Opinion ID: 1381445
Heading Depth: 1
Heading Rank: 2

Heading: meaning of marital asset

Text: In this case the tax effect turns on whether the husband's corporate stock, which was acquired after the marriage and which has always been held in his name, is a marital asset under ORS 107.105(1)(e). Although the answer is not clearly apparent from the face of the statute, the legislative history suggests that such property is a marital asset. The term marital assets is not defined in chapter 107 or elsewhere. It appears in the second sentence of ORS 107.105(1)(e) in connection with the requirement that the court consider the contribution of a spouse as a homemaker. The legislative history concerning the precise meaning of the term marital assets is not as clear as it might be, particularly as it concerns property received by gift or inheritance, but the meaning is clear insofar as the issues in this case are concerned. As stated above, ORS 107.105(1)(e) was amended in 1977, HB 2471, Or. Laws 1977, ch. 847, § 2. The amendments resulted, at least in part, from a resolution of the Oregon Women's Political Caucus Convention recommending that the role of the homemaker be recognized as an economically valuable contribution to the acquisition of assets during marriage. One intent underlying the 1977 amendments is the recognition that although money for the acquisition of property during the marriage often results from the labors of the employed spouse, the efforts of the nonwage-earning homemaker are also an important contribution toward the acquisition of property during the marriage. The end result of the 1977 amendments was the addition of two sentences following the first sentence of ORS 107.105(1)(e). The first of the two sentences referred to required the court to view the contribution of a spouse as a homemaker in the contribution of marital assets. The second added sentence provided for a rebuttable presumption that both spouses have contributed equally to the acquisition of property during their marriage. The first sentence of the amendment uses the phrase the contribution of marital assets and the second sentence of the amendment speaks of the acquisition of property during their marriage. Although there may be some question whether property received during the marriage by a spouse by way of gift or inheritance is intended to be included within either phrase (a question which we need not and do not decide in this case), [6] there is no doubt that both phrases intended to include most other property acquired by one or both spouses during the marriage. The amendment recognized the fact that nonearning spouses who maintain the home, do the cooking and cleaning and raise the children, also contribute to the acquisition of property in a tangible, substantial way. The result was the creation of the rebuttable presumption of an equal contribution. Thus, when property is acquired with monies earned by a working spouse, whether title is taken in the husband's name, the wife's name, or in both names, the acquisition of the property would be treated, at least presumptively, as having resulted from the equal efforts of the spouses. As respects property so acquired, the legislative history indicates that the meaning of the term marital assets, contained in the second sentence of ORS 107.105(1)(e), and the meaning of the term property, contained in the third sentence, are identical. For tax or other reasons, marital partners may choose to acquire property and take title in the name of either or both, as joint tenants, tenants in common, tenants by the entirety, with or without rights of survivorship, or otherwise. The homemaker contribution sentence of ORS 107.105(1)(e) was intended to recognize the participation of the nonworking homemaker spouse, whose efforts contribute to the acquisition of property in numerous tangible and intangible ways, and to minimize the effect of the state of title of an asset acquired after marriage, so far as the division of property is concerned. The term marital assets, as used in the second sentence of ORS 107.105(1)(e), was intended to include property such as the corporate stock involved in this case, where the stock was acquired during the marriage other than by gift or inheritance or other than in exchange for property which was received by gift or inheritance. [7] Our role in this case is an unusual one. We are not sitting as a tax court. The ultimate federal tax consequences of the court-ordered decree in this case would be determinable in a federal tribunal. But federal courts, under Davis, must    look to the state law controlling the disposition of the property to determine the exact nature of that disposition for [federal] tax characteristic purposes. Collins v. C.I.R., 388 F.2d 353, 355 (10th Cir.1968). Pursuant to ORS 107.105(1)(e) and 107.105(2), we consider evidence of the probable federal tax consequences of the decree. We first examine the four Collins cases (referred to herein as Collins I, II, III and IV) to ascertain the probable federal tax consequences of the trial court decree. In Collins I ( Collins v. C.I.R., 388 F.2d 353 (10th Cir.1968)), an Oklahoma husband and wife entered into a divorce property settlement agreement pursuant to which the husband transferred