Court Opinion

ID: 4597929
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:20:13.118414+00
Date Added: 2024-06-11T07:51:52.872700
License: Public Domain

RUSSELL TYSON, ARTHUR T. ALDIS, GRAHAM ALDIS, RICHARDS M. BRADLEY, AND ARTHUR LYMAN, TRUSTEES OF CHICAGO REAL ESTATE TRUST, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Tyson v. CommissionerDocket Nos. 17941, 29276, 40617, 51005.United States Board of Tax Appeals25 B.T.A. 520; 1932 BTA LEXIS 1512; February 11, 1932, Promulgated *1512  Where the purpose of a trust is to engage in business activities and such purpose is carried out along lines similar to that of a corporation, such trust is to be considered an association taxable as a corporation.  Arnold R. Baar, Esq., and Arthur R. Foss, Esq., for the petitioners.  John E. Marshall, Esq., Arthur Carnduff, Esq., W. S. Delaney, Esq., and C. R. Marshall, Esq., for the respondent.  SEAWELL*520  These proceedings, which were consolidated for hearing, involve deficiencies in income tax as determined by the Commissioner as follows: Docket No.Fiscal year ending June 30Deficiencies179411925$23,141.3529276192623,090.4940617192722,287.1751005192820,065.9151005192917,205.48*521  The primary question involved is whether the Chicago Real Estate Trust is to be considered an association and therefore taxable as a corporation.  Should it be held that the trust is not taxable as a corporation, a further question is presented as to whether the trustees are taxable upon all of the undistributed income of the trust.  FINDINGS OF FACT.  The petitioners, Russell Tyson, Arthur, *1513  T. Aldis, Graham Aldis, Richards M. Bradley and Arthur Lyman, are the duly appointed, qualified and acting trustees under a certain instrument known as the "Chicago Real Estate Agreement and Declaration of Trust," as amended, and as such have succeeded to the title, powers, rights and obligations of various predecessor trustees.  The petitioners were such trustees during all of the taxable years here involved, except that John Dorr Bradley was a trustee from March 20, 1914, until his death on October 31, 1928, and the petitioner, Graham Aldis, became a trustee on February 7, 1929, as the successor of John Dorr Bradley.  The "Chicago Real Estate Agreement and Declaration of Trust" was dated June 20, 1890, and, with certain amendments made in 1904, has remained in effect since that time.  As amended in 1904 its pertinent provisions are as follows: We, the subscribers, hereby agree to and with each other, and in consideration of our mutual agreements, as follows: 1.  We agree to pay, at any time within two years from the date hereof, to the trustees hereunder, the amounts set against our names respectively, in such installments and at such times as said trustees may require; but*1514  they shall not require any payment until the total amount subscribed amounts to one million dollars, but when the subscription shall amount to one million dollars the trustees may call it in, as hereinafter provided, and invest the same as hereinafter provided.  In case any subscriber neglects to pay any installment of his subscription within twenty days after the date of the call, the amount of his subscription then unpaid shall be canceled at the option of said trustees.  * * * 4.  Said trustees shall use all money paid to them as such, except as hereinafter provided, for the purchase of real estate, improved or unimproved, and for the improvement of real estate in the City of Chicago, County of *522  Cook and State of Illinois, and all real estate so purchased shall be conveyed to them in joint tenancy as trustees hereunder.  5.  Said trustees shall have as such, as absolute control over and disposal of all real estate held by them at any time under this trust as if they were the absolute owners thereof, including the power to sell for cash or credit at public or private sale, to mortgage with or without power of sale, to lease or hire, for improvement or otherwise, *1515  for a term beyond the possible termination of this trust of for any less term, to let, exchange, to release and to partition.  But the indebtedness of said trust shall never exceed forth per cent.  of the amount of subscriptions actually paid in at par.  This provision and restriction as to mortgages shall not, however, affect the title of any mortgagee, and no purchaser or mortgagee shall be liable for the application of money paid or lent.  In all leases and mortgages it shall be stipulated that neither the receipt-holders nor said trustees shall be personally liable thereon.  6.  Said trustees may set aside not more than ten per cent of the annual gross income, for a contingent fund, or sinking fund, or both.  