1. You have a total of two (2) hours and fifteen (15) minutes to complete the
exam.
2. This exam is CLOSED BOOK.
3. This exam consists of two (2) essay questions worth 50 points each and one short-answer bonus question worth 5 points.
4. All events take place in California unless otherwise specified.
5. Your answer should demonstrate your understanding of California community property law as applied to the facts presented.
6. Please answer these questions in the blue books provided to you. Write only on the right hand side of the page (skipping a page each time) and double-space your work. Please write legibly.
7. Write your exam number on your exam envelope. Put student exam # at the top of this page, each page of questions, and each blue book. Do not use your name, student ID number, Social Security Number, or in any other way identify yourself on any exam materials.
8. At the conclusion of the exam, return all exam materials to the exam envelope and submit it to the proctor. Do not seal the envelope. Students who do not return all exam materials at the end of the exam may not be graded.
GOOD LUCK!
Community Property Final Exam – Question One – 50 Points
When Horatio first met Brittany, he was cohabitating with Al. Horatio and Al never registered with the State of California as domestic partners, since Al believed incorrectly that they were a common law married couple under the laws of Hawaii. Horatio and Al owned a house in San Francisco together with title taken as, “Horatio and Al, as equal tenants in common.”
In 1992, Horatio moved out of the house and legally married Brittany. Later that year, Horatio wrote a tell-all book about life with a porn star based upon his diaries memorializing his life with Al. Al sued Horatio for invasion of privacy and infliction of emotional distress. Al obtains a judgment against Horatio for $25,000.
Later that year, Horatio and Brittany purchased a house in Cole Valley for $500,000. Horatio used $100,000 from his book royalties towards the down payment. Brittany used $50,000 from her trust fund to remodel the house as follows: $10,000 for exterior painting, $25,000 for a new kitchen, and $15,000 for new bathrooms. Title to the property was taken as, “Horatio and Brittany, as joint tenants with right of survivorship.” Horatio told his mother Marian, that Marian would inherit Horatio’s one-half interest in the house. Brittany was present during this conversation and said nothing.
Horatio and Brittany opened a joint bank account together into which they deposited their earnings, royalties, and trust fund distributions. In 1993, BigStar Pictures offered to buy the movie rights to Horatio’s book for $1 million. Horatio began an intimate relationship with Cary, one of the actors for the movie and purchased a house in Laguna Beach with Cary, using the monies from the sale of the movie rights. Title to the Laguna Beach house was in Horatio and Cary’s names as equal tenants in common. In 1994, Horatio “marries” Cary. Horatio tells Cary, “Everything I own belongs to both of us.”
In 1996, Horatio is severely injured when one of the movie props falls on his head during filming. Horatio sues BigStar Pictures and ultimately negotiates a settlement of $500,000. In 1997, Horatio dies intestate from his injuries.
What are the respective rights of Al, Brittany, Cary, and Marian in the following properties:
Community Property Final Exam – Question Two – 50 Points
In 1972, Harry and Wanda married in Ohio after graduating from business school.
As a wedding and graduation gift, Harry’s mother gave them a duplex condominium
but title was in Harry’s name only. After they moved to California in
1974, Harry’s mother continued to live in the duplex condominium rent-free.
In 1974, Harry purchased a small airplane for his wife Wanda for her birthday. Title to the plane was in Wanda’s name only but only Harry was a licensed pilot. Harry paid for the insurance on the airplane with monies distributed from his trust fund that were deposited into a joint bank account. In 1976, the airplane was destroyed during a fire in the hangar and Harry was paid $200,000 from the insurance proceeds.
Harry used the insurance proceeds to begin a business called JetExpress. The purpose of the business was to sell fractional ownership interests in luxury private planes. The business was quite successful and Harry opened a corporate office in San Diego. Harry paid himself an annual salary of $250,000 as the company’s Chief Executive Officer. In 1980, Harry and Wanda purchased a house in Sacramento for $250,000 with title taken as: “Harry a 60 percent tenant in common, and Wanda a 40 percent tenant in common.” Harry used the profits from JetExpress to pay for the house in cash. Harry told Wanda that if either of them died, that the survivor would automatically inherit the property.
After Harry met Polly, he began spending two weeks of each month in San Diego with Polly. Harry and Polly flew to Mexico and got “married”. In 1982, Harry purchased a house in San Diego with Polly and title was taken as, “Harry and Polly, as joint tenants with right of survivorship.” Harry paid $500,000 cash for the house, using profits from JetExpress. That same year, Harry purchased a $1 million life insurance policy naming his sister as the sole beneficiary. Harry used his salary from JetExpress to pay for the premiums on the policy.
While in Las Vegas on vacation with friends, Wanda won $30,000 on the $5 slot machine. She used the money to buy stock in Texaco Oil Company. The stock was in Wanda’s name only.
In 1990, Wanda files for dissolution. During the dissolution, Harry discovers that he has developed terminal brain cancer. How should the court classify the following property:
Community Property Final Exam – Bonus Question – 5 Points
With respect to the taxable consequences for a surviving spouse, what is the
most advantageous form of title to real property for a married couple to hold?
Explain your answer.
END OF EXAM