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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Fortson v. Fortson (2/17/2006) sp-5987

Fortson v. Fortson (2/17/2006) sp-5987, 131 P3d 451

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.

                                                            
            THE SUPREME COURT OF THE STATE OF ALASKA

BLANTON FORTSON, )
) Supreme Court No. S- 11332/11341
Appellant/Cross-Appellee, )
) Superior Court No.
v. ) 3AN-02-9193 CI
)
JAYNE FORTSON, ) O P I N I O N
)
Appellee/Cross-Appellant. ) [No. 5987 - February 17, 2006]
)
          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Sharon Gleason, Judge.

          Appearances:   Susan  Orlansky,   Feldman   &
          Orlansky,   Anchorage,  for  Appellant/Cross-
          Appellee.  Bruce A. Bookman, Bookman &  Helm,
          LLP, Anchorage, for Appellee/Cross-Appellant.

          Before:  Bryner, Chief Justice, Matthews, and
          Carpeneti,  Justices.  [Eastaugh  and   Fabe,
          Justices, not participating.]

          CARPENETI, Justice.

I.   INTRODUCTION
          Blanton and Jayne Fortson divorced after eighteen years
of marriage.  In this property division case, both parties appeal
the  superior  courts  decision to award  sixty  percent  of  the
marital  estate  to Jayne and forty percent to Blanton.   Because
the  court  did not abuse its discretion in dividing the  marital
estate, we affirm the sixty-forty division.  The parties raise an
additional  seven  issues on appeal.  For  the  reasons  set  out
below,  we  affirm the courts requirement of a  cash  payment  to
Blanton,  its treatment of capital gains taxes and selling  costs
for  marital  land in Hawaii, its treatment of loans from  Jaynes
parents, its valuation of the parties boat, and its treatment  of
a   capital   loss   carry  forward.   We  reverse   the   courts
determination that excess profits earned by Jaynes medical clinic
during  the parties separation are her separate property and  its
holding  that  gifts given to one party by the other  during  the
marriage are invariably marital property.  Finally, we decline to
consider  whether  the superior court erred in its  treatment  of
alleged  gifts from Blanton to Jayne because Jayne has failed  to
show that, if there was error, it was prejudicial.
II.  FACTS AND PROCEEDINGS
          Blanton and Jayne Fortson married in 1985 and separated
in October 2001 after sixteen years of marriage; Blanton filed  a
complaint  for  divorce  that month.   The  couple  attempted  to
reconcile following the separation, and the initial complaint for
divorce  was withdrawn, but in July 2002 Jayne filed for divorce,
and  the  case  eventually  went to  trial  on  property  issues.
Throughout  the  marriage,  the  Fortsons  enjoyed  an   affluent
lifestyle.   The  Fortsons have three children, but  custody  and
support of the children is not at issue in this appeal.
          Jayne  is  a dermatologist with a successful clinic  in
Anchorage.  She is also a paraplegic and uses a wheelchair due to
a  1975  accident.   Over the years she has  experienced  various
medical  problems related to her condition, including a 1996  hip
accident  that  left  her  with  significant  pain  and  fatigue.
Because of her health, she works less than five days a week.  She
will  have significant medical expenses in the future and  is  at
high risk of suffering an accident that would end her ability  to
work.  Because of her medical condition, her remaining work  life
is  likely  less  than the sixteen to seventeen  years  generally
predicted for an educated forty-seven year old woman.
          Blanton has a nursing degree and over the course of the
marriage worked as a nurse, a commercial fisherman, and  a  part-
time  supervisor in Jaynes office.  Blanton stopped working as  a
nurse  in 1989 and his nursing license has now lapsed.   He  last
worked  as  a  fisherman in 1999.  He also worked at the  clinic;
from October 2001 until May 2002, Blanton was on its payroll  and
was  paid an annual salary of $65,000.  He is deaf in one ear and
has a weakened back that limits him to light lifting.
          Trial  took  place before Superior Court  Judge  Sharon
Gleason  during a six-day period in May-June 2003.   The  parties
disputed several issues.  These issues, and the facts relevant to
them, are set out briefly here.
          (1)    Division  of  the  marital  estate.   The  court
distributed  the  couples  marital property  on  a  60/40  basis,
awarding the larger share to Jayne.  Judge Gleason focused on the
parties long-term health prospects, commenting that:
          [W]hen  I am called here as a judge to  apply
          the Merrill factors its to . . . discern what
          the   future  holds  for  each  party.    The
          statistical  odds  for Mr. Fortson  of  major
          complications  in his health  precluding  him
          from  functioning in a society  from  working
          are  very  low,  and . . . those  statistical
          probabilities  for Dr. Fortson are  extremely
          high.   She  faces major health complications
          in  her future because of her paraplegia, and
          it is this factor to which Ive given greatest
          weight  in  arriving at  a  division  of  the
          parties  estate, and . . .  the related  need
          for  additional  funds  to  meet  the  health
          related needs of . . .  Dr. Fortson.
          At   trial   one  of  Jaynes  witnesses,  a  vocational
counselor, stated that Blanton was qualified for various  nursing
or health management positions with salaries ranging from $30,600
to  $79,000.  Blanton offered the testimony of another counselor,
Marjorie Linder, who suggested a three-year program where Blanton
would  return  to  school  to become a vocational  rehabilitation
counselor.   The  court,  however,  rejected  Linders   testimony
because  she  did not consider his current earning  capacity  and
only  engaged  in general career planning.  The court  held  that
Blanton  had  an earning capacity of $50,000, and concluded  that
neither  rehabilitation spousal support nor reorientation alimony
were necessary in this case.
          The court acknowledged that Jaynes earning capacity was
ten  times Blantons, but observed that her health is very fragile
and  her earning capacity could be reduced to zero at any  moment
if  she falls from her wheelchair.  Judge Gleason continued  that
Jaynes  health problems are going to severely impact [her]  long-
term  earning  capacity, and thus concluded that I recognize  the
disparity  in  the  parties earning capacities,  but  the  issues
surrounding Jaynes health outweigh the disparity.
          Both  parties attack different aspects of this property
division.   Blanton,  relying primarily on  Jaynes  significantly
larger  income  earning capacity, argues that the superior  court
abused  its  discretion in not awarding him a greater portion  of
the  marital  estate.  Jayne, pointing to large  loans  from  her
parents  that  she  alone  repaid  or  remains  responsible   for