They shall divide the net income of the property held by them under this trust among the receipt-holders annually, or oftener, at their discretion, and their decision as to what constitutes net income from time to time shall be final.  Said Contingent or sinking fund and any money waiting investment may be put at interest or invested and re-invested in interest-bearing securities, by said trustees, at their discretion, and said contingent or sinking fund, or any part thereof, *1516  may be at the discretion of said trustees paid over to the receipt-holders.  7.  The trustees may, from time to time, hire suitable offices for the transaction of the business of the trust, appoint such officers, attorneys and agents, including an agent or agents for procuring subscriptions to this agreement, as they may think best, fix their compensation and define their duties (it being understood that the trustees may, if they shall see fit so to do, appoint such officers, attorneys and agents, or any of them, out of their own number).  And the trustees may incur and pay out of the trust property, such other expenses as the proper execution of this trust shall seem to them to require.  The compensation of the Board of Trustees shall not at any time exceed five per cent of the gross income of the property held by them under this trust, and, within said limit, shall be fixed by themselves.  It is understood that the compensation of the trustees for their services as such shall be distinct and separate from their compensation for services they or any of them may render as attorneys, agents, or in any other capacity than strictly as trustee, to the Trust Estate.  8.  Said trustees*1517  shall issue receipts in such form as they shall deem best, for each sum of one thousand dollars or for multiples thereof, paid to them under this agreement; but no receipt shall be issued for any less sum than one thousand dollars.  * * * 10.  Said trustees may, from time to time, at their discretion, invite and receive further subscriptions for the purpose of increasing the capital of the trust, provided that the capital shall never be increased beyond five million dollars ($5,000,000.00); giving preference in subscribing, upon such terms and conditions as they shall deem best to existing receipt-holders appearing on the books of said trustees.  All subscriptions shall be subject to the terms of this agreement.  11.  No assessment shall ever be made upon the receipt-holders.  *523  12.  The books of said trustees shall always be open to the inspection of receipt-holders.  13.  If at any time any of the trustees nominated in this instrument, or appointed in accordance with the provisions of this instrument, shall die, or shall disclaim, or shall be desirous of being discharged from his or their trusteeship hereunder, or shall decline to act hereunder, or shall fail*1518  for the space of six months so to act, or shall be or become unable so to act by reason of mental or physical infirmity (in case such infirmity shall continue for the space of one year), then, and in either or any of said events, the trust hereby created shall in nowise fail, lapse or determine, but the remaining trustees or trustee shall continue to discharge all the duties and to exercise all the powers and discretion by the terms of this instrument imposed and conferred upon and allowed to the trustees above named, precisely as if such remaining trustees or trustee were the only trustees or trustee nominated herein; and such remaining trustees or trustee shall, within the space of six months from and after any and every such death, or such disclaimer, or an expression in writing of such desire (delivered to some one of the remaining trustees, or if there be only one, to the remaining trustee), or such declination, or such failure to act, or such continued inability, make and file in the office of the recorder of Cook County, Illinois, their or his certificate in writing, by them or him signed, sealed and acknowledged, reciting such death, disclaimer, desire, declination, failure*1519  or inability, and appointing a successor or successors to such former or disclaiming trustee or trustees, which certificate shall, prior to the recording thereof, be endorsed with the written acceptance, signed, sealed and acknowledged by such successor or successors, of such appointment; and any and every such certificate and endorsement when so made and filed for record shall serve and operate to divest such former or disclaiming trustee or trustees, and his and their heirs and legal representatives, of any and all estate, interest and title in and to all of the trust estate, and shall vest the said trust estate in such successor or successors as joint-tenant or joint-tenants with the remaining trustees or trustee, to all intents and purposes as if such successor or successors was or were an original trustee or original trustees hereunder; and no formal conveyance shall be necessary so to divest and vest the trust estate.  