177 Cal.App.3d 150 (1986)
222 Cal. Rptr. 790
In re the Marriage of MARY K. and
HAROLD F. NELSON, JR.
MARY K. NELSON, Appellant,
HAROLD F. NELSON, JR., Appellant.
Docket No. A021066.
Court of Appeals of California, First District, Division
February 4, 1986.
Stanley W. Smith and Niven
& Smith for Appellant Wife.
Harold F. Nelson, Jr., in
pro. per., for Appellant Husband.
[Opinion certified for
cross-respondent, Harold F. Nelson, Jr. (hereafter Harold), appeals from
portions of the interlocutory judgment dissolving his marriage to
cross-appellant and respondent, Mary K. Nelson (hereafter Mary).
Both parties raise issues
regarding property distributed in the judgment.
A large portion of the trial
court's decree involved the characterization and apportionment of stock options
issued to Harold by his employer, the Ampex Corporation. These fell into three separate
categories: those that were granted and became exercisable before the parties
separated; those that were granted before the parties separated but were not
exercisable until after they separated (hereafter the intermediate options);
and those that were granted after the parties separated (hereafter the
postseparation options). The first group was characterized by the trial court
as wholly community property, the second partly community property and partly
Harold's separate property (using a time rule) and the third wholly Harold's
Other property owned by the
parties was characterized as follows: A one-half interest in a parcel of real
property located in Maui, Hawaii (hereafter the Hawaiian property), was
declared a community asset. The couple's house in Half Moon Bay, California,
was also found to be community property. A year-end bonus paid to Harold six
months after the parties separated was determined to be his separate property.
.... .... .... .... .... ....
III. Intermediate Options
Partly Community Property
The trial court's statement
of decision contains the following discussion: "The stock options owned
but not exercisable as of the date of separation were in part community
property for the same reason that a pension plan which is subject to divestment
by termination of employment has a community 154*154 property aspect. They were
granted for services rendered and to be rendered.... See In re Marriage of Brown (1976) 15 Cal.3d 838 and
its progeny, particularly In re Marriage of Judd (1977) 68 Cal. App.3d 515."
(1) Harold disputes the trial
court's finding. He does not attack the court's apportionment of the value of
these options between community and separate property, but rather argues that
they had no community aspect at all. In making this argument he relies
primarily on the following assertions: that the options are not analogous to
nonvested pension benefits, thus making reference to cases like Brown
and Judd inapropos; that the options had no value before their date of
exercisability, so that upon becoming exercisable they were postseparation
earnings within the meaning of Civil Code section 5118; and in a similar vein,
that the price of the Ampex Company stock must increase in value after the date
of exercisability for the employee to realize a gain so the options reward only
future rather than past efforts on the employee's part.
In re Marriage of Hug (1984) 154 Cal. App.3d 780 [201 Cal.
Rptr. 676], refutes Harold's arguments: "we hold that in
marital dissolution actions the trial court has broad discretion to select an
equitable method of allocating community and separate property interests in
stock options granted prior to the date of separation of the parties, which
became exercisable after the date of separation." (At p. 782.) Implicit in
this statement is a recognition of employee stock option grants as "not an
expectancy but a chose in action, a form of property ..." susceptible of
division in spite of being contingent or not having vested. (In re Marriage of Brown, supra, 15 Cal.3d at p. 845 [126 Cal. Rptr.
633, 544 P.2d 561]; In re Marriage of Hug, supra, 154 Cal. App.3d at p. 791.)
IV. Intermediate Options
(2) Mary argues that not only
the above-cited holding of Hug should apply to this case, but also the
formula for apportionment of the intermediate stock options as between
community and separate property which it approved. There the number of options
determined to be community was the product of a fraction in which the numerator
was the period in months from the commencement of the spouse's tenure with his
employer to the date of the couple's separation, and the denominator was the
period in months between commencement of employment and the date when each
group of options first became exercisable. This fraction was then multiplied by
the number of shares of stock which could be purchased with each block of
options, yielding the community figure. (In re Marriage of Hug, supra, 154 Cal. App.3d at p. 782.)