repaying,   argues   that  she  should  have   received   greater
consideration from the court in its property division.
          (2)   Cash payments from Jayne to equalize the property
division.  The court ordered Jayne to make cash payments totaling
$388,200 to Blanton to complete the division of property.   Jayne
was  ordered  to make monthly payments of $3,500 to  Blanton  for
eighteen  months, followed by a final lump sum  payment  for  the
remaining  balance.  On reconsideration, the court  ordered  that
the  principal  should earn 3.75% interest  during  this  interim
period.   Jayne challenges the order, specifically  arguing  that
the  superior  court did not take into account the hardship  that
she would face in financing the lump sum payment to Blanton.
          (3)   Excess  profits  from Jaynes dermatology  clinic.
The  parties  disputed  whether the  clinic  had  any  marketable
goodwill  and whether it earned any income from activities  other
than  Jaynes  work  as a physician.  In addition  to  dermatology
services,  Jaynes  clinic also offers non-medical  therapies  and
sells  cosmetic  and  skin  care products.   In  the  five  years
preceding  the  divorce, Jaynes yearly take-home income  averaged
$550,000.   Blantons  expert,  Donovan  Rulien,  opined  that   a
physician  of Jaynes experience would earn a salary  of  $375,000
and  thus  concluded that Jayne earned excess profit  over  wages
totaling  $272,800  during  the  period  of  separation.   Jaynes
expert,  Frederick  Strand,  disagreed.   He  testified  that  an
appropriate  salary  for someone of Jaynes  experience  would  be
forty  percent  of  the clinics billings, or $508,000,  and  that
given  an  average  yearly cashflow of $455,000,  there  were  no
excess  profits.   He  also  criticized  Ruliens  analysis,   and
maintained  that  even  assuming a  $375,000  salary,  no  excess
profits were present.
          The court rejected much of Ruliens analysis, finding it
not  credible  because  [h]is results  conflicted  with  his  own
methodology,   and   he   relied  solely  on   national   average
compensation  figures  that  were not  linked  to  conditions  in
Anchorage,  or  even  Alaska.  Judge Gleason  instead  adopted  a
modified  version of Strands second analysis, which  incorporated
the $375,000 salary figure; she noted that there could be roughly
$20,000 in excess earnings, but then concluded that the issue was
rendered moot by the clinics lack of marketable goodwill.
          (4)   Capital  gains taxes and sales  costs  of  Hawaii
property.   The couple owned Hawaii property worth $1.5  million.
At  trial, a Hawaii lawyer testified that sale costs would amount
to  thirteen percent of the total value, leaving the  owner  with
$1.3 million in proceeds.  The attorney testified that upon sale,
the  capital gains tax on the property would amount to  $120,800.
The  couple  also owns other real estate, including a  Stuckagain
Heights  property,  the family home, and the medical  condominium
that  houses Jaynes clinic.  The court awarded all of the couples
real estate to Jayne.  The court declined to grant Jayne a credit
for capital gains taxes and sales costs on the sale of the Hawaii
property  on  the grounds that it did not order her to  sell  the
property.
          (5)  Loans from Jaynes parents.  The couple received  a
series  of  payments from Jaynes parents; at  trial  the  parties
disputed  whether they should be treated as loans or gifts.   The
first  payment was for $280,000 in 1986, and was used to purchase
the  fishing boat Blanton used in the 1980s.  Although the couple
made  two  payments on this sum, the bulk of it was  repaid  when
Jayne gave her parents investments originally purchased with  the
money  she  received  as  part of her 1975 accident  settlement.1
Jaynes  parents also gave the couple $80,000 in 1990 and $150,000
in  1996.  Both Jayne and Blanton signed the 1986 and 1990 notes,
but  only Jayne signed the 1996 note.  No payments have been made
or demanded on the 1990 or 1996 notes.  The court held that Jayne
had  not  established that there was a legal obligation to  repay
these loans.  The court also declined to include Jaynes repayment
of  the first loan in its tally of marital assets and debts.  The
court   gave  limited weight to the contribution  made  by  these
loans and extremely limited weight to the effect failure to repay
them may have on Jaynes inheritance from her parents.
          (6)   The Leah Maya.  The parties own the Leah Maya,  a
51-foot  power  boat.  While the couple had  used  the  boat  for
hunting  charters,  it  was  mainly  used  for  family  pleasure.
Blanton  estimated the boat was worth $200,000, and  his  expert,
          Larry Westfall, estimated that the vessels fair market value was
$195,000.   Based  on  Westfalls testimony,  the  superior  court
valued the Leah Maya at $195,000 and awarded it to Blanton.   The
superior  court declined to allow Blanton a deduction  for  costs
associated  with taking the boat to Seattle for sale  because  it
did not order him to sell the boat, noting that Blanton could use
the boat for charters in Alaska.
          (7)   Capital  loss  carry forward.   Blanton  suffered
substantial losses day-trading in the stock market.  These losses
generated a capital loss carry forward, a tax offset that can  be
applied to future income tax liabilities (including capital gains
taxes)  of  $519,500.  The parties disputed to  whom  this  carry
forward  should be assigned.  The court held that  it  should  be
divided  in  the same proportion as the division of  the  marital
estate: sixty percent to Jayne and forty percent to Blanton.
          (8)    Gifts   as  separate  property.    The   parties
identified personal items with a combined value of $5,540;  Jayne
claimed  these  items  were gifts to  her  from  Blanton,   while
Blanton denied that items totalling $4,250 in value were intended
as  gifts.   The superior court held that interspousal gifts  are
marital property and divided them as part of the marital estate.
III.      STANDARD OF REVIEW
          Equitable  division of marital assets is  a  three-step
process: determining what property is available for distribution,
assessing  its  value, and allocating it equitably.2   The  trial
courts  characterization of property as separate  or  marital  is
reviewed  for  abuse  of discretion.3  Whether  the  trial  court
applied the correct legal rule in exercising its discretion is  a
question  of  law  that we examine de novo using our  independent
judgment.4  The valuation of property is a question of  fact  and
is  reviewed  for  clear error.5  A finding of  fact  is  clearly
erroneous if, upon review of the entire record, we are left  with
a  firm  and  definite conviction that a mistake has been  made.6
The  superior courts ultimate distribution of assets is  reviewed
for  abuse  of  discretion, and will  be  reversed  only  if  the
distribution is clearly unjust.7
IV.  DISCUSSION
     A.   The  Superior  Court Did Not Abuse  Its  Discretion  in
          Dividing the Marital Estate.
          
