asset may 

be marital.”12

Here, the focus is only on the growth of the 6300 account. 

The district court allocated the original investment of $100,000 

solely to Tim as nonmarital.

[10-13] 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

The burden is on the owning spouse to prove the extent to 

which marital contributions did not cause the appreciation 

or income.17

As an initial matter, Tim contends that the active appreciation rule in Stephens did not apply here, because the rule 

addressed appreciation on a nonmarital business interest rather 

than an inheritance.18 We disagree. In Stephens, we held that 

“the principles set forth in [Stanosheck v. Jeanette 19] apply 

equally to appreciation or income during the marriage of

12 Id. at 201, 899 N.W.2d at 592.

13 See Stephens v. Stephens, supra note 7.

14 Id.

15 Id.

16 Id.

17 Id.

18 See id.

19 Stanosheck v. Jeanette, 294 Neb. 138, 881 N.W.2d 599 (2016).
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any nonmarital asset.”20 We did not limit our holding solely 

to retirement accounts and business interests, and we decline 

to do so now. Therefore, the burden was on Tim to rebut 

the presumption that the appreciation in the 6300 account 

was marital.

Tim satisfied the first test of the active appreciation rule. 

Neither party disputes that the growth in the 6300 account was 

readily identifiable and traceable to the nonmarital portion of 

the account. Accordingly, the issue before us is the rule’s second prong: whether the growth in the 6300 account was due to 

the active efforts of either spouse.

Tim contends that the definition of active appreciation in 

Stephens and our application of the active appreciation rule 

is too broad.21 As we quoted above, he contends that the rule 

imposes an “impossible” burden on an inheriting spouse to 

maintain an asset’s nonmarital character. In making this argument, he relies on academic criticism of Stephens, which, he 

argues, illustrates that our broad definition of active appreciation encapsulates passive market conditions. Referring to our 

decision, the writer commented:

In particular, [Stephens] held that “[e]ven favorable market conditions are not passive inasmuch as they create 

merely the opportunity that the skilled, owning spouse 

detects and seizes.” . . . The court cited for this point [to] 

§ 5:57 of the third edition of this treatise. But § 5:57 did 

not say that all appreciation caused by favorable market 

conditions is active. On the contrary, it stated expressly 

that appreciation caused by market conditions is generally passive.22

We will address Tim’s argument in two parts. First, we will 

discuss case law concerning the development of the active 

20 Stephens v. Stephens, supra note 7, 297 Neb. at 205, 899 N.W.2d at 595 

(emphasis supplied).

21 See Stephens v. Stephens, supra note 7.

22 3 Brett R. Turner, Equitable Distribution of Property, § 10:29.2 at 408 (4th 

ed. 2019).
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appreciation rule in Nebraska and its application in other 

states. Then, we will apply the active appreciation rule to the 

facts of this case.

(i) Case Law on Active Appreciation

We first discussed the concept of active appreciation in 

Coufal v. Coufal.

23 In Coufal, we discussed whether the appreciation on the husband’s nonmarital contributions to his state 

retirement account was marital property. We began by examining to what extent the appreciation in the nonmarital portion 

of the account was caused by the efforts of either spouse. We 

relied on Van Newkirk v. Van Newkirk 24 and Buche v. Buche25

for the reasoning that “some level of indirect or direct effort 

was required by the nontitled spouse—not just inflation or 

market forces—in order to include the increase in value in the 

marital estate.”26

In Coufal, we then analogized the account to a certificate 

of deposit with a fixed rate of interest that was owned by 

a spouse prior to the marriage. We explained that both the 

principal and the interest remained separate property, because 

it was acquired before the marriage and no marital effort or 

contribution affected the accrual of interest. We reasoned that 

because the interest accrued solely from the operation of Neb. 

Rev. Stat. § 84-1301 (Cum. Supp. 2018), no effort of either 

spouse directly or indirectly affected the appreciation. We 

rejected the wife’s argument that the marital and nonmarital 

portions of the account were commingled. We reasoned that 

the appreciation on the nonmarital portion of the account was 

readily identifiable and traceable. Thus, we concluded, the 

appreciation of the nonmarital portion of the husband’s state 

retirement account was also nonmarital.

