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                               Nebraska Supreme Court Advance Sheets
                                        304 Nebraska Reports
                                                  WHITE v. WHITE
                                                 Cite as 304 Neb. 945




                       Ann Coyle White, appellee and cross-appellant,
                            v. Timothy Vincent White, appellant
                                     and cross-appellee.
                                                   ___ N.W.2d ___

                                        Filed January 31, 2020.   No. S-19-047.

                 1. Divorce: Child Custody: Child Support: Property Division: Alimony:
                    Attorney Fees: Appeal and Error. In a marital dissolution action, an
                    appellate court reviews the case de novo on the record to determine
                    whether there has been an abuse of discretion by the trial judge. This
                    standard of review applies to the trial court’s determinations regarding
                    custody, child support, division of property, alimony, and attorney fees.
                 2. Evidence: Appeal and Error. In a review de novo on the record, an
                    appellate court is required to make independent factual determinations
                    based upon the record, and the court reaches its own independent con-
                    clusions with respect to the matters at issue.
                 3. Judges: Words and Phrases. A judicial abuse of discretion exists if the
                    reasons or rulings of a trial judge are clearly untenable, unfairly depriv-
                    ing a litigant of a substantial right and denying just results in matters
                    submitted for disposition.
                 4. Divorce: Property Division. Under Neb. Rev. Stat. § 42-365 (Reissue
                    2016), the equitable division of property is a three-step process.
                 5. ____: ____. The first step in the equitable division of property is to clas-
                    sify the parties’ property as marital or nonmarital, setting aside the non-
                    marital property to the party who brought that property to the marriage.
                 6. ____: ____. All property accumulated and acquired by either spouse
                    during the marriage is part of the marital estate, unless it falls within an
                    exception to this general rule.
                 7. ____: ____. The marital estate does not include property that a spouse
                    acquired before the marriage, or by gift or inheritance.
                 8. ____: ____. Any given property can constitute a mixture of marital and
                    nonmarital interests; a portion of an asset can be marital property while
                    another portion can be separate property.
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           Nebraska Supreme Court Advance Sheets
                    304 Nebraska Reports
                              WHITE v. WHITE
                             Cite as 304 Neb. 945

 9. ____: ____. The original capital or value of an asset may be nonmarital,
    while all or some portion of the earnings or appreciation of that asset
    may be marital.
10. Divorce: Property Division: Presumptions. Accrued investment earn-
    ings or appreciation of nonmarital assets during the marriage are pre-
    sumed marital unless the party seeking the classification of the growth
    as nonmarital proves: (1) The growth is readily identifiable and trace-
    able to the nonmarital portion of the account and (2) the growth is not
    due to the active efforts of either spouse.
11. Divorce: Property Division: Words and Phrases. Appreciation caused
    by marital contributions is known as active appreciation, and it consti-
    tutes marital property.
12. ____: ____: ____. Passive appreciation is appreciation caused by sepa-
    rate contributions and nonmarital forces.
13. Divorce: Property Division: Proof. The burden is on the owning
    spouse to prove the extent to which marital contributions did not cause
    the appreciation or income.
14. Evidence: Appeal and Error. When evidence is in conflict, the appel-
    late court considers and may give weight to the fact that the trial court
    heard and observed the witnesses and accepted one version of the facts
    rather than another.
15. Divorce: Property Division. Separate property becomes marital prop-
    erty by commingling if it is inextricably mixed with marital property or
    with the separate property of the other spouse.
16. ____: ____. If the separate property remains segregated or is traceable
    into its product, commingling does not occur.
17. ____: ____. The second step in the equitable division of property is to
    value the marital assets and marital liabilities of the parties.
18. Divorce: Property Division: Appeal and Error. As a general principle,
    the date upon which a marital estate is valued should be rationally
    related to the property composing the marital estate.
19. Divorce: Property Division. The third step in the equitable division
    of property is to calculate and divide the net marital estate between the
    parties in accordance with the principles contained in Neb. Rev. Stat.
    § 42-365 (Reissue 2016).
20. ____: ____. The ultimate test in determining the appropriateness of the
    division of property is fairness and reasonableness as determined by the
    facts of each case.

  Appeal from the District Court for Douglas County: Leigh
Ann Retelsdorf, Judge. Affirmed as modified.
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         Nebraska Supreme Court Advance Sheets
                  304 Nebraska Reports
                         WHITE v. WHITE
                        Cite as 304 Neb. 945

   Anthony W. Liakos and, on brief, Pamela Hogenson Govier,
of Govier, Katskee, Suing & Maxell, P.C., L.L.O., for appellant.

   Paul M. Shotkoski and Michael F. Coyle, of Fraser Stryker,
P.C., L.L.O., for appellee.

  Miller-Lerman, Cassel, Stacy, Funke, Papik, and
Freudenberg, JJ.

  Cassel, J.
                      I. INTRODUCTION­­
   Timothy Vincent White (Tim) appeals from a decree dis-
solving his marriage to Ann Coyle White. Ann cross-appeals.
The main issue is whether the growth in value of one invest-
ment account, derived from a nonmarital source, was properly
classified as marital property. Under the active appreciation
rule, Tim had the burden to prove that the growth was not due
to the active efforts of either spouse. Under the specific facts
here, he failed to do so. But he established that part of another
investment account was nonmarital, and we modify the decree
accordingly. Upon de novo review, we find no abuse of dis-
cretion regarding the court’s valuation date, division of a tax
liability, and order for an equalization payment. As so modi-
fied, we affirm the decree.

