Fourth Investment Lp v. United States
720 F.3d 1058
| 9th Cir. | 2013Background
- IRS recorded liens on two San Diego properties (McCall and Fourth) for Ballantyne tax liabilities arising from years 1985–1997.
- Ballantynes transferred title to Leeds and Fourth Investment as part of a complex scheme to move assets to their children’s trusts.
- Appellants claimed no nominee ownership under California law; district court held they held title as nominees of Ballantynes.
- Transfers involved numerous shell entities, loans, backdated documents, and management by Ballantyne-related entities to conceal control.
- Tax assessments on 2 Jan 1995, 30 Jun 1997, and 16 Nov 1998 triggered federal liens; later steps included foreclosures within the scheme.
- Court evaluated nominee status using a six-factor test and concluded ownership rested with Ballantynes for purposes of lien attachment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| California recognizes nominee ownership? | Leeds argues no California nominee doctrine exists. | U.S. government contends state law governs ownership proofs and nominee status. | California recognizes nominee ownership; factors adopted from federal tests apply. |
| Whether the six-factor nominee test supports Appellants as nominees? | Totality of circumstances may refute nominee status. | Most factors favor nominee relationship. | Totality supports nominees; Ballantynes retained control and benefits, satisfying nominee status. |
| Should shell entities have been joined under Rule 19? | Numerous shell entities were essential to resolve interests. | Joinder not required where no quiet title or third-party liens adjudicated. | Nonjoinder proper; absent entities not necessary parties given the relief and proceedings. |
Key Cases Cited
- G.M. Leasing Corp. v. United States, 429 U.S. 338 (Supreme Court 1977) (nominee/alter ego theory under federal lien statutes; state rights in property matter)
- Drye v. United States, 528 U.S. 49 (Supreme Court 1999) (look to state law first to determine taxpayer’s ownership interest)
- Spotts v. United States, 429 F.3d 248 (6th Cir. 2005) (six-factor test; state law backdrop for nominee analysis)
- Dalton v. Commissioner of Internal Revenue, 682 F.3d 149 (1st Cir. 2012) (nominee analysis uses uniform federal criteria adopted by multiple circuits)
- Kimbell Foods, Inc. v. United States, 440 U.S. 715 (Supreme Court 1979) (national uniformity concerns in federal tax liens)