          Under AS 25.24.160, trial courts must consider specific
factors in dividing property.8  In making its division, the trial
court  generally should begin with the presumption that an  equal
division of marital property is most equitable.9
          1.   The superior court did not err in awarding Blanton
               forty percent of the marital estate.
               
          Blanton  maintains that the superior court  abused  its
discretion in awarding him a less than equal share of the estate.
In Blantons favor are the facts that the parties were married for
many years, enjoyed an affluent lifestyle, and the courts finding
that  Blanton  contributed  to the  marriage.   However,  cutting
against  him  is the key fact that Jayne faces long-term  medical
liabilities.    Blanton   argues   that   the   superior   courts
          distribution represents an abuse of discretion because it
overcompensated for Jaynes health concerns, was based on  various
factual  errors, and was motivated by a desire to punish him  for
his spendthrift ways.
          We  have recognized that [w]hen a couple has sufficient
assets,  the  spouse with the smaller earning  capacity  can  and
should  receive  a  larger share in the property  distribution.10
Blanton posits that in light of the disparity between his earning
capacity  of $50,000 a year and Jaynes $500,000 earning capacity,
a  60/40  award  in  Jaynes  favor was an  abuse  of  discretion.
However,  the  statutory  factors for  distribution  include  the
consideration of the age and health of the parties, the financial
condition of the parties, including the availability and cost  of
health  insurance, and the circumstances and necessities of  each
party.11   Moreover, we look to see whether the property division
was  adequate  to  meet the parties needs  while  they  made  the
transition into post-marital life.12  In this case Jayne will face
substantial healthcare costs that are likely to increase  as  she
gets older,13 her ability to earn income will likely fall as  her
healthcare  costs  increase, and she is  uniquely  vulnerable  to
injuries  or accidents that would have immediate and catastrophic
effects on her ability to earn income.  At the same time, Blanton
has  a reasonable earning capacity and has received a portion  of
the estate large enough to help him make the transition into post-
marital life.  In light of these facts, a 60/40 property division
in favor of Jayne was well within the trial courts discretion.
          Blanton   also  argues  that  the  court   abused   its
discretion in failing to award him any of the couples real estate
or income producing assets.14  Judge Gleason emphasized that there
[are] lots of liquid funds that have been received by Mr. Fortson
and explained that I have looked at the fact of the liquid assets
that  were  placed into Mr. Fortsons control, the Leah Maya,  the
hangar proceeds, the Cessna 206.  That . . . comprises $400[,000]
to  $500,000 of cash.  Blanton maintains that the boat is not  an
income  generating asset because it was primarily used for family
activities.  But it was also used for charters, remains  equipped
for  such  work,  and could be outfitted for commercial  fishing.
Its  ability  to generate income is determined not  by  its  past
usage,  but by its future capabilities, and thus it is an  income
generating  asset.   Accordingly, we reject  Blantons  suggestion
that  he was not awarded any income generating assets.  Moreover,
the  fact  that he was awarded liquid funds, many of  which  were
given  to  him  while the parties were separated, undermines  his
argument;  cash can readily be used to purchase income generating
assets.   While  the  superior court awarded Jayne  most  of  the
income  generating  assets, this was not an abuse  of  discretion
given  our  overall conclusion that the court did not  abuse  its
discretion in awarding Jayne sixty percent of the marital estate.
          Blanton  also  asserts that the trial court  improperly
penalized him for what it viewed as his financially irresponsible
ways.   He  relies  on  the trial courts statement  that  if  Mr.
Fortson  . . . were accorded more than 50 percent of the  marital
estate theres every indication that that would be spent solely on
extravagances.   Had  the court based its  property  distribution
          award on a judgment about the propriety of his spending habits,
it  would  have  abused its discretion.15   However,  the  courts
language  is part of a larger discussion that contrasts  Blantons
relatively  minor future liabilities with Jaynes large  impending
health  costs.  In the context of that discussion, the  statement
is  unobjectionable and to some extent superfluous; the  rest  of
the  courts discussion, as well as its written findings  of  fact
and   conclusions   of  law,  demonstrate   that   the   property
distribution was motivated not by a desire to punish Blanton  but
by the realization that Jayne faced large, possibly catastrophic,
healthcare  costs  in  the  coming years.   Given  the  extensive
evidence  in  support  of  this conclusion,  we  reject  Blantons
suggestion that the distribution was designed to punish him.
          In  addition,  Blanton maintains that the trial  courts
finding  that  he has an earning capacity of $50,000  is  clearly
erroneous.  He challenges the testimony of Jill Friedman,  Jaynes
vocational  expert,  that  he  would  be  eligible  for   various
supervisory nursing positions, arguing that he has back  problems
and  has  not  worked  as  a nurse in fourteen  years.   However,
Friedman explained that Blanton could regain his nursing  license
in  as  little  as  nine weeks.  She offered a list  of  possible
salary  ranges  for  nurses  in the  Anchorage  area;  while  she
mentioned  some positions with salary ranges between $30,600  and
$56,000  per year, she also discussed a nurse supervisor position
which  paid  between $52,000 and $79,000 and noted that  Blantons
resume  stated that he had worked as a nurse supervisor at Jaynes
office.   Moreover,  the  trial  court  found  the  testimony  of
Blantons  expert  to be unpersuasive, viewing her  as  a  general
career planner who failed to address his actual earning capacity,
and  Blanton  did  not offer any other evidence  on  this  issue.
While  the  trial courts finding that Blanton could earn  $50,000
may  assume that he can secure a more senior position, given that
it  is  within  the  range offered by the expert  and  below  the
$57,000  mean wage for nurses in the Anchorage area, the  finding
was not clearly erroneous.
             Blanton  also  suggests  that  his  lack  of  health
insurance  supports a larger award, arguing that once  his  COBRA
insurance  lapses,  he  will  face  uncertain  insurance   costs.
However,  COBRA  insurance lasts three years  from  the  time  of
divorce;  during those three years, full coverage costs $556  per
month.   Thus, even if the trial courts assumption that  Blantons
insurance would be provided by his future employers turns out  to
be false, he has access to alternative sources of insurance for a
reasonable amount of time.  The mere possibility that he may have
to  buy  his  health  insurance in the future  does  not  support
increasing his share of the marital estate.
          In  sum,  we conclude that none of Blantons  claims  of
error  have merit and that the superior court did not  abuse  its
discretion  in allocating Blanton a forty percent  share  of  the
marital estate.
          2.   The  court  did  not err in awarding  Jayne  sixty
               percent of the marital estate.
               
