Court Opinion

ID: 9905466
Source: CourtListenerOpinion
Date Created: 2023-11-29 16:11:54.732851+00
Date Added: 2024-06-11T09:23:35.712854
License: Public Domain

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 prop-
erty 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 object-
ing 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 vio-
lated 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 chal-
lenges three aspects of the trial court’s property division.
First, we grant limited de novo review of the characteriza-
tion 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 prop-
erty. 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 prop-
erties 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 equaliz-
ing $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 par-
ties 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 dis-
pute, 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, unre-
solved 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 opin-
ion, 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 consis-
tent 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 rele-
vant 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 res-
idence 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 dissolu-
tion 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 docu-
ment 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 withdraw-
als 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 agree-
     ment of the parties, effective October 1, 2017, [w]ife shall
     pay $474.50 for tuition and childcare directly to the [pri-
     vate 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 inher-
itance. He used part of that money to pay approximately
$20,000 toward the child’s private school expenses. He tes-
tified 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 gener-
ally 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 recap-
ture 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 par-
ents 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 sep-
arate property.”
        The court also concluded that the joint debts would
be equalized, which included two accounts with stipu-
lated 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 pre-
    sumptions, 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 equaliza-
    tion. 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 hus-
band’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 evi-
dence 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 appropri-
ate 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 regard-
ing 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 prop-
   erty 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 cred-
   ible 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 distri-
bution, concluding that husband had joint debts to be equal-
ized in the amount of $46,469.00, and wife had joint debts
to be equalized in the amount of $9,206.06. The court con-
cluded 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 pre-
   sumptions, 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 opin-
ion, and in response to the court’s invitation to do so, both
wife and husband filed objections and a request for correc-
tions 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 con-
formed with the revised opinion.
          Wife appeals from that final judgment of dissolu-
tion, 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 prop-
erty 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 equi-
table considerations that the Supreme Court has directed
trial courts to consider “to promote consistency and pre-
dictability 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 under-
standing 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 reconsid-
eration 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 act-
ing 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 judg-
ment. 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 pre-
scribes 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 assign-
ment 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 par-
ents 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 dis-
cretion “only in exceptional cases.” ORAP 5.40(8)(c). Factors
we consider as relevant to our decision, include, among oth-
ers, “whether the trial court made express ‘demeanor-based
credibility findings,’ whether ‘the trial court’s decision com-
ports with its express factual findings or with uncontro-
verted evidence in the record,’ and whether the ‘finding[s]
that the appellant requests’ this court to make are ‘import-
ant to the trial court’s ruling’ at issue on appeal.” Pulley
v. Herndon, 324 Or App 568, 573, 527 P3d 19 (2023) (quot-
ing 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 quota-
tion 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 substan-
tial 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 demean-
or-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 determi-
nation 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 deter-
mination.’ ” 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 determi-
nation was based on the written record and not any observ-
able 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 prop-
erty. 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 prop-
erty 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 rea-
son 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 impor-
tance in this case. The trial court’s change in its finding in
that regard dramatically changed the balance of the prop-
erty 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 con-
clude 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 presump-
tion is that wife will be awarded the property without equal-
ization. Brush and Brush, 319 Or App 1, 8, 509 P3d 124
(2022).
          The remaining question is whether, under the equi-
table 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 con-
sidered 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 par-
ties, 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 equi-
table 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 consider-
ation would render that legislative directive largely meaningless. It would be a
different matter if the existence of separately held gifts of unequal value impli-
cated one of the social or financial objectives identified in Kunze, such as eco-
nomic 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 prop-
erty was not made part of the marital finances and that
wife’s parents lived on the property and exercised sole con-
trol 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 recap-
ture 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 evi-
dence that the sale of the real property is pending or reason-
ably 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 con-
sequences 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 contem-
plated 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 proper-
ties 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 retire-
ment account, he will be liable for depreciation recapture on
the properties at some point and that the amount is calcu-
lable and thus can be taken into consideration even with-
out 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 reason-
able 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 vir-
tual certainty that husband will not receive his retirement
account free of income tax liability[.]”). Here, LaJoy’s testi-
mony established no such certainty that husband will have
to pay the depreciation recapture tax on the rental proper-
ties. Rather, his testimony established a certainty that hus-
band 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 evi-
dence 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 evi-
dence 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 stipu-
lation 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 consid-
eration 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 par-
ties, the debt should generally remain that party’s respon-
sibility.” 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 erro-
neously 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 deci-
sion only if it misapplied the statutory and equitable consid-
erations 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 inheri-
tance. 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 stipu-
lation 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 contem-
plated 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 stipu-
lated 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 judg-
ment 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 deter-
mining 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 equal-
izing 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 con-
clude 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 hus-
band 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; other-
wise affirmed.