Could California record a nominee lien after a taxpayer transferred real property for no consideration immediately after a tax determination?

Plain-English summary

California legal staff approved a nominee lien against real property after concluding that a delinquent taxpayer transferred it for no consideration to hinder, delay, or defraud tax collection.

The taxpayer owed $16,737 under a dual determination issued September 11, 1995. One day later, the taxpayer granted a one-half interest in the property to a married couple, and the deed showed no documentary transfer tax. On March 29, 1996, the taxpayer deeded away the remaining interest, with the deed stating that no consideration was paid.

The memorandum described a nominee lien as a recorded instrument alleging that a third party holds property for the debtor taxpayer's benefit. It said the relevant inquiry included the parties' intent and relationship, the debtor's financial condition, and the consideration—or lack of consideration—for the transfer. On the facts presented, staff concluded that the transfers were fraudulent and the lien should be recorded.

Common questions

What amount did the taxpayer owe?

$16,737, according to the memorandum.

How soon after the determination was the first transfer made?

One day later.

Why did staff approve the nominee lien?

Because the transfers were for no consideration and staff concluded they were intended to hinder, delay, or defraud collection.

Citations and references

• California Civil Code section 3439.04 — fraudulent-transfer standard quoted
• Operations Memorandum No. 878, revised June 22, 1987 — nominee-lien factors discussed
• 1986 California Statutes, chapter 383, section 2 — amendment and consolidation history cited

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/170-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/170-0013.pdf

Original ruling text

State of California

Board of Equalization

170.0013

Memorandum
To:

From:

Subject:

Mr. Bill Ragle
Special Procedures Section

Date:

June 12, 1996

Thomas J. Cooke
Tax Counsel
REDACTED TEXT
Gary Jugum has requested that I respond to your memorandum to him dated June 5, 1996 concerning a request for approval of a nominee lien. A nominee lien is an instrument that is recorded against certain property to allege that the property is being held by another, the “nominee,” for the benefit and usage of the debtor taxpayer. The filing of the nominee lien is proper where title is held by a nominee third party as a result of a fraudulent conveyance by a delinquent tax debtor. Whether a conveyance is fraudulent involves a review of the following elements and factors: (1) the intent of the parties; (2) the financial conditions of the transfer; (3) the consideration or lack of considerations for transfer; and (4) the relationship of the parties. (Operations Memo No. 878, revised June 22, 1987.) Operations Memo No. 878 cited former Civil Code sections 3439.04 and 3439.07 of the Uniform Fraudulent Conveyance Act as to what circumstances to look for in determining whether a fraudulent conveyance has been made. These code sections were subsequently amended by the revamped Uniform Fraudulent Transfer Act, and consolidated into Civil Code Section 3439.04. (Stats. 1986, Ch. 383 §2.) Civil Code Section 3439.04, as amended, provides that: “A transfer made or obligation incurred by the debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows: “(a)

With actual intent to hinder, delay, or defraud any creditor of the debtor.

“(b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, the debtor: “(1) Was engaged or was about to engage in business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or “(2) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due.”

Mr. Bill Ragle

-2-

June 12, 1996
170.0013

REDACTED TEXT currently owes the Board $16,737.00 as the result of a dual determination issued on September 11, 1995 for the period from January 1, 1993 to September 30, 1993. On July 25, 1995, trustees of the REDACTED TEXT Trust deeded certain real property located in REDACTED TEXT County to REDACTED TEXT. On September 5, 1995, the deed was recorded in the REDACTED TEXT County Recorder’s Office. On September 12, 1995 (one day after the determination was issued), REDACTED TEXT granted an undivided one-half(1/2) interest in this property to Mr. REDACTED TEXT and Mrs. REDACTED TEXT, Husband and Wife, as joint tenants. This deed was recorded in REDACTED TEXT County on September 21, 1995. The deed indicates that no documentary transfer tax was paid on this transfer. On March 29. 1996, REDACTED TEXT deeded all of his interest in this property to Mr. REDACTED TEXT and Mrs. REDACTED TEXT, Husband and Wife, as joint tenants. Apparently, this deed was conveyed to the REDACTED TEXT but has not yet been recorded in the REDACTED TEXT County Recorder’s Office. The deed indicates that “no consideration” was paid for this transfer. It is our opinion that the transfers of this property to the REDACTED TEXT for no consideration were made with the intent to hinder, delay, or defraud the Board in the collection of the liability due from REDACTED TEXT. A nominee lien should be recorded against this property. TJC/cmm