When any trustee is absent from the state of Illinois or incapable by reason of disease, the other trustees shall have all the powers hereunder; and any trustee may by power of attorney delegate his powers for a period not exceeding six months at any one time*1520  to any other trustee or trustees hereunder; provided, that in no case shall less than three trustees actually exercise the powers hereunder (except that vacancies in the number of the trustees may be filled by the act of all the remaining trustees or by the remaining trustee if there be only one).  All powers hereunder may be exercised and all deeds and other instruments made be executed by three of the trustees and their decision shall be binding upon all.  The term "said trustees" and "trustees" used in this agreement shall be deemed to mean those who are or may be trustees for the time being.  No trustee shall be required to give a bond.  14.  At and upon the expiration of twenty years, after the death of the last survivor of the following named persons: [Here follow the names of the sons of various individuals.] or at such earlier time as three-fourths in value of the receipt-holders may, by an instrument in writing, signed and acknowledged, in the manner prescribed for the acknowledgment of deeds, and recorded in the office of the Recorder of Deeds for said Cook County, Illinois, appoint, said trustees shall terminate this trust by selling all property then held by them, as*1521  such, and dividing the proceeds among the receipt-holders.  *524  Provided, however, that upon the request of three-fourths in value of the receipt-holders in writing, signed, acknowledged and recorded as above provided, said trustees may, if it seems to them judicious so to do, convey the trust property to new or other trustees, or to a corporation, according to the terms of such request, and in the manner stated therein, being first duly indemnified for any outstanding obligation; and said trustees upon filing in said Recorder's office for Cook County, Illinois, a certificate that they have complied with such request, shall be under no further obligation, provided, however, and it is especially understood and agreed, that nothing in this clause contained shall be construed as making it obligatory upon said trustees to comply with such request to convey.  15.  For all acts under this instrument and otherwise, said trustees shall be responsible only for a willful breach of trust, and each shall be responsible only for his own acts.  16.  Meetings of the receipt-holders may be called by any two of the trustees, and shall be called upon the written request of receipt-holders*1522  holding not less than three hundred thousand dollars ($300,000) or more, in amount of receipts.  The receipt-holders may, for their own government, pass by-laws and elect necessary officers, and may instruct the trustees hereunder in any manner not inconsistent with the powers herein or hereafter given said trustees, or with the acquired rights of third parties.  The vote or agreement in writing of three-fourths in value of the receipt-holders shall be binding upon all and upon the trustees, and this agreement may be altered or added to accordingly; but the rights of third persons shall not be affected, nor shall any third person be deemed to have notice thereof until a certificate setting forth such vote or agreement, signed by a majority of the trustees, and duly acknowledged, shall be recorded in the Recorder's office of said Cook County, Illinois, and such certificate shall be conclusive as to the validity of the vote certified and all facts therein stated.  A like certificate, so recorded, shall also be conclusive as to all facts affecting title.  IN WITNESS WHEREOF, we have hereto set our hands and stated the amount of our respective subscriptions on the day and year above*1523  written.  The maximum authorized capital for the trust was $5,000,000.  The interests of the beneficiaries in the trust were evidenced by engraved receipts which had a transfer form on the back.  The total amount of receipts outstanding during each of the years here involved was $2,500,000, which was likewise the amount which had been outstanding at least since 1902.  The receipts were bought, sold and transferred, though the number of transfers during any one year, exclusive of transfers under wills, did not exceed twenty.  An experienced transfer agent was designated to attend to transfers of the receipts and to keep the transfer records.  