155*155 In contrast, the
trial court here utilized a formula in which the numerator was the number of
months from the date of grant of each block of options to the date of the
couple's separation, while the denominator was the period from the time of each
grant to its date of exercisability.
Our reading of In re
Marriage of Hug convinces us that no modification of the trial court's
formula for apportionment is necessary. Hug specifically states,
"we stress that no single rule or formula is applicable to every
dissolution case involving employee stock options. Trial courts should be
vested with broad discretion to fashion approaches which will achieve the most
equitable results under the facts of each case." (In re Marriage of Hug, supra, 154 Cal. App.3d at p. 792.)
We find nothing inequitable in the formula adopted by the trial court; in fact,
under the circumstances of this case it was probably a better method of division.
V. Anticipated Taxation
of Options Properly Credited
It is clear from the face of
the option grants that any gain realized upon their exercise is taxable as
ordinary income. In recognition of this fact, the trial court ordered that the
portion of the options valued as community property be reduced to reflect an
assumed tax rate of 20 percent, and correspondingly credited Harold directly
with one-half this amount. The court ordered, in addition, that should Harold
actually realize a tax consequence in excess of 20 percent upon exercising any
of the "community options," he would be credited for the further
reduction in their value as community assets.
Credit for the increased tax
rate would be limited to its effect on the community property value of the
options as set forth in the interlocutory judgment. The court further ordered,
"[i]n the event that the actual tax attributable to the exercise of the
Ampex/Signal stock options is less than the twenty percent (20%) offset
provided for above [$9,243.76], Respondent [Harold] shall reimburse to
petitioner [Mary] one-half (1/2) of the difference between the actual tax
attributable to exercise of the options and the amount of the offset provided
for herein [$9,243.76]."
(3a) Harold argues that the
trial court should have offset the community property value of the options by
55 percent, his "more likely income tax 156*156 rate," and eliminated
the adjustment mechanisms cited above. In support of this he points out that
the court, in assigning to him a tax loss carry forward as an asset, recognized
his 55 percent incremental bracket. He states, "[i]f the court assumes
realization of value [of the options], as it has done, it must also assume
The case law does not support
Harold's argument. (4a) In distributing community assets, a trial court is
obliged to consider tax consequences only where it is proven that an immediate
and specific liability will arise upon the ordered division. (Weinberg v. Weinberg (1967) 67 Cal.2d
557, 566 [63 Cal. Rptr. 13, 432 P.2d 709]; In re Marriage of Sharp (1983) 143 Cal. App.3d 714, 718-719
[192 Cal. Rptr. 97].) (3b) In the situation at hand, the time at
which a tax liability may arise and the extent of that tax liability are
exclusively within Harold's control. He is under no obligation as a result of
the interlocutory judgment to immediately exercise the options. (4b) "The
trial court need not ... consider tax consequences that may or may not arise
after the division of the community property." (Weinberg v. Weinberg, supra, 67 Cal.2d
at p. 566.)
(3c) This is not to say that
the trial court erred in ordering that Harold be issued a credit against
possible tax liability and establishing a mechanism for possible future
credits. Civil Code section 4800 directs the trial court to divide community
assets equally upon dissolution of a marriage, and where economic circumstances
warrant to "award any asset to one party on such conditions as it deems
proper to effect a substantially equal division of the property." (§ 4800,
subd. (b)(1).) The special economic circumstance present in this case is the
fact that the options are nonassignable and therefore had to all be given to
Harold. The court's tax reimbursement formula was therefore a substitute for
what, as it declared, would have been a more equitable distribution: "to
divide them [the options] in kind and let each party be at the mercy of his/her
own tax circumstance."
VI. Postseparation Stock
Options and Bonus Both Separate Property
Mary maintains that in line
with the principles of In re Marriage of Brown, supra, 15 Cal.3d 838 and In re Marriage of Judd, supra, 68 Cal. App.3d 515 [137 Cal. Rptr.
318], a portion of both Harold's grant of 157*157 1,750 Ampex stock
options, received 25 days after the couple's legal date of separation, and his
year-end bonus, received some 8 months after separation, is community property.