                      II. BACKGROUND
   Ann and Tim were married in September 1990. In May
2017, Ann filed a dissolution action. There were no minor chil-
dren, alimony was not contested, and the parties mostly agreed
to the division of property. On appeal, the parties dispute only
the marital or nonmarital characterization of two investment
accounts: the Waddell & Reed 6300 account (6300 account)
and the Charles Schwab account (Schwab account), the valu-
ation date for the two accounts, the allocation of the 2017 tax
liability, and the amount of the equalization payment. We begin
with the accounts.
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          Nebraska Supreme Court Advance Sheets
                   304 Nebraska Reports
                          WHITE v. WHITE
                         Cite as 304 Neb. 945

                   1. Inheritance and Gifts
   In 2008, Tim’s mother died. As an inheritance, he received
4,900 shares of ConAgra stock and $100,000. In April 2012,
he used the $100,000 to purchase mutual funds and transferred
the funds to open the 6300 account. He then used the 4,900
shares of ConAgra stock to open the Schwab account. From
that point on, the accounts differed.

                        (a) 6300 Account
   Regarding the 6300 account, Tim never made any deposits
or withdrawals from the account. The account was solely in
Tim’s name. Ann was aware of the account but unaware that it
was in his name. Tim testified that he told Ann he would take
the $100,000 and diversify it into mutual funds. Because Tim
is a licensed financial advisor, he allocated the investments
using “modern portfolio theory”—which he used for all his
clients. Each year, he reinvested any income earned on the
account. Tim presented evidence that the balance of the 6300
account as of June 30, 2017, was $338,852. Tim’s valuation
date represented the parties’ separation date. Ann presented
evidence that the balance of the 6300 account as of July 31,
2018—a date close to trial—was $357,213.
   In the district court’s decree, it found that June 30, 2017,
was the valuation date for the marital estate “as that date is best
supported by the evidence and represents the separation of the
parties[’] working finances.”
   Further, the court recognized that the account was created
with Tim’s inherited funds and was opened solely in his name.
The taxable income derived from the account, the court noted,
was reported on the parties’ joint tax returns. It found that the
parties discussed the management of the account—specifically,
the diversification of the money into four mutual funds. The
court reasoned that Tim made a marital contribution to the
appreciation, because “there clearly [was] a causal connection
between [Tim’s] investment strategy and the growth in value.”
It awarded the initial $100,000 investment as a nonmarital
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         Nebraska Supreme Court Advance Sheets
                  304 Nebraska Reports
                         WHITE v. WHITE
                        Cite as 304 Neb. 945

asset to Tim. It then classified the appreciation as a marital
asset and awarded it to Tim.
                      (b) Schwab Account
   Tim opened the Schwab account with the 4,900 shares of
ConAgra stock. After this account was opened, Tim’s father
gave 38,000 shares of ConAgra stock to Tim by two direct
transfers into the account. Throughout the parties’ marriage,
they had received gifts of ConAgra stock. All previous gifts
were deposited into the parties’ joint account. Tim testified that
“I was going to keep it separate from our joint account, which
was a margin account, because we had blown through all of
those assets on margin living beyond our means.”
   Tim managed all withdrawals and deposits from the Schwab
account. In 2013, Tim transferred funds from the Schwab
account to purchase a new marital home. About $240,000 of
marital funds were transferred from the joint account to the
Schwab account. Tim diversified the Schwab account and sold
shares of ConAgra to purchase shares in four other compa-
nies. He then purchased several units of exchange trade funds
(ETF’s) with proceeds from ConAgra stock and marital mon-
eys in the account. Throughout the marriage, Tim withdrew
money from the Schwab account for household expenses, trips,
major repairs, and remodeling the marital home. Neither party
deposited any income into the Schwab account.
   Tim presented evidence that the value of the Schwab account
on June 30, 2017, was $1,432,796. According to evidence Ann
submitted, the value of the Schwab account on July 31, 2018,
was $1,648,705.
   In the district court’s decree, it reasoned that no evidence,
other than opening the account in his name, supported an intent
to treat the Schwab account differently from previously gifted
assets. After reviewing the evidence regarding the Schwab
account, the district court reasoned that the difference in the
purpose, management, and utilization of the Schwab account,
in contrast to the 6300 account, resulted in the entire account
being a marital asset. The court stated:
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            Nebraska Supreme Court Advance Sheets
                     304 Nebraska Reports
                              WHITE v. WHITE
                             Cite as 304 Neb. 945

       [T]he totality of evidence before the Court makes it clear
       that both parties intended the [Schwab account] as a “nest
       egg” for the parties’ future and the entirety of the account
       should be treated as a marital asset, as valued on June 30,
       2017, at $1,432,796. This amount is ordered to be equally
       divided between the parties.