The petitioner owned certain buildings which were acquired as follows: Section D of the Monadnock Building, a seventeen-story, fire-proof office building which it built in 1893; the Cable Building, a nine-story store and office building which was built about 1898; and the Hartman Building, a thirteen-story mercantile building which was built by the petitioner in 1924 and 1925, having been completed shortly prior to June 30, 1925, at a cost, including land, of approximately $2,500,000.  *525  Section D of the Monadnock Building is a*1524  part of a large building known as the Monadnock Block, parts of the building being owned by different parties.  The part owned by the petitioner was leased to a single tenant, the Monadnock Trust, under a lease dated May 1, 1917, which ran for 20 years and which has been in effect since the date of its execution to the time of the hearing in these proceedings.  Under this lease the lessee managed the building and paid all taxes, insurance and operating expenses.  The building was occupied by various store and office tenants, who were lessees of the Monadnock Trust.  Subsequent to 1917 the Monadnock Trust was the only lessee of the petitioner and the petitioner received a net rental equal to 10/36 of the net rental of the entire Monadnock Block.  The Cable Building was leased to the Cable Piano Company at a net rental.  The lease was dated May 1, 1913, and ran for a term of 29 years and 8 months.  The aforesaid tenant has been the only tenant of the Cable Building during the existence of the trust agreement here in question.  The following provision is contained in the above mentioned lease: It is the intention of the lessors and the lessee that the rents hereinbefore reserved shall*1525  be a net payment to the lessors, and the lessors shall not be required to expend any sum of money whatsoever for the maintenance, operation or other expense in any way connected with or accruing against said premises during said term.  The lessee does hereby assume all carrying charges, including heat and light and all other expenses of maintenance and operation.  Prior to June 30, 1924, the petitioner acquired the land upon which the Hartman Building was constructed, and at that time the land was subject to an existing contract for a lease which provided for the construction of a building and the payment by the tenant of a net rental based upon its cost.  The plans for the building were attached to the aforementioned contract, but they were submitted to the trustees and talked over by them though the main features had already been agreed upon.  The trustees continued the employment of the architect who had been formerly employed by the prior owner of the land and they selected the contractors for the construction of the building and let the contracts.  Upon its completion on or shortly prior to June 30, 1925, it was occupied, and has continued to be occupied, by the Hartman Furniture*1526  & Carpet Company, under a net lease which provided that the said tenant should pay the taxes, insurance, expense of repairs, expense of operations, special assessments and all other expenses, in addition to the rental.  During the entire existence of the trust agreement eight parcels of real estate were purchased and five of them were sold by the trustees prior to the taxable years here involved, leaving the three buildings referred to above.  *526  During the years 1926 to 1929 the petitioner held securities as follows: June 30, 1926$520,292.28June 30, 1927285,931.73June 30, 192873,943.25June 30, 192939,850.00The above securities consisted almost entirely of state and municipal bonds.  The trustees did not hold any real estate mortgages during that time and they did not frequently or customarily buy and sell real estate mortgage notes.  The foregoing securities were purchased for the purpose of investing the depreciation fund which the trustees were authorized to set aside and any surplus earnings which were held for contingencies.  No bonds were purchased during the aforementioned period, but sales were made to provide funds for paying off*1527  the mortgage on the Hartman Building, which was entirely paid off by June 30, 1929.  The securities disposed of included bonds which were called for redemption at maturity.  Three of the five trustees resided in Chicago and the other two in Boston.  No formal or stated meetings of the trustees were held during the years here under consideration, though conferences were had as to matters which came up for consideration.  Generally, they acted by correspondence.  Every six months the Chicago trustees would go over the accounts for the preceding six-month period and decide what dividends should be paid to the beneficiaries.  A dividend resolution would then be prepared by the Chicago trustees and mailed to the Boston trustees for their approval.  