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

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

abrogated, Stephens v. Stephens, supra note 7.

25 Buche v. Buche, 228 Neb. 624, 423 N.W.2d 488 (1988).

26 Coufal v. Coufal, supra note 23, 291 Neb. at 384, 866 N.W.2d at 78.
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In Stanosheck v. Jeanette,

27 we discussed the application 

of Coufal to nonmarital retirement accounts. We agreed that 

Coufal was not restricted to any particular kind of retirement 

account; instead, its applicability was dependent on the facts 

of each case. Extrapolating a test from Coufal, we stated that 

investment earnings accrued during the marriage on the nonmarital portion of a retirement account may be classified as 

nonmarital where the party seeking the classification proves: 

(1) The growth is readily identifiable and traceable to the nonmarital portion of the account and (2) the growth is due solely 

to inflation, market forces, or guaranteed rate rather than the 

direct or indirect effort, contribution, or fund management of 

either spouse.28

In Stephens, we discussed the concept of active appreciation regarding a business interest.29 We rejected the husband’s 

argument that Coufal and Stanosheck apply only to appreciation on retirement accounts. After reexamining Van Newkirk

and our case law on awards under Grace v. Grace,

30 we 

found them inapplicable in our modern dual classification 

system but did not absolutely forbid a court from taking into 

account nonmarital assets in its equitable division of the marital estate.31

Then, relying on Stanosheck, we articulated in Stephens the 

active appreciation rule. In doing so, we agreed with several 

other jurisdictions that the burden is on the owning spouse to 

prove the extent to which marital contributions did not cause 

the appreciation and expressly held that the appreciation or 

income of a nonmarital asset during the marriage is marital 

27 Stanosheck v. Jeanette, supra note 19.

28 Id.

29 Stephens v. Stephens, supra note 7.

30 See Grace v. Grace, 221 Neb. 695, 380 N.W.2d 280 (1986), abrogated, 

Stephens v. Stephens, supra note 7.

31 Stephens v. Stephens, supra note 7.
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insofar as it was caused by the efforts of either spouse or 

both spouses.32

Applying the active appreciation rule in Stephens, we reasoned that the district court should not have excluded the 

business interest from the marital estate. We explained that 

the growth in the value of the husband’s business interest 

depended on the extent of growth of the business that was 

caused by his active efforts. We discussed the husband’s active 

efforts as someone in first-tier management. The husband was 

a cofounder of the business and worked full time for 25 years, 

contributing significantly to the business’ growth.

We then discussed in Stephens the direct and indirect efforts 

of a spouse. We rejected the argument that “‘“ground work”’” 

for growth was laid before the marriage and would preclude 

appreciation of the company’s value during the marriage as marital.33 We illustrated a spouse’s indirect efforts as active efforts 

when his or her mere presence was identified with the business 

entity and tied to its goodwill.

Regarding direct efforts, we cited to Turner’s treatise on 

equitable distribution. “‘[E]ven favorable market conditions 

are not passive inasmuch as they create merely the opportunity 

that the skilled, owning spouse detects and seizes.’”34 In the 

context of Stephens, the quotation merely explained how a business owner could actively exploit favorable market conditions. 

We reject the interpretation that favorable market conditions 

necessarily result in active appreciation. We reasoned that the 

husband did not carry his burden to demonstrate that any portion of his business’ appreciation was due to passive efforts or 

“the active efforts of third parties who would qualify as firsttier management or similar.”35 In light of the burden of proof, 

the record presented evidence that the husband’s active efforts 

32 Id.

33 Id. at 208, 899 N.W.2d at 596.

34 3 Turner, supra note 22.

35 Stephens v. Stephens, supra note 7, 297 Neb. at 208, 899 N.W.2d at 596.
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were responsible for at least 34 percent of the business’ growth 

during the marriage.