                      2. Tax Liability and
                     Equalization Payment
   At trial, Tim testified that the parties always had filed a
joint tax return. He agreed that in practice, if the withholdings
from Ann’s salary did not satisfy the entire tax obligation, the
balance would be paid from the Schwab account. The district
court determined that because the valuation date of the Schwab
account and the 6300 account was June 30, 2017, Tim would
be required to pay the 2017 tax liability.
   The district court found that the marital estate should be
divided equally. Pursuant to the parties’ stipulations and the
court’s division of the disputed accounts, it ordered Tim to pay
Ann $14,373 to equalize the division.
   Tim filed a timely appeal, and Ann cross-appealed. We
moved the proceeding to our docket.1

               III. ASSIGNMENTS OF ERROR
   On appeal, Tim assigns that the district court erred in (1)
finding that the appreciation in the 6300 account constituted
marital property, (2) finding that the Schwab account was
marital property, (3) ordering him to pay the entirety of the
parties’ 2017 joint tax liability, and (4) ordering him to pay an
equalization amount.
   Ann cross-appeals and assigns that the district court erred
in valuing the accounts on June 30, 2017, rather than July 31,
2018.

1
    See Neb. Rev. Stat. § 24-1106(3) (Cum. Supp. 2018).
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            Nebraska Supreme Court Advance Sheets
                     304 Nebraska Reports
                             WHITE v. WHITE
                            Cite as 304 Neb. 945

                  IV. STANDARD OF REVIEW
    [1] In a marital dissolution action, an appellate court reviews
the case de novo on the record to determine whether there has
been an abuse of discretion by the trial judge. This standard
of review applies to the trial court’s determinations regard-
ing custody, child support, division of property, alimony, and
attorney fees.2
    [2] In a review de novo on the record, an appellate court
is required to make independent factual determinations based
upon the record, and the court reaches its own independent
conclusions with respect to the matters at issue.3
    [3] A judicial abuse of discretion exists if the reasons or rul-
ings of a trial judge are clearly untenable, unfairly depriving a
litigant of a substantial right and denying just results in matters
submitted for disposition.4
                           V. ANALYSIS
   [4] It is well settled that under Neb. Rev. Stat. § 42-365
(Reissue 2016), the equitable division of property is a three-
step process.5 Because the parties’ assignments of error attack
different steps in the process, we take up each assignment as it
fits into the three-step framework.
                        1. Classification
   [5] The first step in the equitable division of property is to
classify the parties’ property as marital or nonmarital, setting
aside the nonmarital property to the party who brought that
property to the marriage.6 Tim makes two arguments regard-
ing the court’s classification decisions. First, he argues that
the appreciation in the 6300 account was nonmarital, because

2
    Burgardt v. Burgardt, ante p. 356, 934 N.W.2d 488 (2019).
3
    Id.
4
    Id.
5
    See Dooling v. Dooling, 303 Neb. 494, 930 N.W.2d 481 (2019).
6
    See id.
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             Nebraska Supreme Court Advance Sheets
                      304 Nebraska Reports
                              WHITE v. WHITE
                             Cite as 304 Neb. 945

it was the direct fruit of his inheritance. Second, he argues
that the court erred in classifying the entirety of the Schwab
account as marital property, because, he contends, the growth
of the account was readily identifiable and traceable to the
nonmarital property. We address each argument in turn.
                         (a) 6300 Account
   Tim argues that the appreciation on the 6300 account could
not be considered marital property, because he did not actively
manage the account. His testimony showed, he contends, that
after selecting the initial mutual funds, he relied on profes-
sional money managers to manage the funds. He contends
that the district court’s reliance on Stephens v. Stephens 7 was
misplaced, because the instant case involves classification
of an inheritance and not a business interest. Additionally,
he contends that our broad definition of active appreciation
in Stephens, if extended to the 6300 account, would make it
“virtually impossible . . . to retain the non-marital nature of
a particular asset” where the inheriting spouse has “merely
made the decision to invest in funds that happen to grow
over time.”8
   [6-9] All property accumulated and acquired by either
spouse during the marriage is part of the marital estate, unless
it falls within an exception to this general rule.9 The marital
estate does not include property that a spouse acquired before
the marriage, or by gift or inheritance.10 Any given property
can constitute a mixture of marital and nonmarital interests;
a portion of an asset can be marital property while another
portion can be separate property.11 “Therefore, the original
capital or value of an asset may be nonmarital, while all or

 7
     Stephens v. Stephens, 297 Neb. 188, 899 N.W.2d 582 (2017).
 8
     Brief for appellant at 18.
 9
     Stephens v. Stephens, supra note 7.
10
     Brozek v. Brozek, 292 Neb. 681, 874 N.W.2d 17 (2016).
11
     Stephens v. Stephens, supra note 7.
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             Nebraska Supreme Court Advance Sheets
                      304 Nebraska Reports
                               WHITE v. WHITE
                              Cite as 304 Neb. 945