The trustees have had no name under which they have acted except that for convenience they have used the names "Chicago Real Estate Trustees" and "Chicago Real Estate Trust." The leases to the properties of the trust were executed by the trustees in their individual names as "Trustees acting under the Chicago Real Estate Agreement and Declaration of Trust," or in a similarly described manner.  At no time has there been a meeting of the*1528  receipt holders.  They have never in any way attempted to instruct the trustees.  They have never adopted by-laws, nor any code of rules for the government of the trust.  The trustees owned less than 5 per cent of the receipts in 1925.  During the period after June 30, 1924, the trustees did not have any officers.  There was no president, secretary or treasurer.  They have not at any time had or used a seal of the trust, nor have they had a place of business which they occupied exclusively.  The properties of the trust were managed during the years here under consideration by a real estate management firm known as *527 Aldis & Company.  One of the trustees was a member of that firm and the mail of the trustees was received at its office.  As agent for the trustees, that firm collected the rents from the trust properties, saw that the obligations of the leases were followed, and accounted to the trustees for the proceeds of the leases.  If necessary, it would be the duty of the said agents to seek tenants for the properties owned under the trust agreement.  Funds collected by the agents were deposited in the Northern Trust Company to the credit of the trust under the name*1529  of "Chicago Real Estate Trustees," and checks on that account were signed "Chicago Real Estate Trustees by Aldis & Company, Agents." The books and records of the trust (except the transfer records) were kept by Aldis & Company.  No specified portion of the agent's office was set apart as the office of the trust, but the records were handled in a common space and by a common office force, together with the records of several other trusts and other properties which were similarly represented by Aldis & Company.  Each year the trustees sent to the receipt holders and annual statement consisting of a profit and loss statement for the year and a balance sheet as of the end of the year.  The statement for the fiscal year ended June 30, 1926, which is similar to that furnished for other subsequent years, follows: MONADNOCK, SECTION D (Cost $1,095,229.03):(Northwest corner Dearborn and Van Buren Sts.)Gross earnings$70,557.96Expenses (tenant operates building and pays taxes and insurance)3,638.46Net earnings, at rate of 6.2% per annum$66,919.50CABLE BUILDING (Cost $453,025.86):(Southeast corner Wabash Ave. and Jackson Blvd.)Gross earnings40,000.08Expenses (tenant operates building and pays taxes and insurance)3,000.08Net earnings, at rate of 8.17% per annum37,000.00HARTMAN BUILDING (Cost $2,532,802.32):(Northwest corner Wabash Ave. and Adams St.):Gross earnings176,724.80Expenses (tenant operates building and pays taxes and insurance13,246.64Net earnings, at rate of 6 1/2% per annum163,478.16Interest received and accrued on investments (less trustee's fees)23,338.43Net profit on sale and redemption of bonds and notes509.00Miscellaneous income293.00291,538.09OTHER EXPENSES:Legal and miscellaneous$2,175.02Income taxes26,176.13Personal property tax26.10Interest on mortgage loan41,250.00$70,167.25Earnings for year before depreciation, equal to 8.85%221,370.84DEDUCT:Reserve for 25th year rent Hartman Building$7,000.00Reserve for depreciation on buildings50,369.15Distribution paid for year, 6 1/2%162,500.00219,869.15Balance for year ending June 30, 19261,501.69Balance for earnings June 30, 1925266,705.31Less additional depreciation 19259,740.71256,964.60Balance of earnings on June 30, 1926258,466.29*1530 BALANCE SHEETAs at June 30, 1926ASSETS:Monadnock Section D$1,095,229.03Cable Building453,025.86Hartman Property2,532,802.324,081,057.21Less reserve for depreciation196,432.94Total Real Estate3,884,624.27Cash$113,699.55Notes and Bonds520,292.28Rents accrued4,152.56Interest accrued on investments9,219.06647,363.454,531,987.72LIABILITIES:Receipt-holders2,500,000.00Distribution payable July 1, 192687,500.00The Northern Trust Co., Mortgage Loan750,000.00Interest accrued on loan to June 30th5,156.26Hartman Building Rent Reserve7,000.00Notes payable1,000.00PROFIT AND LOSS:Contingent fund$27,129.33Balance of earnings, June 30, 1926258,466.29Capital Surplus895,735.851,181,331.474,531,987.72*529  The gross earnings of the trust for the fiscal years ended June 30, 1927, 1928, and 1929, as shown in statements furnished to receipt holders for those years, were as follows: Fiscal year ended June 30, 1927$315,314.581928303,895.461929288,701.78Dividends were distributed as follows: Fiscal year ended June 30, 1925$150,0001926162,5001927150,0001928150,0001929150,000*1531  OPINION.  