Marriage of Motiska & Ford

Summary

Motiska sold his premarital sole proprietorship, Neon Palm, to Buxup, a corporation found to be community property, for $1. He had chosen the price himself, partly to avoid business transfer taxes. The trial court had already found he failed to trace Buxup's funding to separate funds because his records were inadequate. The court of appeal held that a sale is not a contribution under section 2640, the $1 price fixed the value, and there was no basis to treat it as a de facto gift absent undue influence or a sham. Affirmed.

What it means for the financial analysis

If your client sold an asset to the community, the sale price controls, and there is nothing to trace or value as a contribution unless the sale is shown to be a sham or the product of undue influence. Reimbursement work should start by finding out whether the transfer was a documented sale or a gift. Also keep records showing the funding source at formation, because this spouse lost the community presumption on that point before the 2640 issue was ever reached.

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