Community Payments on Purchase Price of Separate Property

Question 1

Payments On Separate Property With CP

Answer 1

To determine the character of the property, you apply the Moore formula. The community interest is proportional to the amount by which the community payments reduce the debt principal—and only the debt principal.

Value at divorce x (Principal paid down (not interest)/total purchase price) = CP interest

Question 2

Improvements Made on SP Using CP

Answer 2

When a spouse makes community payments to improve their own separate property, the community is entitled to the greater of the reimbursement amount or the amount by which the improvement increases the value of the separate asset.

When a spouse makes community payments to improve the other spouse’s separate property, the general rule is that there is a presumption that the community made a gift to the other spouse’s separate property, and thus there is neither a right to reimbursement nor a community interest in the improved separate property, in the absence of evidence to overcome the presumption.