Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 170.0010


170.0010 Nominee Lien. A nominee lien may be warranted in a situation where there is an apparent transmutation of community property to a spouse as his or her separate property. If a nominee lien was not filed in this type of situation, the community property lien would only reach the community property interest of the spouse in that particular piece of property. However, if upon the sale of that property the escrow company concluded that no community property interest existed, but rather that the interest was the spouse's separate property, the Board's lien would go unpaid.

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. (See Compliance Policy and Procedures Manual sections 742.155 and 742.158.)

A nominee lien is appropriate in a transmutation situation due to Civil Code section 5110.720 which states that transmutations are subject to the laws governing fraudulent transfers. Civil Code section 5110.710 states, in pertinent part, that subject to Civil Code section 5110.720, married persons may by agreement or transfer, with or without consideration, transmute community property to separate property of either spouse.

An example of a fraudulent conveyance is when a taxpayer who was the purchaser of an aircraft, is liable for the use tax, was the recipient of a Determination and a Demand and then quitclaimed his community property interest in the residence as a gift to his spouse. In quitclaiming his interest in the property, the taxpayer attempted to shield his assets and hinder collection of the use tax. Such actions indicate an intent to frustrate collection activities through the divestiture of the property by fraudulent conveyance while still engaging the benefit of the property as his own. 5/25/90.