In Baker v. Baker,

36 the Minnesota Supreme Court discussed active appreciation on the nonmarital portion of the 

husband’s retirement account. The husband had 11 separate 

accounts, which were moved between several financial institutions, including Merrill Lynch. The Merrill Lynch manager of 

the husband’s account testified that he and his money managers had discretion to invest the money from the accounts. The 

Merrill Lynch manager had power to direct investment and 

transfer funds between investment institutions. The husband 

directed only one trade to be made in 13 years at Merrill 

Lynch. He never made a withdrawal or received distributions from the accounts during the marriage. All investment 

returns were reinvested. The Minnesota Court of Appeals reasoned that because the husband had control over the accounts 

by transferring them between institutions, he actively managed the accounts and defeated the claim that the investment 

was passive.

In disagreeing with the lower court’s analysis, the Minnesota 

Supreme Court in Baker made five points. Its precedent on 

active appreciation focused on the spouse’s efforts and not the 

spouse’s control over an asset. Its case law regarding active 

appreciation dealt primarily with appreciation in the value of 

a small business or real estate. In evaluating an investment 

portfolio, the court looked to the character of the underlying investments. And it rejected the lower court’s reliance 

on agency principles to attribute Merrill Lynch’s efforts to 

the husband. Instead, the Minnesota Supreme Court reasoned 

that by utilizing professional investment institutions, the husband avoided the need to devote significant marital efforts 

to managing his retirement funds. Thus, the court concluded, 

the husband’s efforts were insufficient to render the appreciation active.

36 Baker v. Baker, 753 N.W.2d 644 (Minn. 2008).
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In Chapman v. Chapman,

37 the Florida District Court of 

Appeal discussed active appreciation on bonds in a retirement 

account. The issue before the court was whether the trial court 

erred in holding that a portion of increase of nonmarital securities resulted from marital labor. The husband’s efforts were limited to replacing investment grade bonds, as they became due, 

with similar bonds. The wife’s expert opined that the husband’s 

active trading of stocks and bonds enabled him to achieve a 

greater annual return than the benchmark for stocks and bonds. 

The wife presented evidence of “the benchmark [of return] for 

stocks [through] the Standard & Poors 500 Stock Index” and 

“[t]he benchmark for . . . bonds [through] the Lehman Brothers 

Aggregate Bond Index . . . .”38 The appellate court affirmed the 

trial court’s treatment of the portion of the appreciation which 

could have been achieved through passive investment as nonmarital and the additional appreciation as marital.

In O’Brien v. O’Brien,

39 the North Carolina Court of Appeals 

discussed appreciation in an investment account funded with 

inherited moneys. After setting forth the evidence which persuaded the court that the original nonmarital investments 

were traced to the existing account, the court then discussed 

whether the appreciation should be considered marital. It 

adopted a multifactorial approach from the Missouri Court of 

Appeals to determine whether either spouse performed substantial services during the marriage to increase the value of 

the investment.

In making the determination of whether the services of 

a spouse are substantial, the trial court should consider, 

among other relevant facts and circumstances of the particular case, the following factors: (1) the nature of the 

investment; (2) the extent to which the investment decisions are made only by the party or parties, made by 

37 Chapman v. Chapman, 866 So. 2d 118 (Fla. App. 2004).

38 Id. at 118-19.

39 O’Brien v. O’Brien, 131 N.C. App. 411, 508 S.E.2d 300 (1998).
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the party or parties in consultation with their investment 

broker, or solely made by the investment broker; (3) the 

frequency of contact between the investment broker and 

the parties; (4) whether the parties routinely made investment decisions in accordance with the recommendation 

of the investment broker, and the frequency with which 

the spouses made investment decisions contrary to the 

advice of the investment broker; (5) whether the spouses 

conducted their own research and regularly monitored the 

investments in their accounts, or whether they primarily 

relied on information supplied by the investment broker; 

and (6) whether the decisions or other activities, if any, 

made solely by the parties directly contributed to the 

increased value of the investment account.40

The North Carolina appellate court agreed with the trial court 

that because the spouses jointly met with the broker and routinely chose between the broker’s alternative recommendations, 

neither spouse’s services were substantial.