SEAWELL: The primary question at issue arises on account of the Commissioner's determination that the petitioner was during the years in question not a trust, taxable under section 219 of the Revenue Acts of 1924 and 1926 and sections 161 and 162 of the Revenue Act of 1928, but an association within the meaning of that term as used in section 2(a)(2) of the Revenue Acts of 1924 and 1926 and section 701(a)(2) of the Revenue Act of 1928, and therefore taxable as a corporation.  In form of organization the trust here involved is almost identical with that considered in ; in fact, some of the same trustees and the same agent of the trustee appear in each case and so great is the similarity between the cases that the petitioner submitted as a brief in this proceeding the brief which had theretofore been submitted by it to the Circuit Court of Appeals to which appeal had been taken from the Board in the Zenith case.  Since a decision was had on December 9, 1931, from the Circuit Court in the Zenith case (*1532 ), in which the action of the Board was reversed, we think it pertinent to discuss the case at bar from the point of view of the court in that case.  The argument of the taxpayer in the Zenith case, as directed to the Circuit Court, was largely that a trust "should be taxed as a corporation only when 'in form and effectiveness' it actually resembled a corporation." In reaching its conclusion the court said: Probably the best test is to be found in the activities of the entity.One could readily conceive of a Massachusetts trust being possessed of powers and so exercising them that for taxation purposes it should be called a corporation.  An illustration of this is to be found in Trust No. 5833, Security-First Nat.  . Likewise, it is easy to conceive of a Massachusetts trust so designed and so purposed as to be considered a trust as that term is used in the Revenue Acts.  For an illustration of this, see Lansdowne*530 *1533 . It necessarily follows then, and numerous decisions sustain this view, that in determining when a trust is an association courts must look to the substance rather than the form of the entity used to carry on the business.  Likewise, it must be more influenced by the instrument's activities than the ascertainment of the possible field of its activity.  (; ; ). This does not mean that we should not look to the articles of agreement which brought the entity into being.  An examination of this document will aid a court in construing the activities and in weighing the taxpayer's asserted intention respecting its activities.  [Italics supplied.] That is, if we understand the court correctly, the emphasis is to be placed on the activities of the trust rather than its form, and apparently had it not been for the very limited purpose and activity of the trust a different conclusion would have been*1534  reached.  In applying the principles outlined above and deciding that the trust in question was not taxable as a corporation, the court emphasized the fact that while the articles of agreement suggest that "the counsel drawing the articles entertained for it somewhat pretentious hopes for its future enlargement," the witnesses testified that "it was conceived and brought into existence for the single purpose of acquiring a single piece of real estate; that such real estate had been leased for a long period to a responsible lessee; and that the said lessee kept the property in repair and paid the taxes in addition to the rental." (Italics supplied.) The court further observed: * * * In short, the investment was one which provided with reasonable certainty for a sure and fixed income without either care or supervision.  They also say this plan was never departed from, save once when $5,000 of the income was invested in bonds.  This departure, however, was also for the purpose of making more certain said income.  The insertion in the articles of agreement that the trustees might purchase other property may be ascribed to the caution of counsel to take care of the unforeseen and*1535  unforeseeable rather than to impeach the witnesses who testified respecting the promoters' intentions to limit the trust to a single investment, the return from which was to furnish a fixed and steady income for the beneficiaries.  But in the case we are considering there was no such singleness of purpose and activity; on the contrary, the articles of agreement not only provide for "pretentious hopes of enlargement," but those hopes were realized.  The trust agreement was executed in 1890 and by 1893 land had been acquired and a building erected thereon at a cost of approximately $1,000,000.  