Court Opinion

ID: 4498664
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:16:04.09437+00
Date Added: 2024-06-11T15:04:13.237227
License: Public Domain

Mult,pit,
dissenting: I respectfully dissent from the holding of the majority to the effect that the Frandel Partnership is a partnership within the meaning of the Revenue Act of 1936. In the trust agreement the settlor granted, bargained, sold, transferred and set over unto the Bank of Pittsburgh National Association and to Isaac W. Frank, as joint trustees, certain securities “to have and to hold the said moneys and securities and the investments into which the same *950may be hereafter converted and to invest and reinvest the same from time to time, in the discretion of the trustees, in stocks, interest bearing securities and/or first mortgages upon improved real estate * * They were to “collect, recover and receive, the interest, income and dividends upon said securities, money and investments, when due and payable” and to pay over not to exceed the sum of $60,000 annually to the donor. After the death of the donor “the trust shall continue as theretofore” and all of the net income is to be paid to the donor’s sons and daughter. The trust is to end when the last surviving child of the donor is deceased and the donor’s daughters-in-law and son-in-law shall have died or remarried. Any funds held by the trustees “arising from the sale or maturity of securities, or otherwise, shall be invested pursuant to the terms hereof in such securities as the trustee shall deem wise, such investments not being limited to such securities as are designated under the laws of Pennsylvania as ‘trust investments’.”
In my judgment the trustees had no power or authority to enter into such a partnership agreement as that shown in the findings or to “contribute” to the partnership the shares of stock held by them in trust. This would be a delegation of their trustee powers and duties to the other partners and subject the assets of the trust to the payment of partnership debts, contrary to the clear intent of the grantor. Moreover, an examination of the record indicates quite clearly not only “that tax consciousness prompted some of the transactions”, as set out in the majority opinion, but that the sole purpose of the organization of the partnership was to minimize or altogether avoid Federal income taxes. Under such circumstances, even if the partnership were a valid entity, which I do not concede, it should be disregarded under the rationale of such cases as Higgins v. Smith, 308 U. S. 473; Gregory v. Helvering, 293 U. S. 465; and Griffiths v. Helvering, 308 U. S. 355.