          Jayne  argues that the court erred in failing  to  give
          appropriate weight to her use of separate funds to benefit the
marriage.  Specifically, she argues that the trial court erred by
failing  to grant sufficient weight to (1) her payment of roughly
$240,000  to her parents for the first loan, and (2) her $107,000
contribution towards the Stuckagain Heights property.
          In  distributing  the  marital property,  the  superior
court  gave limited weight to the fact that roughly $600,000  was
contributed to the parties by Jaynes family allegedly  as  loans.
The   court  concluded  that  Jayne  did  not  establish   by   a
preponderance  of  the evidence that these payments  created  any
legal obligation of repayment; accordingly, it concluded that  no
adjustment  is  required based on these payments.   Jayne  argues
that the trial court erred by not separating out from this amount
the $240,000 Jayne contributed from her premarital funds to repay
her  parents  for  their 1986 commercial fishing  loan.16   Jayne
argues that the courts discussion of her payment was insufficient
and  that  the court was required to consider the fact  that  she
contributed separate funds to pay off this loan.
          The  superior  court also accorded  limited  weight  to
Jaynes  use  of  her  separate funds to purchase  the  Stuckagain
Heights  property, concluding that she intended to transmute  the
funds  into  marital  property.  Jayne  argues  that  the  courts
treatment  of her separate contributions amounts to an  abuse  of
discretion.
          We  have  held that contributions of separate  property
may  be  relevant to equitable division.17  However, we have  not
held  that  failure to make an adjustment for such  contributions
constitutes  an  abuse  of  discretion.18   The  superior   court
considered   the   alleged  loans  and  Jaynes  contribution   of
premarital  funds  into  the  Stuckagain  Heights  property,  and
accorded  these  facts  limited weight.   Jaynes  argument  would
require  us  to  conclude  that  the  trial  court  should   have
explicitly stated how much weight it was according to her use  of
premarital  assets  to  repay a portion  of  the  loans,  and  to
quantify that declaration with precision.  Because the court need
only  take separate payments into account at its discretion,  and
given  that the court considered the general impact of the  loans
and  held that they were not marital debts, we conclude  that  it
did  not abuse its discretion by refusing to give more weight  to
Jaynes   contributions.   Jayne  may  disagree  with  the  weight
accorded to these contributions, but that alone does not  support
a conclusion that the trial court abused its discretion.
     B.   The  Superior Court Did Not Err in Fashioning the Terms
          of Jaynes Payment of a Cash Settlement to Blanton.
          
          On  cross-appeal,  Jayne argues that  the  trial  court
failed  to  make specific findings about the hardship imposed  by
the cash award.  Specifically, she contends that the court failed
to consider whether costs related to financing the large lump sum
payment would impose an undue hardship on her.
          Cash   awards  are  a  permissible  means  of  dividing
illiquid marital assets where they would not impose a hardship on
the paying party.19  In this case, the trial court considered the
effects of the cash award on Jaynes finances.  First, in its oral
          decision, the court noted that it was allowing Jayne eighteen
months  to pay the lump sum in consideration of the fact that  it
might  take [Jayne] some time to reorganize finances, obtain  any
refinancing on the Hawaii property, or undertake other  financial
considerations  of  considerable priority.  .  .  .   Second,  in
deciding  Blantons motion for reconsideration,  the  court  again
considered Jaynes health and granted Jayne the right to alter the
payment  schedule if she could not comply due to changes  in  her
health  or employment.  Thus, the court carefully considered  the
potential hardships of the award, giving Jayne time for financial
restructuring,  taking  into account  her  health  concerns,  and
allowing for necessary adjustments as time goes on.  In light  of
this  record, we reject Jaynes contention that the court did  not
consider the possible hardships of the payment plan.20
     C.   The  Superior  Court Erred in Treating  Excess  Profits
          Earned  by  the Clinic During the Separation Period  as
          Jaynes Separate Property.
          