We adhere to the active appreciation rule articulated in 

Stephens. Tim had the burden to prove that all or some portion of the growth in value was not attributable to his or Ann’s 

active efforts. We reject his assertion that this imposed an 

“impossible” burden. And we agree that in an appropriate case 

and depending upon the particular circumstances, the factors 

articulated by the North Carolina appellate court may be useful 

in assessing whether growth was attributable to the efforts of 

either spouse.

(ii) Application

[14] Upon a de novo review of the record for an abuse of the 

district court’s discretion, we conclude that Tim failed to carry 

his burden. And here, witness credibility becomes important. 

When evidence is in conflict, the appellate court considers 

and may give weight to the fact that the trial court heard and 

40 Id. at 421, 508 S.E.2d at 307.
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observed the witnesses and accepted one version of the facts 

rather than another.41

We concede that there was no evidence of any active efforts 

on Ann’s part; thus, we look solely to Tim’s efforts. At oral 

argument, neither party disputed that the growth amounted 

to something in the neighborhood of 15 percent compounded 

annually. In other words, both acknowledged what appeared to 

be a highly successful rate of growth.

Tim presented no evidence to establish that this growth was 

attributable solely to passive market forces or separate contributions, even in part. Tim did not present evidence of some 

recognized benchmark of general market growth, which might 

have been very persuasive evidence of the effect of market 

forces.42 Nor did he present evidence that the annual rate of 

return, or some portion of it, was guaranteed or statutorily prescribed.43 He failed to show that he relied on the recommendations or management of his account by a third party.44 To the 

contrary, in light of the district court’s findings, the evidence 

showed that through Tim’s direct efforts of employing his modern portfolio theory, he achieved a highly successful return on 

his investment. He did not distinguish these efforts from similar efforts he provided to his clients. Without evidence showing 

that his direct or indirect efforts did not cause the appreciation, 

we agree with the district court that there was a causal connection between Tim’s efforts in employing his modern portfolio 

theory and the appreciation on the account.

Had the evidence provided a basis for distinguishing the 

results attributable to his efforts from the results that would 

have occurred merely because of market forces, the district 

41 Burgardt v. Burgardt, supra note 2.

42 See Chapman v. Chapman, supra note 37.

43 See, Coufal v. Coufal, supra note 23; Stanosheck v. Jeanette, supra 

note 19.

44 See Stephens v. Stephens, supra note 7. See, also, Baker v. Baker, supra 

note 36; O’Brien v. O’Brien, supra note 39.
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court might have abused its discretion in failing to treat some 

or all of the appreciation as nonmarital. But, here, Tim had 

the burden of proof and he simply failed to carry that burden. 

Accordingly, the district court did not err in classifying the 

appreciation on the 6300 account as marital.

(b) Schwab Account

Tim argues that the entirety of the Schwab account is 

nonmarital, because the growth was readily identifiable and 

traceable to the inherited and gifted assets. Tim contends that 

the record showed that he never had the intent to make the 

gifted or inherited assets marital property, because he opened 

the account solely in his name and the growth in the account 

was not due to his active efforts. He contends that the district court placed extensive emphasis on its interpretation of 

Tim’s intent and erroneously considered Ann’s intent regarding the account.

As stated earlier in this opinion, the marital estate does not 

include property that a spouse acquired before the marriage, 

or by gift or inheritance.45 The burden of proof rests with the 

party claiming that property is nonmarital.46

The record shows that Tim inherited shares of ConAgra 

stock from his late mother and received gifts of additional 

shares of ConAgra stock from his father and his uncle. All 

stock was placed in the Schwab account, along with other 

marital property. Although the vast majority of the ConAgra 

stock was converted into other assets, at the valuation date, 

6,500 shares of ConAgra stock remained.

[15,16] Setting aside nonmarital property is simple if the 

spouse possesses the original asset, but can be problematic if 

the original asset no longer exists.47 Separate property becomes 

marital property by commingling if it is inextricably mixed 

with marital property or with the separate property of the other 

45 Stephens v. Stephens, supra note 7.

46 Rohde v. Rohde, 303 Neb. 85, 927 N.W.2d 37 (2019).

47 Brozek v. Brozek, supra note 10.
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spouse.48 If the separate property remains segregated or is 

traceable into its product, commingling does not occur.49

(i) Remaining ConAgra Stock

Tim showed that the ConAgra stock left in the Schwab 

account remained segregated and traceable. The evidence is 

undisputed that all of the shares of ConAgra stock that came 

into the Schwab account were Tim’s by inheritance or gift. 