The trial court ruled in regard to these assets, "[t]hose [options] which
had not been granted as of separation are confirmed to husband as his separate
property," and "[t]he Court is not persuaded ..." by Mary's
claim "that all or some portion of a $9,000.00 bonus received
post-separation by Mr. Nelson [Harold] is community property because it was
paid either in consideration for or in recognition of services rendered during
We recall for purposes of
this discussion the trial court's explanation of why it characterized the
intermediate options as partly a community asset. In its wording it expressly
recognized the holdings of Brown and Judd that contractual rights
earned wholly or in part during marriage, even if not vested at the time of
separation, are partially community assets. We therefore conclude that in
characterizing the postseparation bonus and stock options as Harold's separate
property, it made the factual determination that these assets had not,
even in part, accrued to Harold before his separation from Mary. (5) That being
the case, our mandate on appeal is solely to determine whether or not there is
support in the record for the trial court's findings under the previously set
forth "substantial evidence rule."
(6) Harold testified that he
was granted the 1,750 postseparation options concurrent with his promotion to
treasurer of Ampex, as approved by its board of directors on October 28, 1980
(25 days after separation). Like the previous option grants, the purchase price
of each option was the fair market value of Ampex stock on the date of the
grant; thus, as Harold testified, the value of Ampex stock had to rise after
the date of grant in order for the grantee to realize a profit. Though Harold
admitted that he knew of his impending promotion before separating from Mary,
there is no indication that the board's ratification was a foregone conclusion.
Also, Harold testified that there was no mention of the option grant before the
board acted. From this it was reasonable for the trial court to conclude that
Harold had no expectation of being granted this block of options and enjoyed no
financial gain from them until after his separation from Mary.
In the case of the bonus, the
strongest evidence that it was a guaranteed yearly form of compensation was the
fact that Harold received one both in 1980 and 1981. He testified at one point,
however, "[t]here is no contract associated with the bonuses. It's a
decision is [sic] made yearly at the end of the year and I know only
what I'm told." He also testified that some employees who had received
bonuses in 1980 received lesser ones or none at all in 1981. The trial court
had the option of believing this testimony and concluding that Ampex employees
had only an expectancy of a year-end 158*158 bonus rather than a right to one
contingent solely upon continued employment.
We therefore affirm the trial
court's characterization of the 1,750 stock options granted October 29, 1980,
and the $9,000 bonus paid in May 1981 as Harold's separate property.
VII. Attorney's Fees on
.... .... .... .... .... ....
We therefore remand this case
to the trial court solely for the purpose of determining the propriety of
awarding attorney's fees and costs on appeal. In all other respects the
interlocutory judgment is affirmed.
Poche, J., and Channell, J.,
[*] Certified for publication except as to parts I, II and
VII (Cal. Rules of Court, rules 976(b) and 976.1.)
 In the middle of the divorce proceedings the Ampex
Corporation became the Signal Companies, Inc., as the result of a
merger/reorganization. The options to buy Ampex stock were converted into
options to buy Signal stock.
[*] Parts I and II of this opinion are not certified for
publication. (See fn., ante, at p. 150.)
 The major difference we discern between the Ampex
options and those before the court in Hug is that while both reward
future productivity, the Hug options appear to have been designed to
attract new employees and/or more generously reward past services. (Id.,
at pp. 783, 789.) As previously discussed, only prospective increases in the
value of Ampex stock could result in a profit to the Ampex option holders. It
was therefore appropriate to place more emphasis on the period following each
grant to the date of separation, as the trial court did here, than on the
employee's entire tenure with the company up to the time of separation as the Hug
 Harold also argues that the trial court's program of
reimbursement is flawed because the value of the options could plunge, he could
then exercise them, his tax liability would be very low because he would
realize very little income, and yet he would be compelled to reimburse Mary the
difference between his 20 percent allowance and the tax he was actually
required to pay. We find this contention overly speculative and contradictory
of the basic thrust of his argument, that the value of the options should have
been further discounted.
[*] Part VII of this opinion is not certified for
publication. (See fn., ante, at p. 150.)