          Marital property includes all property acquired  during
the  marriage,  excepting only inherited  property  and  property
acquired  with  separate  property  which  is  kept  as  separate
property.  21   The clinic was started during the  marriage,  and
Jaynes  primary  means of employment was her  clinic  work.   The
parties do not dispute that the business was marital property.
          However, spousal income earned after a final separation
leading  to  divorce is not marital property.22  Blanton  accepts
this  general  principle  but  argues  that  some  of  the  post-
separation profit that Jayne earned from the business was not her
separate  income,  but  represented excess  earnings  or  profits
stemming from the other clinic activities, such as the efforts of
various   technicians  and  sales  of  speciality  services   and
cosmetics.   He posits that these profits are marital property.23
Jayne  responds  that the superior court found that  all  of  the
business  profits were from her sole efforts and that there  were
no excess profits.
          We agree with Blanton that the court erred in declining
to consider the amount of separation period excess earnings.  The
clinics  unmarketability  made it unnecessary  to  determine  the
value  of the clinics goodwill.24  But lack of goodwill does  not
address  and  is irrelevant to the separate question  of  whether
there  were  profits  from clinic activities  other  than  Jaynes
efforts  as  a  dermatologist during the separation  period  that
should be divided between the parties.25  Thus, because the court
relied on its resolution of the goodwill issue to avoid examining
the clinics excess profits, it erred.
          Jayne  relies  on  the language of the superior  courts
written  order,  arguing that its statement  that  there  may  be
$20,000  in  excess  earnings and its failure  to  apportion  any
earnings  support  the  conclusion  that  there  were  no  excess
profits.   However,  the  courts oral decision  and  an  exchange
between  the court and Blantons counsel support Blantons argument
that the court did find there to be some excess profits.  But the
court then declined to consider the source of this profit or  its
value  based on its conclusion, which was unrelated to the excess
          profits issue, that the practice lacked marketable goodwill.26
          Because the court acknowledged that some excess profits
existed, but then failed to identify the source of these  profits
or  quantify their value, we reverse its decision to treat excess
profits  from the clinic as Jaynes separate property.  On remand,
the  court  should  determine what portion of the  clinics  post-
separation  income involved excess profits stemming  from  clinic
activities  above  and beyond Jaynes work as a dermatologist  and
then classify this sum as marital property.
     D.   The  Superior  Court Did Not Err in  Refusing  To  Give
          Jayne  a Credit for the Capital Gains Taxes and Selling
          Costs of the Hawaii Property.
          
          Jayne  argues that the superior court erred in refusing
to give her a credit for costs and capital gains taxes associated
with selling the Hawaii property.  In Oberhansly v. Oberhansly,27
we  held  that  trial  courts are required to  consider  the  tax
consequences  of property division where there  is  proof  of  an
immediate and specific tax liability, but cautioned that [a]t the
same  time,  the  court is not required to  speculate  on  or  to
consider tax consequences in the absence of proof that a  taxable
event  will  occur in connection with the division of property.28
However, in Dodson v. Dodson29 we allowed trial courts to consider
tax  liabilities  regardless  of  whether  the  liabilities  were
immediate   and  specific,  recognizing  that  consideration   of
possible  tax consequences is within the trial courts  discretion
when  distributing property.30  Jayne maintains  that  the  court
abused  its discretion by refusing to grant her a credit for  the
taxes and sale costs associated with selling the Hawaii property,
arguing  that Dodson overruled Oberhansly and requires  a  credit
even  where a sale is not immediate and regardless of why or when
[a  party] chooses to sell the property.  However, Jayne misreads
Dodson.   While Dodson allows the superior court to consider  tax
consequences to reach an equitable outcome, it does  not  mandate
the credit, and Oberhansly requires the credit only where the tax
effects  are specific and immediate.  Because the court  did  not
require  Jayne  to  sell the property, the tax effects  were  not
specific  and  immediate,  and  the  court  did  not  abuse   its
discretion in denying Jayne a credit for possible tax effects and
costs resulting from a sale.
          We  have  also required courts to consider sales  costs
where  the  division of property is premised on  an  economically
disadvantaged party being forced to sell a house.31  Where a court
order  or  external conditions force a party to sell,  the  court
must  grant the party necessary costs because the courts  failure
to  make provision for the costs of repairs and sale of the  real
property awarded . . . defeat[s] its stated goal of awarding  [an
economically  disadvantaged  party]  the  greater  share  of  the
marital estate.32  However, Jaynes financial circumstances do not
require that she sell the Hawaii property.  She could not in  any
sense   be  characterized  as  economically  disadvantaged.    In
addition,  the court specifically allowed her eighteen months  to
refinance  the property.  Because the sale is not inevitable,  we
hold  that  the  trial  court did not  abuse  its  discretion  by
          refusing to grant her the costs of selling the property.
     E.   The  Superior Courts Finding that the Loans from Jaynes
          Parents  Were  Not Legally Enforceable Is  Not  Clearly
          Erroneous.
          