Although most of the stock was sold, there were 6,500 shares 

remaining at the time of trial. We conclude that Tim met his 

burden of tracing the remaining shares of ConAgra stock and 

proving it to be nonmarital. Therefore, the district court erred 

in classifying the 6,500 shares of ConAgra stock as marital property. We modify the court’s decree to determine that 

the remaining 6,500 shares of ConAgra stock in the Schwab 

account were Tim’s nonmarital property.

(ii) Other Holdings in 

Schwab Account

Marital and nonmarital funds were withdrawn and deposited 

into the Schwab account. In order to purchase the parties’ marital home, Tim wired funds directly from the Schwab account 

to the real estate company. The parties acquired several large 

sums of money from a settlement award, the mortgage on the 

marital home, and the proceeds from the sale of the former 

marital home. Some of the moneys were placed in the joint 

account, some were used for home improvements, and the 

remaining $240,000 was placed in the Schwab account.

Additionally, Tim diversified the account with both marital 

and nonmarital funds. The record shows that Tim sold thousands of ConAgra shares and purchased ETF’s. The record 

further shows that as Tim moved marital funds into the Schwab 

account, he diversified those moneys into the same ETF’s. He 

then sold some of the ETF’s and purchased other ETF’s.

48 Id.

49 Id.
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Except for the 6,500 shares of remaining ConAgra stock, 

the evidence presented did not show that the gifted stock was 

segregated or traceable into its products. Several gifted shares 

and marital moneys were used to purchase ETF’s. ETF’s were 

then sold to purchase different ETF’s. Clearly, the nonmarital 

property became commingled when it was inextricably mixed 

with the marital property through diversification. It was Tim’s 

burden to show what portion of the parties’ assets were attributable as nonmarital assets. Tim did not meet his burden. We 

conclude that the district court did not abuse its discretion 

when classifying the Schwab account, other than the 6,500 

shares of ConAgra stock, as marital property.

The district court’s decree valued the Schwab account at 

$1,432,796 and divided it equally between the parties, i.e., 

$716,398 to each party. Having modified the decree to classify the remaining 6,500 shares of ConAgra stock, which were 

valued at $232,440, as Tim’s nonmarital property, we further 

modify the decree to divide the remaining value of the Schwab 

account, totaling $1,200,356, equally between the parties, i.e., 

$600,178 to each party. Thus, of the value of the Schwab 

account totaling $1,432,796, Tim shall receive $832,618 and 

Ann shall receive $600,178.

2. Valuation Date

[17] The next assignment of error falls within the second 

step of the three-step framework for division of property. The 

second step in the equitable division of property is to value the 

marital assets and marital liabilities of the parties.50

On cross-appeal, Ann argues that the district court erred in 

valuing the 6300 account and the Schwab account on June 30, 

2017, instead of July 31, 2018. She contends that Tim received 

a windfall from the growth in the accounts between the two 

valuation dates. She contends that the district court considered the growth of the accounts when it ordered Tim to pay 

the tax liability. Ann does not explain why the June 30, 2017, 

50 See Dooling v. Dooling, supra note 5.
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valuation date was not reasonably related to the property. She 

requests that if we change the district court’s findings in any 

way, we should consider this growth.

[18] Ann’s argument lacks merit. As a general principle, the 

date upon which a marital estate is valued should be rationally 

related to the property composing the marital estate.51 She has 

failed to show how the June 30, 2017, valuation date does not 

reasonably relate to the property. And she has failed to identify 

why the July 31, 2018, valuation date reasonably relates to the 

property. The district court found that the June 30, 2017, valuation date was “best supported by the evidence and represents 

the separation of the parties[’] working finances.” Upon a de 

novo review of the record, we cannot say that the district court 

abused its discretion in determining the valuation date.

