## Facts

- Husband and wife married in 1953; husband worked for the J.R. Simplot Company enterprise, and wife maintained the household.
- Before marriage, husband owned 610 shares of Apex Corporation, a holding company whose sole function was to hold shares of J.R. Simplot Company Class B stock; this interest translated to an 8.4% ownership interest in the operating company.
- During the marriage, the operating company’s retained earnings increased substantially; wife claimed husband’s proportionate share of that increase was community property as “rents, issues and profits” from his separate stock.
- The company paid no dividends during the marriage; the board reinvested earnings in property and equipment.
- Husband was a director and salaried employee; the trial court found his salary adequately compensated the community for his labor, and there was no showing he manipulated dividend policy to divert value from the community.
- A divorce decree and property division classified various assets and debts as community or separate, including a parcel of Ketchum, Idaho real property deeded to husband as one of four parcels conveyed to Simplot children.
- Wife appealed, challenging (1) characterization of retained earnings and other assets/debts, and (2) adequacy of alimony and child support.

## Issues

1. Whether the increase in corporate retained earnings during marriage, reflected in the value of a spouse’s premarital stock interest, constitutes community property as “rents, issues and profits” of separate property under Idaho law.
2. Whether the trial court correctly classified certain assets (including gifted or transferred real property) and debts as separate or community property.
3. Whether the alimony and child support awards were proper in light of the parties’ circumstances and the property characterization.

## Decision

- The court held that corporate retained earnings accumulated during marriage, and the shareholder spouse’s proportionate interest in those retained earnings, were not community property under the circumstances.
- The court treated the retained earnings as contributing to appreciation of the separate stock interest rather than as community “rents, issues and profits,” because the earnings were not distributed and the shareholder had no present right to them.
- The court largely affirmed the trial court’s classifications of other assets and debts, but reversed or modified parts of the decree and remanded for further proceedings on specified valuation/division matters.
- The court affirmed in part and modified in part the alimony and child support provisions, remanding for recalculation or clarification consistent with the corrected property analysis.
- Disposition: affirmed in part, reversed in part, and remanded.

## Legal Principles

- Property owned before marriage remains separate property; whether increases during marriage are community depends on whether they are “rents, issues and profits” or merely appreciation of the separate asset.
- Corporate retained earnings that are reinvested and not distributed are generally not treated as community property solely because they increase the value of separately owned shares.
- Where the spouse’s community labor is reasonably compensated through salary, and there is no proof of manipulation to avoid distributions, appreciation attributable to corporate growth and reinvestment remains separate property.
- Trial courts’ property classifications and support determinations are reviewed for support in the record; partial remand is appropriate where corrections to characterization require adjusted financial orders.

## Conclusion

The Idaho Supreme Court ruled that undistributed corporate retained earnings increasing the value of premarital stock did not become community property where the community received adequate compensation for the spouse’s labor and there was no evidence of dividend manipulation; it otherwise affirmed much of the property characterization, modified parts of the financial orders, and remanded for further proceedings consistent with that analysis.


Simplot v. Simplot, 526 P.2d 844 (Idaho 1974)