some portion of the earnings or appreciation of that asset may
be marital.”12
   Here, the focus is only on the growth of the 6300 account.
The district court allocated the original investment of $100,000
solely to Tim as nonmarital.
   [10-13] The active appreciation rule sets forth the relevant
test to determine to what extent marital efforts caused any
part of an asset’s appreciation or income.13 Accrued invest-
ment earnings or appreciation of nonmarital assets during
the marriage are presumed marital unless the party seeking
the classification of the growth as nonmarital proves: (1) The
growth is readily identifiable and traceable to the nonmarital
portion of the account and (2) the growth is not due to the
active efforts of either spouse.14 Appreciation caused by mari-
tal contributions is known as active appreciation, and it con-
stitutes marital property.15 Passive appreciation is appreciation
caused by separate contributions and nonmarital forces.16
The burden is on the owning spouse to prove the extent to
which marital contributions did not cause the appreciation
or income.17
   As an initial matter, Tim contends that the active appre-
ciation rule in Stephens did not apply here, because the rule
addressed appreciation on a nonmarital business interest rather
than an inheritance.18 We disagree. In Stephens, we held that
“the principles set forth in [Stanosheck v. Jeanette 19] apply
equally to appreciation or income during the marriage of

12
     Id. at 201, 899 N.W.2d at 592.
13
     See Stephens v. Stephens, supra note 7.
14
     Id.
15
     Id.
16
     Id.
17
     Id.
18
     See id.
19
     Stanosheck v. Jeanette, 294 Neb. 138, 881 N.W.2d 599 (2016).
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              Nebraska Supreme Court Advance Sheets
                       304 Nebraska Reports
                                WHITE v. WHITE
                               Cite as 304 Neb. 945

any nonmarital asset.”20 We did not limit our holding solely
to retirement accounts and business interests, and we decline
to do so now. Therefore, the burden was on Tim to rebut
the presumption that the appreciation in the 6300 account
was marital.
   Tim satisfied the first test of the active appreciation rule.
Neither party disputes that the growth in the 6300 account was
readily identifiable and traceable to the nonmarital portion of
the account. Accordingly, the issue before us is the rule’s sec-
ond prong: whether the growth in the 6300 account was due to
the active efforts of either spouse.
   Tim contends that the definition of active appreciation in
Stephens and our application of the active appreciation rule
is too broad.21 As we quoted above, he contends that the rule
imposes an “impossible” burden on an inheriting spouse to
maintain an asset’s nonmarital character. In making this argu-
ment, he relies on academic criticism of Stephens, which, he
argues, illustrates that our broad definition of active apprecia-
tion encapsulates passive market conditions. Referring to our
decision, the writer commented:
      In particular, [Stephens] held that “[e]ven favorable mar-
      ket conditions are not passive inasmuch as they create
      merely the opportunity that the skilled, owning spouse
      detects and seizes.” . . . The court cited for this point [to]
      § 5:57 of the third edition of this treatise. But § 5:57 did
      not say that all appreciation caused by favorable market
      conditions is active. On the contrary, it stated expressly
      that appreciation caused by market conditions is gener-
      ally passive.22
   We will address Tim’s argument in two parts. First, we will
discuss case law concerning the development of the active

20
     Stephens v. Stephens, supra note 7, 297 Neb. at 205, 899 N.W.2d at 595
     (emphasis supplied).
21
     See Stephens v. Stephens, supra note 7.
22
     3 Brett R. Turner, Equitable Distribution of Property, § 10:29.2 at 408 (4th
     ed. 2019).
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             Nebraska Supreme Court Advance Sheets
                      304 Nebraska Reports
                             WHITE v. WHITE
                            Cite as 304 Neb. 945

appreciation rule in Nebraska and its application in other
states. Then, we will apply the active appreciation rule to the
facts of this case.
              (i) Case Law on Active Appreciation
   We first discussed the concept of active appreciation in
Coufal v. Coufal.23 In Coufal, we discussed whether the appre-
ciation on the husband’s nonmarital contributions to his state
retirement account was marital property. We began by examin-
ing to what extent the appreciation in the nonmarital portion
of the account was caused by the efforts of either spouse. We
relied on Van Newkirk v. Van Newkirk 24 and Buche v. Buche 25
for the reasoning that “some level of indirect or direct effort
was required by the nontitled spouse—not just inflation or
market forces—in order to include the increase in value in the
marital estate.”26
   In Coufal, we then analogized the account to a certificate
of deposit with a fixed rate of interest that was owned by
a spouse prior to the marriage. We explained that both the
principal and the interest remained separate property, because
it was acquired before the marriage and no marital effort or
contribution affected the accrual of interest. We reasoned that
because the interest accrued solely from the operation of Neb.
Rev. Stat. § 84-1301 (Cum. Supp. 2018), no effort of either
spouse directly or indirectly affected the appreciation. We
rejected the wife’s argument that the marital and nonmarital
portions of the account were commingled. We reasoned that
the appreciation on the nonmarital portion of the account was
readily identifiable and traceable. Thus, we concluded, the
appreciation of the nonmarital portion of the husband’s state
retirement account was also nonmarital.