3. Division

[19,20] The remaining assignments of error fall within the 

third step in the process of dividing property. The third step 

in the equitable division of property is to calculate and divide 

the net marital estate between the parties in accordance with 

the principles contained in § 42-365.52 The ultimate test in 

determining the appropriateness of the division of property 

is fairness and reasonableness as determined by the facts of 

each case.53

(a) 2017 Tax Liability

Tim argues that the district court erred in allocating the parties’ 2017 tax liability. He relies on Meints v. Meints54 for the 

proposition that income tax liability incurred during the marriage is one of the accepted costs of producing marital income, 

and thus, income tax liability should generally be treated as 

a marital debt. He contends that Meints effectively holds that 

51 Rohde v. Rohde, supra note 46.

52 See Dooling v. Dooling, supra note 5.

53 Id.

54 Meints v. Meints, 258 Neb. 1017, 608 N.W.2d 564 (2000).
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one spouse cannot be solely responsible for the parties’ tax 

liability. He contends that the district court did not equitably 

divide the marital debt. We disagree.

In Meints, during the course of the marriage, the husband 

accrued a federal income tax liability and statutory penalties 

for late filings.55 The district court found that the husband was 

responsible for the accrued income tax liability. We reasoned 

that although income tax liability was a marital debt, when an 

innocent spouse has filed a separate tax return and paid his or 

her taxes in a timely manner, the innocent spouse should not 

be forced to share in the statutory penalties. We concluded that 

the district court erred in attributing all past due tax liability to 

the husband and that the tax liability should have been equitably divided, while the statutory penalties should remain as 

nonmarital debt of the husband.

While the Meints rule generally applies, the specific facts 

of this case support a different outcome. The record supports 

that the district court gave proper consideration to fairness 

and reasonableness when dividing the 2017 tax liability. The 

district court determined that because “the operative date of 

the appropriate determination of the value of the disputed 

marital assets is June 30, 2017 for both [the 6300 account 

and the Schwab account], [Tim] is ordered to pay the 2017 

tax liability.” The record showed that if Ann’s federal and 

state income tax withholdings were insufficient to cover the 

entirety of the parties’ tax liability, Tim would pay the tax 

liability from the Schwab account. It showed that Ann earned 

a salary of over $200,000 a year and that she had significant 

federal and state income withholdings. Additionally, there was 

evidence of significant growth in both the 6300 account and 

the Schwab account between the argued for valuation dates, 

which would effectively be awarded to Tim. Based upon the 

facts of the case, it appears that the district court considered 

fairness and reasonableness as to the parties’ circumstances 

55 Id.
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when distributing the tax liability. We cannot say that the district court abused its discretion when ordering Tim to pay the 

2017 tax liability.

(b) Equalization

Based upon all his arguments, Tim argues that it was inequitable for the district court to order an equalization payment. 

He contends that if we were to remove the appreciation on the 

6300 account and the entirety of the Schwab account from the 

marital estate, 56 percent of the estate would accrue to Ann and 

only 44 percent to him. The circumstances, he suggests, do not 

justify a disparate division of the marital estate.

But we have rejected the conditions on which his argument 

is premised. We do not remove the appreciation on the 6300 

account and the entirety of the Schwab account from the marital estate. Thus, his argument necessarily fails. And because we 

have already accounted for the removal of the 6,500 ConAgra 

shares and the equal division of the remainder of the value of 

the Schwab account above, no further modification is necessary here.

VI. CONCLUSION

After reviewing the record de novo, we conclude that the 

district court did abuse its discretion when it found that the 

remaining 6,500 shares of ConAgra stock in the Schwab 

account were marital property. We otherwise conclude that 

the district court did not abuse its discretion in classifying, 

valuing, and dividing the remaining marital estate. We modify 

the decree to classify the remaining 6,500 shares of ConAgra 

stock, which were valued at $232,440, as Tim’s nonmarital 

property, and to divide the remaining value of the Schwab 

account, totaling $1,200,356, equally between the parties, i.e., 

$600,178 to each party. As so modified, we affirm the decree 

of the district court.

Affirmed as modified.

Heavican, C.J., participating on briefs.