Court Opinion

ID: 9637936
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:27:06.978846+00
Date Added: 2024-06-11T15:02:28.387545
License: Public Domain

WILSON, Circuit Judge
(dissenting).
For the present I must record my dissent to the opinion. If the original declaration of trust had been drawn substantially as it was left by the amendment of November 29, 1919, I should under the circumstances of its creation hold that it was not an association within the meaning of section 700(a) of the Revenue Act of 1924, 43 Stat. 253, 325 (26 USCA § 223 note), since the affajrs of the trust would not then have been carried on in any manner similar to the mode of procedure of corporations, the shareholders having no control over the trustees. It would then have been a pure trust under the definition laid down in Williams v. Milton, 215 Mass. 1, 102 N. E. 355, which was adopted by Judge Holmes in Crocker v. Malley, 249 U. S. 223, 232-234, 39 S. Ct. 270, 63 L. Ed. 573, 2 A. L. R. 1601, as distinguishing pure or “exact” trusts from taxable associations. Also see Hecht v. Malley, 265 U. S. 144, 158-161, 44 S. Ct. 462, 68 L. Ed. 949; Burk-Waggoner Ass’n v. Hopkins, 269 U. S. 110, 113, 114, 46 S. Ct. 48, 70 L. Ed. 183. The substance of these decisions is that it was not the intent of Congress to tax pure trusts where the management of the trust estate was vested wholly in trustees, and for the ultimate purpose of more efficiently distributing the trust estate, but only those organizations, the beneficiaries and trustees of which were associated together, and the affairs of the trust conducted by trustees in substantially the same manner and mode of procedure as the directors of a corporation, and who were, in the final analysis, subject to the control of the shareholders.
As. originally drawn, we agree that the Samuel Hammond Real Estate Trust was clearly subject to the excise tax under the Revenue Act of 1918 (40 Stat. 1057). By the amendment of 1919; however, the shareholders voluntarily surrendered up all their control over the trustees and the conduct of the affairs of the trust and its termination or amendment, except by withholding their assent in certain instances.
The opinion states that the amendment of 1919 somewhat limited the powers of the shareholders as to removal of the trustees. This hardly states the scope of the amendment. It provided: “The shareholders shall have no control over the acts of the Trustees, except in the matter of filling vacancies among the Trustees as provided in See. 11 hereof, and except the right of consenting to an alteration or amendment of this Agreement or termination of this Trust as above *994provided, anything in this Agreement to the contrary notwithstanding, and any provision in this Agreement whereby the shareholders are given any control except as above stated is hereby annulled.”
The amendment was probably made in view of the change in the Revenue Law by the Revenue Act of 1918, which rendered the original trust taxable. Whether the shareholders could by this amendment change the nature- of the trust originally created, and thus escape the tax, is the real issue here. I have doubts, but I cannot assent to the opinion.