23
     Coufal v. Coufal, 291 Neb. 378, 866 N.W.2d 74 (2015).
24
     Van Newkirk v. Van Newkirk, 212 Neb. 730, 325 N.W.2d 832 (1982),
     abrogated, Stephens v. Stephens, supra note 7.
25
     Buche v. Buche, 228 Neb. 624, 423 N.W.2d 488 (1988).
26
     Coufal v. Coufal, supra note 23, 291 Neb. at 384, 866 N.W.2d at 78.
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             Nebraska Supreme Court Advance Sheets
                      304 Nebraska Reports
                             WHITE v. WHITE
                            Cite as 304 Neb. 945

   In Stanosheck v. Jeanette,27 we discussed the application
of Coufal to nonmarital retirement accounts. We agreed that
Coufal was not restricted to any particular kind of retirement
account; instead, its applicability was dependent on the facts
of each case. Extrapolating a test from Coufal, we stated that
investment earnings accrued during the marriage on the non-
marital portion of a retirement account may be classified as
nonmarital where the party seeking the classification proves:
(1) The growth is readily identifiable and traceable to the non-
marital portion of the account and (2) the growth is due solely
to inflation, market forces, or guaranteed rate rather than the
direct or indirect effort, contribution, or fund management of
either spouse.28
   In Stephens, we discussed the concept of active apprecia-
tion regarding a business interest.29 We rejected the husband’s
argument that Coufal and Stanosheck apply only to apprecia-
tion on retirement accounts. After reexamining Van Newkirk
and our case law on awards under Grace v. Grace,30 we
found them inapplicable in our modern dual classification
system but did not absolutely forbid a court from taking into
account nonmarital assets in its equitable division of the mari-
tal estate.31
   Then, relying on Stanosheck, we articulated in Stephens the
active appreciation rule. In doing so, we agreed with several
other jurisdictions that the burden is on the owning spouse to
prove the extent to which marital contributions did not cause
the appreciation and expressly held that the appreciation or
income of a nonmarital asset during the marriage is marital

27
     Stanosheck v. Jeanette, supra note 19.
28
     Id.
29
     Stephens v. Stephens, supra note 7.
30
     See Grace v. Grace, 221 Neb. 695, 380 N.W.2d 280 (1986), abrogated,
     Stephens v. Stephens, supra note 7.
31
     Stephens v. Stephens, supra note 7.
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                      304 Nebraska Reports
                               WHITE v. WHITE
                              Cite as 304 Neb. 945

insofar as it was caused by the efforts of either spouse or
both spouses.32
   Applying the active appreciation rule in Stephens, we rea-
soned that the district court should not have excluded the
business interest from the marital estate. We explained that
the growth in the value of the husband’s business interest
depended on the extent of growth of the business that was
caused by his active efforts. We discussed the husband’s active
efforts as someone in first-tier management. The husband was
a cofounder of the business and worked full time for 25 years,
contributing significantly to the business’ growth.
   We then discussed in Stephens the direct and indirect efforts
of a spouse. We rejected the argument that “‘“ground work”’”
for growth was laid before the marriage and would preclude
appreciation of the company’s value during the marriage as mar-
ital.33 We illustrated a spouse’s indirect efforts as active efforts
when his or her mere presence was identified with the business
entity and tied to its goodwill.
   Regarding direct efforts, we cited to Turner’s treatise on
equitable distribution. “‘[E]ven favorable market conditions
are not passive inasmuch as they create merely the opportunity
that the skilled, owning spouse detects and seizes.’”34 In the
context of Stephens, the quotation merely explained how a busi-
ness owner could actively exploit favorable market conditions.
We reject the interpretation that favorable market conditions
necessarily result in active appreciation. We reasoned that the
husband did not carry his burden to demonstrate that any por-
tion of his business’ appreciation was due to passive efforts or
“the active efforts of third parties who would qualify as first-
tier management or similar.”35 In light of the burden of proof,
the record presented evidence that the husband’s active efforts

32
     Id.
33
     Id. at 208, 899 N.W.2d at 596.
34
     3 Turner, supra note 22.
35
     Stephens v. Stephens, supra note 7, 297 Neb. at 208, 899 N.W.2d at 596.
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                      304 Nebraska Reports
                              WHITE v. WHITE
                             Cite as 304 Neb. 945

were responsible for at least 34 percent of the business’ growth
during the marriage.
   In Baker v. Baker,36 the Minnesota Supreme Court dis-
cussed active appreciation on the nonmarital portion of the
husband’s retirement account. The husband had 11 separate
accounts, which were moved between several financial institu-
tions, including Merrill Lynch. The Merrill Lynch manager of
the husband’s account testified that he and his money manag-
ers had discretion to invest the money from the accounts. The
Merrill Lynch manager had power to direct investment and
transfer funds between investment institutions. The husband
directed only one trade to be made in 13 years at Merrill
Lynch. He never made a withdrawal or received distribu-
tions from the accounts during the marriage. All investment
returns were reinvested. The Minnesota Court of Appeals rea-
soned that because the husband had control over the accounts
by transferring them between institutions, he actively man-
aged the accounts and defeated the claim that the investment
was passive.
   In disagreeing with the lower court’s analysis, the Minnesota
Supreme Court in Baker made five points. Its precedent on
active appreciation focused on the spouse’s efforts and not the
spouse’s control over an asset. Its case law regarding active
appreciation dealt primarily with appreciation in the value of
a small business or real estate. In evaluating an investment
portfolio, the court looked to the character of the underly-
ing investments. And it rejected the lower court’s reliance
on agency principles to attribute Merrill Lynch’s efforts to
the husband. Instead, the Minnesota Supreme Court reasoned
that by utilizing professional investment institutions, the hus-
band avoided the need to devote significant marital efforts
to managing his retirement funds. Thus, the court concluded,
the husband’s efforts were insufficient to render the apprecia-
tion active.

