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The court formulated a six-factor test to use in determining whether a
nominee relationship existed under both federal and New Jersey law.

The district court’s decision taxpayer retained possession and en- involved in Pachava; i.e., he settled the
The district court held that both joyed the benefits and bore the burdens Pachava Trust, his mother contributed
Pachava and VSHPHH were nominees of owning the property. the property to it, his ex-wife and
of Shant Hovnanian. Thus, the proper- With respect to Pachava, the IRS cousin had served stints as trustee, his
ties were subject to the IRS’s tax liens, argued that the trust simply held title sister was the current trustee, and his
and the IRS could foreclose on and sell of the Navesink property and Shant ac- children were the sole beneficiaries.
the properties. tually had control over the property, as It also determined that factors five
In Patras, the Third Circuit held evidenced by his paying the property’s and six were met. In support of this
that “[w]hen there is a tax lien on a bills, living on the property, and being determination, the court pointed to
taxpayer’s property, the [IRS] may seek the decision-maker for anything that the unrebutted deposition testimony of
to satisfy it by levying upon property had to do with the property. The court Shant’s ex-wife, which was corroborat-
the taxpayer controls” (Patras, 544 F. applied the Patras test to determine ed by the testimony of an employee of
App’x at 140). A third party is a tax- whether Pachava was Shant’s nominee. Morgan Stanley, the firm that managed
payer’s nominee (and thus the taxpayer The court found that the first factor Pachava’s financial account. Specifically,
controls property owned by the third was satisfied for Pachava because the the ex-wife testified that the Navesink
party) where “the taxpayer has engaged transfer of the Navesink property from property was Shant’s primary residence
in a legal fiction by placing legal title Shant’s mother to Pachava was for only starting in 2008, where he, she, and
to property in the hands of [that] third $1. Citing Coles v. Osback, 92 A.2d 35, their children all resided, he did not
party while actually retaining some or 36 (N.J. Super. Ct. App. Div. 1952), the pay rent while living there, and he paid
all of the benefits of true ownership” court stated that under New Jersey law, for all of the property’s expenses.
(id. at 141). The court formulated a the sale price of the property was not Having found that out of the six
six-factor test to use in determining adequate where it was below market factors of the Patras nominee test,
whether a nominee relationship existed value. Also, it reasoned that the second five favored a finding that Pachava
under both federal and New Jersey law: factor was satisfied because his mother was a nominee, the court concluded
1. Whether the nominee paid adequate recorded the transfer of the Navesink that there was no genuine dispute
consideration for the property; property after Shant lost a case before that the trust was Shant’s nominee
2. Whether the property was placed in the Tax Court with regard to his tax and Shant was the beneficial owner
the nominee’s name in anticipation liabilities. Again, the court cited Coles of the Navesink property, effectively
of a suit or other liabilities while v. Osback for support, in this instance subjecting the Navesink property to the
the taxpayer continued to control because the Coles court held in that tax lien.
the property; case that the second factor was satisfied With respect to VSHPHH, the
3. Whether there was, and the extent because the debtor in that case placed IRS again argued that the trust simply
of, a relationship between the tax- the property in question in his son’s held title of the Village Mall property
payer and the nominee; name after a suit was filed against him. and Shant actually had control over
4. Whether the conveyance of the The district court found that the fourth the property. The court found that his
property was recorded; factor weighed against a nominee find- control was evidenced by his paying the
5. Whether the property remained in ing for Pachava because the transfer property’s real estate taxes and other
the taxpayer’s possession; and had been recorded. Nonetheless, in the expenses from his personal business
6. Whether the taxpayer continued to court’s view, on balance, these three fac- account, by his living on the property,
enjoy the benefits of the property. tors favored a conclusion that Pachava by the fact that rent from the property’s
The first, second, and fourth factors was a nominee of Shant. tenants was deposited or transferred
focus on the mechanics of the transfer. The court then looked at the rela- to the bank account of one of Shant’s
The other three factors examine the tionship factors. It found that factor other businesses, by the fact that Shant
relationship between the nominee three was satisfied because Shant was did not pay any rent for the space he
and taxpayer, as well as whether the so closely intertwined with everyone used at the property, that he used the

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