The building was then leased under a net rental agreement similar to that involved in the Zenith case, and were this the one transaction before us, that is, if the single purpose of the trust had been to acquire and lease that building in *531  that manner and if we were now concerned with the income only from that building, it might well be said that the decision of the Circuit Court of Appeals would require a holding that the trust is not taxable as a corporation.  The record, however, shows that the aforementioned transaction was but one of several of a similar nature carried out*1536  by the trust.  We find that the trust owned and had under lease three buildings during the years here involved.  One of the buildings was that referred to above, a second building was constructed about 1898, and a third in 1924 and 1925 on land acquired shortly prior thereto.  Whether other land was acquired and buildings erected thereon we do not know, but it does appear that five other pieces of real estate were acquired and disposed of prior to the years before us.  The original funds for the use of the trust were obtained throught the sale of interests in the form of "receipts." The authorized capitalization was $5,000,000, though the amount issued was only $2,500,000, and that amount had been outstanding at least since 1902.  Prior to that time the Monadnock Building had been constructed at a cost of approximately $1,000,000 and since that time the Cable Building and the Hartman Building were constructed at the respective costs of approximately $400,000 and $2,500,000.  In addition, five other pieces of real estate were purchased and sold.  By June 30, 1929, all buildings had been entirely paid for.  All buildings were leased under net rental agreements, though we find for each*1537  year substantial expenses incident to the operation of the trust.  For example, in the profit and loss statement which we set out in our findings for the fiscal year ended June 30, 1926, the expenses for the operation of the Monadnock Building were $3,638.46; those for the Cable Building, $3,000.08; and those for the Hartman Building, $13,246.64.  In addition, "legal and miscellaneous" expenses amounted to $2,715.02 and "interest on mortgage loans," $41,250.  Evidently, therefore, we do not have a simple case of a trust investing funds furnished it by its members in a single business venture, passively collecting the income from such investments under net rental agreements and distributing the proceeds to the beneficiaries, such as was involved in the Zenith case, but rather a trust which, while in form of organization similar to that involved in the Zenith case, was carrying on business through recurring investments in real estate from the profits - at least in a substantial part - derived from the trust operations and the operation of the buildings acquired by it.  In fact, it would seem that in every sense of the word the "pretentious hopes of future enlargement" referred*1538  to by the Circuit Court of Appeals in its decision in the Zenith case were here fully realized.  The original funds which were paid in for *532  investment were all paid in more than twenty years prior to the taxable years with which we are concerned, and had been used - in large part at least - in other ventures, but yet we find that in the first year before us, namely, the fiscal year ended June 30, 1925, the trust constructed a building at a cost, including cost of land acquired shortly prior thereto, of approximately the entire original investment of $2,500,000.  During the succeeding years from 1925 to 1929 the indebtedness on the building was paid off, partly at least, through the sale of bonds in which its sinking fund had been invested.  That the greater part of the trust activities were carried on by the firm of Aldis & Company does not seem to us material.  Not only was the firm the agent of the trustees, but also it was closely associated with them, since at least one of the trustees was a member of that firm.  In view of the above considerations and the record as presented, we are of the opinion that the trust here involved satisfies every requirement for an*1539  association taxable as a corporation as laid down in , and the many decisions of the Board on the subject, as well as the test enunciated by the Circuit Court of Appeals of the Seventh Circuit in the Zenith case, supra, to the effect that the "best test is to be found in the activities of the entity." Our conclusion that the trust is to be considered an association taxable as a corporation makes a decision unnecessary on the further issue raised by the petitioner as to the taxability to the trust of the income which was not distributed by it to the beneficiaries.  Judgment will be entered for the respondent.