708 F.3d 249
1st Cir.2013Background
- Livermore owned ~15 acres of undeveloped land in Ludlow, MA; proposed Leland Estates subdivision and recorded a covenant restricting use of the land.
- Livermore formed WAL Development, LLC, with WAL owned and controlled by Livermore, using WAL to develop Leland Estates.
- Livermore transferred title to WAL for no consideration and WAL secured a Berkshire Bank mortgage; Livermore personally guaranteed the loan and managed finances from his accounts.
- Proceeds from sales partly funded Livermore’s personal expenses; he mingled WAL funds with his personal funds and controlled WAL’s finances.
- IRS recorded a Notice of Federal Tax Lien in March 2009 for Livermore’s 2006–2008 liabilities; Berkshire Bank foreclosed the mortgage and interpleader funds were filed in Aug 2010 to determine rights to surplus funds.
- District court found WAL was Livermore’s nominee/alter ego under a multi-factor test; issue on appeal was whether WAL qualifies as a nominee; court assumed state law questions and applied the federal nominee test; ultimately held WAL was Livermore’s nominee, supporting the IRS lien.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether WAL was Livermore’s nominee for the tax lien. | Ludlow argues WAL is not a nominee. | IRS argues WAL is Livermore’s nominee. | Yes; WAL was Livermore’s nominee. |
| What governing law applies to determine nominee status. | State law question not addressed; assume Livermore had adequate interest. | Federal nominee test applies after assuming Massachusetts law question. | Assumed state-law adequacy and applied federal nominee test. |
| Do the nominee factors support the district court’s finding? | Factors do not collectively show nominee status. | Factors weigh in favor of nominee status. | Yes; factors support nominee status. |
| Is there a procedural or evidentiary error in applying the multi-factor test? | No dispute of material fact to defeat summary judgment. | No; the record supports inferences favoring nominee status. | No reversible error; judgment affirmed. |
Key Cases Cited
- Dalton v. Comm'r, 682 F.3d 149 (1st Cir. 2012) (state-law question guides property rights for tax liens; use of federal test otherwise)
- Holman v. United States, 505 F.3d 1060 (10th Cir. 2007) (nominee/alter ego analysis for property rights in tax liens)
- In re Callahan, 442 B.R. 1 (D. Mass. 2010) (multifactor nominee test for determining nominee status)
- United States v. Nat'l Bank of Commerce, 472 U.S. 713 (1985) (lien reaches all property interests of taxpayer)
- Drye v. United States, 528 U.S. 49 (1989) (state-law rights used to determine what is property for federal liens)