          Jayne  disputes the trial courts finding that the loans
from   her   parents   were  not  legally   enforceable   marital
liabilities.   Blanton  responds that the  court  had  sufficient
reason to doubt that they were bona fide debts, and thus that  it
did not err in excluding them as marital debts.
          The  evidence supporting the validity of the  loans  is
equivocal.  Factors such as Jaynes repayment of the fishing  boat
loan, her sisters repayment of a similar loan,  and the testimony
of  Jayne  and  her father that they intended that the  loans  be
repaid   support a finding that the loans were valid debts.   But
several  factors cut against the validity of the loans, including
Blantons  failure to sign the 1996 notes, his testimony  that  he
did  not  regard  the  loans as legal debts, and  Jaynes  fathers
testimony  that he never demanded payment and never received  nor
asked  for  interest on the loans even though  the  demand  notes
state  an  interest  rate.  This failure  to  demand  payment  or
interest  on  the loans is particularly probative given  that  it
likely  renders  at  least  the 1990 loans  unenforceable;  under
Alaska  law, failure to demand payment, coupled with no  payments
on  the  loan  principal or interest for  more  than  ten  years,
triggers  the statute of limitations.33  The trial court  is  the
factfinder,  and given the evidence in the record supporting  its
decision, we cannot say that its finding that the loans were  not
marital debts was clearly erroneous.34
     F.   The  Superior Courts Valuation of the Leah Maya Is  Not
          Clearly Erroneous.
          
          Blanton argues that the court erred in valuing the Leah
Maya at $195,000.  Blantons pre-trial property spreadsheet listed
the  vessels value at $195,000, he testified that the vessel  was
worth  $200,000, and he and his expert, Larry Westfall, testified
that  it  had a fair market value of $195,000.  However,  Blanton
maintains that even though the court based its valuation  on  his
experts  testimony, the court erred in relying on either  his  or
Westfalls  opinions  because  he  is  a  layperson  and  Westfall
qualified his opinion.35  This argument is unpersuasive.   Having
presented substantial evidence on the point, Blanton now will not
be  heard  to  argue that the trial court erred in accepting  his
evidence.36
          Because Blanton was personally familiar with the vessel
and  Westfall was knowledgeable about the overall market for such
vessels,  and  because  both reached a  similar  conclusion,  the
superior  court  did not commit clear error by relying  on  their
testimony.   Moreover,  to  the extent  that  the  testimony  was
deficient,  Blanton  must bear the consequences  because  parties
seeking  to establish an items value must shoulder the burden  of
producing  supporting evidence.37  Blanton acknowledges  that  he
bore the burden for creating an evidentiary record on this issue,
but  argues that his failure to offer better evidence  should  be
          excused because he was not put on notice that the vessels value
would  be  an  issue  at trial.  He also maintains  that  because
Jaynes  original trial brief stated that the parties intended  to
sell  the Leah Maya and divide the proceeds, valued the  ship  at
$125,000, and stated that the court need not value the boat,  she
should  be estopped from disputing Blantons claim that the  trial
courts  finding was based on improper evidence.  But a review  of
the trial proceedings belies Blantons claims.
          Jayne  testified on May 22, the second  day  of  trial,
that  she did not intend to sell the boat and was unaware of  any
plans  to sell it with Blanton, and Blanton offered his testimony
about  the  boats value the next day.  On May 23 the trial  court
informed the parties that it was going to award the boat  to  one
of  them, and on May 28, the fourth day of trial, Jayne submitted
an amended trial brief which stated that Dr. Fortson is agreeable
to  allocating the Leah Maya to Mr. Fortson at whatever the court
decides is the appropriate value.  Westfall testified later  that
same  day.   This  chronology belies Blantons  argument  that  he
lacked  notice  about  the  need to present  valuation  evidence.
Jaynes  testimony, as well as Judge Gleasons statement and Jaynes
amended  trial brief, made it clear that the value  of  the  boat
would  be an issue at trial.  Blanton was thus repeatedly put  on
notice that the trial court was going to value the Leah Maya.  If
he was concerned about the sufficiency of his evidence, he should
have  requested  a  continuance so that he could  secure  a  more
accurate  valuation of the vessel.  Because he chose  to  proceed
with  trial, he cannot now claim that a finding based on his  own
evidence  is clearly erroneous.38  Accordingly, we conclude  that
the superior court did not commit clear error in valuing the Leah
Maya.
     G.   The  Superior  Court  Did Not  Err  in  Allocating  the
          Capital Loss Carry Forward on a 60/40 Basis.
          
          Jayne argues that the trial court abused its discretion
in  failing  to award her the entire amount of the  capital  loss
carry forward because she has the ability to immediately apply it
against  capital gains taxes associated with selling  the  Hawaii
property.39  However, as Jayne concedes, Blanton could  also  use
the  loss  carry  forward; $3,000 may be taken  against  ordinary
income  each  year.  Although Jayne estimates that  it  may  take
Blanton  as  long as eleven years to use his share  of  the  loss
carry  forward, he can still derive value from it, so long as  he
has  some  taxable income.  Thus, we conclude that the court  did
not  err in dividing the capital loss carry forward 60/40.  Jayne
may  be  able to secure more immediate benefits from the  capital
loss carry forward, but that does not mean that Blanton would not
also receive benefits from some share of the carry forward.   The
court  did  not abuse its discretion in making its allocation  of
the carry forward.
     H.   Because  Jayne Has Failed To Show Prejudicial Error  in
          the  Classification of Gifts, We Decline To Reach  This
          Issue.
          
          At  trial, Jayne claimed that various items of property
          totaling $5,540 in value were gifts to her from Blanton, and were
therefore her separate property.  Blanton testified that  two  of
the  items, totaling $4,250 in value, were not gifts to her,  but
were  either  purchased  by  both  parties  with  the  intent  of
replacing an item in the household that had worn out (a Husqvarna
sewing  machine  valued at $3,500) or an item  of  clothing  that
Jayne  had purchased for herself (an otter parka valued at $750).
Blanton  therefore argues that these items were marital  property
that  should  be subject to division as to value.  Judge  Gleason
appears to have credited Blantons testimony.40  To the extent that
the  property purchased with marital assets was not  intended  by
one spouse to be a gift to the other, it could not be found to be
separate  property.  Accordingly, at most only $1,290 in property
might  arguably  have been found to be Jaynes separate  property.
This  case  involves a total marital estate valued at  over  $2.8
million.   The gifts in dispute represent less than .05%  of  the
estate.
          The  process  of  classifying  marital  property  in  a
divorce  is not an end in itself but simply serves to inform  the
trial  courts decision on the ultimate issue of what  constitutes
an  equitable  distribution of the marital estate.   Because  the
trial  court  exercises  broad discretion  in  making  its  final
equitable  determination, a classification error will  result  in
prejudice  only  when it appears that the error probably  had  an
appreciable  effect  on the ultimate determination  of  equitable
distribution.   Here, given the minor amount in  controversy  and
the  size  of  the estate, any error in classifying the  disputed
property  would  have  at most a negligible effect  on  equitable
distribution.  Therefore, Jayne has failed to carry her burden of
showing prejudicial error.