36
     Baker v. Baker, 753 N.W.2d 644 (Minn. 2008).
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             Nebraska Supreme Court Advance Sheets
                      304 Nebraska Reports
                              WHITE v. WHITE
                             Cite as 304 Neb. 945

   In Chapman v. Chapman,37 the Florida District Court of
Appeal discussed active appreciation on bonds in a retirement
account. The issue before the court was whether the trial court
erred in holding that a portion of increase of nonmarital securi-
ties resulted from marital labor. The husband’s efforts were lim-
ited to replacing investment grade bonds, as they became due,
with similar bonds. The wife’s expert opined that the husband’s
active trading of stocks and bonds enabled him to achieve a
greater annual return than the benchmark for stocks and bonds.
The wife presented evidence of “the benchmark [of return] for
stocks [through] the Standard & Poors 500 Stock Index” and
“[t]he benchmark for . . . bonds [through] the Lehman Brothers
Aggregate Bond Index . . . .”38 The appellate court affirmed the
trial court’s treatment of the portion of the appreciation which
could have been achieved through passive investment as non-
marital and the additional appreciation as marital.
   In O’Brien v. O’Brien,39 the North Carolina Court of Appeals
discussed appreciation in an investment account funded with
inherited moneys. After setting forth the evidence which per-
suaded the court that the original nonmarital investments
were traced to the existing account, the court then discussed
whether the appreciation should be considered marital. It
adopted a multifactorial approach from the Missouri Court of
Appeals to determine whether either spouse performed sub-
stantial services during the marriage to increase the value of
the investment.
      In making the determination of whether the services of
      a spouse are substantial, the trial court should consider,
      among other relevant facts and circumstances of the par-
      ticular case, the following factors: (1) the nature of the
      investment; (2) the extent to which the investment deci-
      sions are made only by the party or parties, made by

37
     Chapman v. Chapman, 866 So. 2d 118 (Fla. App. 2004).
38
     Id. at 118-19.
39
     O’Brien v. O’Brien, 131 N.C. App. 411, 508 S.E.2d 300 (1998).
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      the party or parties in consultation with their investment
      broker, or solely made by the investment broker; (3) the
      frequency of contact between the investment broker and
      the parties; (4) whether the parties routinely made invest-
      ment decisions in accordance with the recommendation
      of the investment broker, and the frequency with which
      the spouses made investment decisions contrary to the
      advice of the investment broker; (5) whether the spouses
      conducted their own research and regularly monitored the
      investments in their accounts, or whether they primarily
      relied on information supplied by the investment broker;
      and (6) whether the decisions or other activities, if any,
      made solely by the parties directly contributed to the
      increased value of the investment account.40
The North Carolina appellate court agreed with the trial court
that because the spouses jointly met with the broker and rou-
tinely chose between the broker’s alternative recommendations,
neither spouse’s services were substantial.
   We adhere to the active appreciation rule articulated in
Stephens. Tim had the burden to prove that all or some por-
tion of the growth in value was not attributable to his or Ann’s
active efforts. We reject his assertion that this imposed an
“impossible” burden. And we agree that in an appropriate case
and depending upon the particular circumstances, the factors
articulated by the North Carolina appellate court may be useful
in assessing whether growth was attributable to the efforts of
either spouse.

                          (ii) Application
   [14] Upon a de novo review of the record for an abuse of the
district court’s discretion, we conclude that Tim failed to carry
his burden. And here, witness credibility becomes important.
When evidence is in conflict, the appellate court considers
and may give weight to the fact that the trial court heard and

40
     Id. at 421, 508 S.E.2d at 307.
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                               WHITE v. WHITE
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observed the witnesses and accepted one version of the facts
rather than another.41
   We concede that there was no evidence of any active efforts
on Ann’s part; thus, we look solely to Tim’s efforts. At oral
argument, neither party disputed that the growth amounted
to something in the neighborhood of 15 percent compounded
annually. In other words, both acknowledged what appeared to
be a highly successful rate of growth.
   Tim presented no evidence to establish that this growth was
attributable solely to passive market forces or separate contri-
butions, even in part. Tim did not present evidence of some
recognized benchmark of general market growth, which might
have been very persuasive evidence of the effect of market
forces.42 Nor did he present evidence that the annual rate of
return, or some portion of it, was guaranteed or statutorily pre-
scribed.43 He failed to show that he relied on the recommenda-
tions or management of his account by a third party.44 To the
contrary, in light of the district court’s findings, the evidence
showed that through Tim’s direct efforts of employing his mod-
ern portfolio theory, he achieved a highly successful return on
his investment. He did not distinguish these efforts from simi-
lar efforts he provided to his clients. Without evidence showing
that his direct or indirect efforts did not cause the appreciation,
we agree with the district court that there was a causal connec-
tion between Tim’s efforts in employing his modern portfolio
theory and the appreciation on the account.
   Had the evidence provided a basis for distinguishing the
results attributable to his efforts from the results that would
have occurred merely because of market forces, the district

