§4.03 Allocating Earnings and Profits

You may apply one of two alternative approaches to allocate earnings and profits between separate and community income:

• Under the Pereira method of apportionment, which derives from Pereira v Pereira (1909) 156 C 1, 7, you should allocate a fair return on the spouse's separate property investment as separate income, and allocate any excess to the community property as arising from the spouse's efforts [Beam v Bank of America (1971) 6 C3d 12, 21]; or
• Under the Van Camp method of apportionment, which derives from Van Camp v Van Camp (1921) 53 CA 17, 27–28, you should determine the reasonable value of the spouse's services, allocate that amount as community property, and treat the balance as separate property attributable to the normal earnings of the separate estate [Beam v Bank of America, supra, 6 C3d at 18].

Under either approach, you must deduct the community's living expenses from community income to determine the balance of the community property. [Beam v Bank of America, supra, 6 C3d at 21.]