V.   CONCLUSION
          Because we hold that the trial court erred in declining
to  consider  the amount of any excess profits earned  by  Jaynes
clinic  during the separation period, we REMAND for determination
of  the size of this amount and its distribution.  We AFFIRM  the
trial courts decision in all other respects.
_______________________________
     1     The investments exact value is unclear.  Jaynes father
invested  the  settlement proceeds but did not  keep  any  formal
records.   He estimated they were worth something less  than  the
$245,000  remaining  on  the  loan.   Jayne  testified  that  the
investments were worth roughly $240,000.

     2     Martin v. Martin, 52 P.3d 724, 726 (Alaska 2002).

     3    Id.

     4    Id.

     5    Id.

     6    Schmitz v. Schmitz, 88 P.3d 1116, 1121 (Alaska 2004).

     7    Martin, 53 P.3d at 726.

     8    Alaska Statute 25.24.160(a)(4) states in relevant part:

          [T]he   division  of  property  must   fairly
          allocate  the economic effect of  divorce  by
          being based on consideration of the following
          factors:
          (A) the length of the
                              marri
                              age
                              and
                              stati
                              on in
                              life
                              of
                              the
                              parti
                              es
                              durin
                              g the
                              marri
                              age;
          (B) the age and health of the parties;
          (C)  the  earning  capacity of  the  parties,
          including   their  educational   backgrounds,
          training,     employment     skills,     work
          experiences, length of absence from  the  job
          market,  and  custodial responsibilities  for
          children during the marriage;
          (D)  the  financial condition of the parties,
          including the availability and cost of health
          insurance;
          (E)  the  conduct  of the parties,  including
          whether there has been unreasonable depletion
          of marital assets;
          (F)  the desirability of awarding the  family
          home,  or  the  right to live  in  it  for  a
          reasonable period of time, to the  party  who
          has primary physical custody of children;
          (G) the circumstances and necessities of each
          party;
          (H) the time and manner of acquisition of the
          property in question; and
          (I)  the  income-producing  capacity  of  the
          property and the value of the property at the
          time of division.
          
These  factors  are  commonly known as the  Merrill  factors,  as
listed  in  Merrill v. Merrill, 368 P.2d 546, 547-48 n.4  (Alaska
1962).

     9     Brown  v.  Brown,  947  P.2d 307,  313  (Alaska  1997)
(citation  omitted);  Wanberg v. Wanberg, 664  P.2d  568,  574-75
(Alaska 1983).

     10    Dodson v. Dodson, 955 P.2d 902, 914 n.19 (Alaska 1998)
(quoting Dixon v. Dixon, 747 P.2d 1169, 1173 (Alaska 1987)).

     11    AS 25.24.160(a)(4)(B), (D), & (G).

     12     See Dixon, 747 P.2d at 1173 (property division should
consider  transition needs of parties); cf. Hilliker v. Hilliker,
755   P.2d  1111,  1112  (Alaska  1988)  (rehabilitation  alimony
appropriate  only where property division cannot meet  reasonable
needs of party).

     13     Jaynes  expert predicted her future lifetime  medical
expenses would range between $1.3 million and $3.3 million.

     14     In  addition to the medical practice and the  medical
condominium, Blanton also classifies the Stuckagain  Heights  and
the  Hawaii property as income producing because they can be sold
for  more  than  their purchase price.  The Hawaii  property  was
valued   at $1.5 million, or $1,000,050 above its purchase price.
The  Stuckagain Heights property saw minor appreciation,  gaining
$3,000 in value since its purchase.

     15     See Jones v. Jones, 942 P.2d 1133, 1139 (Alaska 1997)
(holding  that courts may consider economic misconduct only  when
it rises to level of unreasonable depletion of marital assets).

     16     This first loan was used to benefit the marriage; the
parties  used  the  funds to purchase the fishing  boat  used  by
Blanton, the vessel generated marital income, and when they  sold
the  boat, the parties deposited the sale proceeds into a marital
account.

     17    Green v. Green, 29 P.3d 854, 860 (Alaska 2001).

     18    Id.; Chotiner v. Chotiner, 829 P.2d 829, 834-35 (Alaska
1992); cf. Ramsey v. Ramsey, 834 P.2d 807 (Alaska 1992) (no fixed
rule  requiring  credit  for contributions  from  post-separation
property to maintain marital property).

     19     See  Green, 29 P.3d at 861; Johns v. Johns, 945  P.2d
1222, 1228 (Alaska 1997).

     20     Jayne argues in the alternative that she should  have
received  a credit for any financing costs necessary for  her  to
obtain  the  cash.   However, we have never held  that  financing
costs  demand a credit, and indeed, implicit in the trial  courts
decision  is  the fact that Jaynes income is sufficient  to  bear
refinancing  costs without drawing on her share  of  the  marital
estate.  Thus, we reject Jaynes alternative argument.