41
     Burgardt v. Burgardt, supra note 2.
42
     See Chapman v. Chapman, supra note 37.
43
     See, Coufal v. Coufal, supra note 23; Stanosheck v. Jeanette, supra
     note 19.
44
     See Stephens v. Stephens, supra note 7. See, also, Baker v. Baker, supra
     note 36; O’Brien v. O’Brien, supra note 39.
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                              WHITE v. WHITE
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court might have abused its discretion in failing to treat some
or all of the appreciation as nonmarital. But, here, Tim had
the burden of proof and he simply failed to carry that burden.
Accordingly, the district court did not err in classifying the
appreciation on the 6300 account as marital.
                       (b) Schwab Account
   Tim argues that the entirety of the Schwab account is
nonmarital, because the growth was readily identifiable and
traceable to the inherited and gifted assets. Tim contends that
the record showed that he never had the intent to make the
gifted or inherited assets marital property, because he opened
the account solely in his name and the growth in the account
was not due to his active efforts. He contends that the dis-
trict court placed extensive emphasis on its interpretation of
Tim’s intent and erroneously considered Ann’s intent regard-
ing the account.
   As stated earlier in this opinion, the marital estate does not
include property that a spouse acquired before the marriage,
or by gift or inheritance.45 The burden of proof rests with the
party claiming that property is nonmarital.46
   The record shows that Tim inherited shares of ConAgra
stock from his late mother and received gifts of additional
shares of ConAgra stock from his father and his uncle. All
stock was placed in the Schwab account, along with other
marital property. Although the vast majority of the ConAgra
stock was converted into other assets, at the valuation date,
6,500 shares of ConAgra stock remained.
   [15,16] Setting aside nonmarital property is simple if the
spouse possesses the original asset, but can be problematic if
the original asset no longer exists.47 Separate property becomes
marital property by commingling if it is inextricably mixed
with marital property or with the separate property of the other

45
     Stephens v. Stephens, supra note 7.
46
     Rohde v. Rohde, 303 Neb. 85, 927 N.W.2d 37 (2019).
47
     Brozek v. Brozek, supra note 10.
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                         WHITE v. WHITE
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spouse.48 If the separate property remains segregated or is
traceable into its product, commingling does not occur.49

                 (i) Remaining ConAgra Stock
   Tim showed that the ConAgra stock left in the Schwab
account remained segregated and traceable. The evidence is
undisputed that all of the shares of ConAgra stock that came
into the Schwab account were Tim’s by inheritance or gift.
Although most of the stock was sold, there were 6,500 shares
remaining at the time of trial. We conclude that Tim met his
burden of tracing the remaining shares of ConAgra stock and
proving it to be nonmarital. Therefore, the district court erred
in classifying the 6,500 shares of ConAgra stock as mari-
tal property. We modify the court’s decree to determine that
the remaining 6,500 shares of ConAgra stock in the Schwab
account were Tim’s nonmarital property.

                     (ii) Other Holdings in
                         Schwab Account
   Marital and nonmarital funds were withdrawn and deposited
into the Schwab account. In order to purchase the parties’ mari-
tal home, Tim wired funds directly from the Schwab account
to the real estate company. The parties acquired several large
sums of money from a settlement award, the mortgage on the
marital home, and the proceeds from the sale of the former
marital home. Some of the moneys were placed in the joint
account, some were used for home improvements, and the
remaining $240,000 was placed in the Schwab account.
   Additionally, Tim diversified the account with both marital
and nonmarital funds. The record shows that Tim sold thou-
sands of ConAgra shares and purchased ETF’s. The record
further shows that as Tim moved marital funds into the Schwab
account, he diversified those moneys into the same ETF’s. He
then sold some of the ETF’s and purchased other ETF’s.

48
     Id.
49
     Id.
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                               WHITE v. WHITE
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   Except for the 6,500 shares of remaining ConAgra stock,
the evidence presented did not show that the gifted stock was
segregated or traceable into its products. Several gifted shares
and marital moneys were used to purchase ETF’s. ETF’s were
then sold to purchase different ETF’s. Clearly, the nonmarital
property became commingled when it was inextricably mixed
with the marital property through diversification. It was Tim’s
burden to show what portion of the parties’ assets were attrib-
utable as nonmarital assets. Tim did not meet his burden. We
conclude that the district court did not abuse its discretion
when classifying the Schwab account, other than the 6,500
shares of ConAgra stock, as marital property.
   The district court’s decree valued the Schwab account at
$1,432,796 and divided it equally between the parties, i.e.,
$716,398 to each party. Having modified the decree to clas-
sify the remaining 6,500 shares of ConAgra stock, which were
valued at $232,440, as Tim’s nonmarital property, we further
modify the decree to divide the remaining value of the Schwab
account, totaling $1,200,356, equally between the parties, i.e.,
$600,178 to each party. Thus, of the value of the Schwab
account totaling $1,432,796, Tim shall receive $832,618 and
Ann shall receive $600,178.
                       2. Valuation Date
   [17] The next assignment of error falls within the second
step of the three-step framework for division of property. The
second step in the equitable division of property is to value the
marital assets and marital liabilities of the parties.50
   On cross-appeal, Ann argues that the district court erred in
valuing the 6300 account and the Schwab account on June 30,
2017, instead of July 31, 2018. She contends that Tim received
a windfall from the growth in the accounts between the two
valuation dates. She contends that the district court consid-
ered the growth of the accounts when it ordered Tim to pay
the tax liability. Ann does not explain why the June 30, 2017,