his separately-owned corporate stock to the wife. At the time of the transfer, the value of the stock was greater than its cost. Husband reported no gain resulting from the stock transfer. The Tax Court of the United States held that the transfer of the stock was, for federal income tax purposes, a disposition of property and a taxable transaction, 26 U.S.C. §§ 1001(c), 1002, [8] and a deficiency was assessed against the husband. The husband appealed, claiming that under 12 O.S. 1961, § 1278, [9] the transfer of the stock was a division of jointly owned property and therefore no tax was due. The Court of Appeals affirmed the Tax Court, holding that because the traditional elements of co-ownership were lacking  the wife had no rights to transfer, control or bequeath the husband's stock  capital gain was realized when the transfer was made. 388 F.2d at 355-356. Collins I was decided in January, 1968. In October, 1968, the Supreme Court of Oklahoma decided Collins II ( Collins v. Oklahoma Tax Commission, 446 P.2d 290 (Okl. 1968)), which involved virtually the same question, albeit under Oklahoma state tax law. The Oklahoma Supreme Court held that the wife's interest in the corporate stock under O.S. 1961, § 1278, was a species of common ownership. The nature of the wife's interest is similar in conception to community property of community property states, and is regarded as held by a species of common ownership. The fact record title is in the husband by reason of conveyance or contract does not destroy such joint ownership, since the plain language of the statute precludes such requirement. Thompson v. Thompson, 70 Okl. 207, 173 P. 1037. The purpose to be accomplished by equitable division is a complete severance of common title, so the portion awarded each is free from claims or domination of the other. Kupka v. Kupka, 190 Okl. 392, 124 P.2d 389. The nature of the estate subject to division is not a matter of judicial discretion. Williams v. Williams, Okl., 428 P.2d 218. Although one spouse brings separate property to the marriage, enchanced value resulting from joint efforts, skill or funds of both working together constitutes jointly acquired property subject to division.   . 446 P.2d at 295. Accordingly, the court held that the transfer resulted in no taxable gain to the husband. Collins III. The husband, after losing in the Tenth Circuit in Collins I, filed a petition for a writ of certiorari in the Supreme Court. After the Supreme Court was advised of the Oklahoma Supreme Court decision in Collins II, it summarily vacated the judgment of the Tenth Circuit and remanded for further consideration in light of the opinion of the Supreme Court of Oklahoma in Collins v. Oklahoma Tax Comm'n, 446 P.2d 290. Collins v. Commissioner, 393 U.S. 215, 89 S.Ct. 388, 21 L.Ed.2d 355 (1968). On remand, in Collins IV, Collins v. C.I.R., 412 F.2d 211 (10th Cir.1969), the Court of Appeals held that [h]aving the benefit of an interpretation of state law on this very point, we must conclude that the stock transfer operated merely to finalize the extent of the wife's vested interest in property she and her husband held under `a species of common ownership.' 412 F.2d at 212. The opinion concluded: In sum, we look to the law of the state, as the Supreme Court did in Davis and as this court did in Pulliam v. C.I.R., 329 F.2d 97 (1964), and conclude that the transfer of stock was a nontaxable division of property between co-owners. 412 F.2d at 212 The legislative history of ORS 107.105(1)(e) reflects legislative awareness of the Collins cases and similar cases from other jurisdictions, and a desire to achieve the same result. The words used in the amending language  a species of co-ownership  is virtually identical to the language in the Collins II and Collins IV opinions. Our decision, based upon the evidence in this case, the applicable federal statutes, the four Collins cases discussed above, other caselaw discussed in the Court of Appeals opinion, see 52 Or. App. at 568-571, 629 P.2d 397, and the 1981 amendments to ORS 107.105(1)(e) is that whatever the nature of the spouse's interest in a separately held marital asset prior to the filing of a petition for dissolution, the statute compels this conclusion:    Subsequent to the filing of a petition for    dissolution    [1] the rights of the parties in the marital assets shall be considered a species of co-ownership, and [2] a transfer of marital assets pursuant to a decree of dissolution    shall be considered a partitioning of jointly owned property. ORS 107.105(1)(e). The statute is clear and its mandate binds this court. We must hold that upon the filing of the complaint, the interest of the parties is as set forth in the statute  there exists a species of co-ownership. [10] The precise nature of the species of co-ownership is not defined in the statute. Whatever its extent, we believe that the co-ownership interests created by the statute are such that an appropriate federal tax tribunal would hold that the court-ordered disposition, for federal tax purposes, is in the nature of a nontaxable division of property jointly acquired during the marriage, and that the transferring spouse would not be liable for the payment of taxable gain realized at the time of transfer. [11]