     21     Schmitz v. Schmitz, 88 P.3d 1116, 1125 (Alaska  2004)
(quoting Lewis v. Lewis, 785 P.2d 550, 558 (Alaska 1990)).

     22     Schanck  v.  Schanck, 717 P.2d  1,  3  (Alaska  1986)
(property accumulated with income earned after a final separation
that  is  intended to, and does in fact, lead  to  a  divorce  is
excluded from the category of marital property, as long as it  is
obtained  without  the  invasion of  any  pre-separation  marital
asset.).

     23     This  court has defined excess earnings  as  earnings
which  remain  after  earnings  on  tangible  assets  and  owners
compensation  for  services  are deducted  from  total  earnings.
Moffitt v. Moffitt, 813 P.2d 674, 676 n.3 (Alaska 1991).

     24    See Moffitt v. Moffitt, 749 P.2d 343, 347 (Alaska 1988)
(If the trial court determines either that no good will exists or
that  the good will is unmarketable, then no value for good  will
should be considered in dividing the marital assets.).

     25     Jayne  suggests that Blanton cannot  argue  that  any
profits  resulted from activities other than her efforts  because
he  did  not  present  sufficient evidence  at  trial.   However,
Blanton  questioned  her  about  billing  spreadsheets  detailing
income  based  on the work of her employees and the  trial  court
admitted this evidence into the record.

     26    The courts explanation of its calculations in the oral
hearing  make  it  clear that the court found there  to  be  some
excess  profits.  After discussing Strands figures  and  adopting
them subject to minor changes,  the court noted that its analysis
result[ed]  in  excess income somewhere in  the  neighborhood  of
$20,000  that could be attributable to the intangible  components
of  the  business.  Moreover, when Blantons counsel asked whether
the  interim  profits that Dr. Fortson earned from  the  business
during  the  separation period [were] not a marital asset,  Judge
Gleason replied, I think thats implicit in my ruling . . . . [I]n
terms  of  her income . . . thats her income, and post-separation
earnings  were  not included in this division.  In addition,  the
superior  court  did  not determine the source  of  these  excess
profits,  and  simply  noted that they were attributable  to  the
intangible component of the business.

     27    798 P.2d 883 (Alaska 1990).

     28    Id. at 887; accord Money v. Money, 852 P.2d 1158, 1163
(Alaska 1993).

     29    955 P.2d 902 (Alaska 1998).

     30    Id. at 909.

     31     Beal  v. Beal, 88 P.3d 104, 117 (Alaska 2004) (citing
Tollefson v. Tollefson, 981 P.2d 568, 571-72 (Alaska 1999)).

     32    Tollefson, 981 P.2d at 572.

     33    Alaska Statute 45.03.118(b) states in relevant part:

          [I]f  demand for payment is made to the maker
          of  a  note  payable on demand, an action  to
          enforce the obligation of a party to pay  the
          note must be commenced within six years after
          the demand.  If no demand for payment is made
          to  the maker, an action to enforce the  note
          is  barred if neither principal nor  interest
          on  the  note has been paid for a  continuous
          period of 10 years.
          
     34      See   generally   Charles  C.  Marvel,   Annotation,
Unexplained Gratuitous Transfer of Property From One Relative  to
Another  As  Raising Presumption of Gift, 94 A.L.R.3d 608  (1979)
(courts   commonly  view  loans  between  family   members   with
suspicion,  and  thus  apply rebuttable  presumption  that  loans
between  close relatives are not actual debts); 59  Am.  Jur.  2d
Parent and Child  92 (2002) (same).

     35     We have defined fair market value as [t]he amount  at
which property would change hands, between a willing buyer and  a
willing seller, neither being under compulsion to buy or sell and
both having reasonable knowledge of the relevant facts. Doyle  v.
Doyle,  815  P.2d 366, 370 n.6 (Alaska 1991) (quoting Blacks  Law
Dictionary 597 (6th ed. 1990)).  Westfall noted that the $195,000
figure  was not a reflection of what a buyer would pay,  but  was
instead  a  guess as to the value a surveyor would  give  to  the
vessel.   Blanton  thus  argues that Westfall  did  not  actually
measure  the  vessels  fair  market  value  and  that  there  was
insufficient  evidence  in  the  record  to  support  the  courts
valuation of the Leah Maya.

     36     Cf.  Koller  v. Reft, 71 P.3d 800, 804 (Alaska  2003)
(trial court did not err in relying on income figures provided by
appellant).

     37     See  Brotherton v. Brotherton, 941  P.2d  1241,  1245
(Alaska  1997) ([This court has] previously held that it  is  the
duty  of the parties, not the court, to ensure that all necessary
evidence  is before the court in divorce proceedings and  that  a
party  who  fails to present sufficient evidence  may  not  later
challenge the adequacy of the evidence on appeal.) (quoting  Root
v.  Root,  851 P.2d 67, 69 (Alaska 1993)); see also  Hartland  v.
Hartland,  777 P.2d 636, 640 (Alaska 1989) ([It] is  the  parties
obligation to present the court with sufficient evidence  of  the
value  of  the  property.  Reviewing courts  cannot  continue  to
reverse  and remand dissolution cases where the parties have  had
an  adequate opportunity to introduce evidence but have failed to
do  so.)  (quoting In re Marriage of Smith, 448 N.E.2d  545,  550
(Ill. App. 1983)).

     38     Cf. Jenkins v. Handel, 10 P.3d 586, 592 (Alaska 2000)
(party  waived  claims  regarding lack of notice  about  admitted
evidence where party found out evidence one day prior to  hearing
and failed to request continuance or object during hearing).

     39    Jayne calculates she would save roughly $31,170 if she
were allowed to apply Blantons forty percent share of the capital
loss  carry  forward towards capital gains taxes associated  with
selling the Hawaii property.

     40     I  was talking more about the otter [parka]  and  the
various other items Mr. Fortson said he really didnt intend . . .
to  be  gifts, he meant those to be investments, and I  gave  him
credit for those various items.

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