50
     See Dooling v. Dooling, supra note 5.
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                              WHITE v. WHITE
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valuation date was not reasonably related to the property. She
requests that if we change the district court’s findings in any
way, we should consider this growth.
   [18] Ann’s argument lacks merit. As a general principle, the
date upon which a marital estate is valued should be rationally
related to the property composing the marital estate.51 She has
failed to show how the June 30, 2017, valuation date does not
reasonably relate to the property. And she has failed to identify
why the July 31, 2018, valuation date reasonably relates to the
property. The district court found that the June 30, 2017, valu-
ation date was “best supported by the evidence and represents
the separation of the parties[’] working finances.” Upon a de
novo review of the record, we cannot say that the district court
abused its discretion in determining the valuation date.
                          3. Division
   [19,20] The remaining assignments of error fall within the
third step in the process of dividing property. The third step
in the equitable division of property is to calculate and divide
the net marital estate between the parties in accordance with
the principles contained in § 42-365.52 The ultimate test in
determining the appropriateness of the division of property
is fairness and reasonableness as determined by the facts of
each case.53
                      (a) 2017 Tax Liability
   Tim argues that the district court erred in allocating the par-
ties’ 2017 tax liability. He relies on Meints v. Meints 54 for the
proposition that income tax liability incurred during the mar-
riage is one of the accepted costs of producing marital income,
and thus, income tax liability should generally be treated as
a marital debt. He contends that Meints effectively holds that

51
     Rohde v. Rohde, supra note 46.
52
     See Dooling v. Dooling, supra note 5.
53
     Id.
54
     Meints v. Meints, 258 Neb. 1017, 608 N.W.2d 564 (2000).
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                           WHITE v. WHITE
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one spouse cannot be solely responsible for the parties’ tax
liability. He contends that the district court did not equitably
divide the marital debt. We disagree.
   In Meints, during the course of the marriage, the husband
accrued a federal income tax liability and statutory penalties
for late filings.55 The district court found that the husband was
responsible for the accrued income tax liability. We reasoned
that although income tax liability was a marital debt, when an
innocent spouse has filed a separate tax return and paid his or
her taxes in a timely manner, the innocent spouse should not
be forced to share in the statutory penalties. We concluded that
the district court erred in attributing all past due tax liability to
the husband and that the tax liability should have been equi-
tably divided, while the statutory penalties should remain as
nonmarital debt of the husband.
   While the Meints rule generally applies, the specific facts
of this case support a different outcome. The record supports
that the district court gave proper consideration to fairness
and reasonableness when dividing the 2017 tax liability. The
district court determined that because “the operative date of
the appropriate determination of the value of the disputed
marital assets is June 30, 2017 for both [the 6300 account
and the Schwab account], [Tim] is ordered to pay the 2017
tax liability.” The record showed that if Ann’s federal and
state income tax withholdings were insufficient to cover the
entirety of the parties’ tax liability, Tim would pay the tax
liability from the Schwab account. It showed that Ann earned
a salary of over $200,000 a year and that she had significant
federal and state income withholdings. Additionally, there was
evidence of significant growth in both the 6300 account and
the Schwab account between the argued for valuation dates,
which would effectively be awarded to Tim. Based upon the
facts of the case, it appears that the district court considered
fairness and reasonableness as to the parties’ circumstances

55
     Id.
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                         WHITE v. WHITE
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when distributing the tax liability. We cannot say that the dis-
trict court abused its discretion when ordering Tim to pay the
2017 tax liability.
                         (b) Equalization
   Based upon all his arguments, Tim argues that it was ineq-
uitable for the district court to order an equalization payment.
He contends that if we were to remove the appreciation on the
6300 account and the entirety of the Schwab account from the
marital estate, 56 percent of the estate would accrue to Ann and
only 44 percent to him. The circumstances, he suggests, do not
justify a disparate division of the marital estate.
   But we have rejected the conditions on which his argument
is premised. We do not remove the appreciation on the 6300
account and the entirety of the Schwab account from the mari-
tal estate. Thus, his argument necessarily fails. And because we
have already accounted for the removal of the 6,500 ConAgra
shares and the equal division of the remainder of the value of
the Schwab account above, no further modification is neces-
sary here.
                       VI. CONCLUSION
   After reviewing the record de novo, we conclude that the
district court did abuse its discretion when it found that the
remaining 6,500 shares of ConAgra stock in the Schwab
account were marital property. We otherwise conclude that
the district court did not abuse its discretion in classifying,
valuing, and dividing the remaining marital estate. We modify
the decree to classify the remaining 6,500 shares of ConAgra
stock, which were valued at $232,440, as Tim’s nonmarital
property, and to divide the remaining value of the Schwab
account, totaling $1,200,356, equally between the parties, i.e.,
$600,178 to each party. As so modified, we affirm the decree
of the district court.
                                       Affirmed as modified.
   Heavican, C.J., participating on briefs.
