Court Opinion

ID: 5833088
Source: CourtListenerOpinion
Date Created: 2022-01-12 22:30:35.933869+00
Date Added: 2024-06-11T08:43:30.648540
License: Public Domain

Staley, Jr., and Mikoll, JJ.,
dissent and vote to annul in the following memorandum by Staley, Jr., J. Staley, Jr., J. (dissenting). The sole issue affecting all the years in issue is whether petitioner is subject to the unincorporated business tax by reason of acting as trustee or cotrustee of various trusts so as to constitute the carrying on of business. Respondent found that petitioner was not an investment counsel to the trusts, but he was a trustee of the trusts, and made decisions as trustee or cotrustee after receiving investment advice from banks, brokers and investment firms. "The *976trusteeships which he took on, he took on as an incident to his work as a lawyer at White & Case or to his work as the Partner in Charge of the Foreign Department at Dominick & Dominick.” While he was trustee of about 15 trusts, all of these trusts had their origin in personal relationships which he developed, and involved only four family groups. Only one trust which was created for the benefit of the same family group was created after he left Dominick & Dominick. Respondent concluded that petitioner was engaged in an unincorporated business in accordance with the meaning and intent of section 703 of the Tax Law. Petitioner contends that while his income as trustee of these trusts was substantial, that it was not income from a trade or business; that he was not a professional trustee; and that the commissions of a trustee were not business income for the purpose of the unincorporated business tax, unless he was in the business of being a trustee. He further contends he did not hold himself out to the public as a trustee, and did not offer to perform such services to the general public on an independent basis. Subdivision (a) of section 703 of the Tax Law defines an unincorporated business as any trade, business or occupation conducted or engaged in by an individual or unincorporated entity, including a fiduciary. Subdivision (b) of section 703 states: "The performance of services by an individual as an employee or as an officer or director of a corporation, society * * * or as a fiduciary, shall not be deemed an unincorporated business, unless such services constitute part of a business regularly carried on by such individual.” The main issue is whether the activities of petitioner as trustee of the various trusts constituted part of a business regularly carried on by him. Subdivision (d) of 20 NYCRR 203.10, relating to persons subject to the unincorporated business income tax, provides that personal services rendered by a fiduciary will ordinarily be deemed part of a business regularly carried on by such individual if such services are performed in furtherance of or for the direct benefit of other business activities or occupational activities the conduct of which constitutes an unincorporated business. Services performed by a fiduciary will not be deemed to be performed in furtherance of or for the direct benefit of other business activities if the services of the fiduciary are undertaken and performed entirely independently of any other business activity engaged in by the fiduciary. It is clear that petitioner did not perform services for the furtherance of some other business, since he retired in 1962 and his other income, such as director’s fees, dividends, interest, oil and gas royalties was not derived from a business, trade or occupation. Under the provisions of law relating to the unincorporated business income tax, an individual is not deemed to be engaged in an unincorporated business with respect to compensation for services rendered by him as a fiduciary unless such compensation constitutes receipts of a business regularly carried on by such fiduciary (20 NYCRR 281.3). In the construction of tax statutes, the term "business” has been limited to connote something more than the investment of funds and the collection of income therefrom with the incidental replacement of securities and the collection of income of the investments that constitute the corpus of the trust. "Where an individual maintains an office or employs assistants in connection with the performance of services as an employee, officer, director or fiduciary for one or more employers or other principals, the services so performed will be deemed part of a business regularly carried on if the individual regularly performs or offers to perform similar services to the general public on an independent basis.” (20 NYCRR 203.10 [d].) Petitioner did not, in his capacity as trustee, "perform or offer to perform similar services to the general public.” The four family groups with *977which petitioner has been intimately associated for so many years, and for which he has been a trusted confidant, hardly constitute the general public. The carrying on of a trade or business involves holding one’s self out to others as engaged in the selling of goods or services (Deputy v du Pont, 308 US 488; McDowell v Ribicoff, 292 F2d 174). The concept of business denotes a systematic and continual effort to engage in additional transactions. It is difficult to see how a business exists if the "businessman” does not attempt to solicit any further business or does not hold himself out as being available to do business. An individual, especially an attorney, who because of his wisdom and prudence has been asked to serve as a trustee of various trusts of individuals with whom he has been closely associated and does not at all solicit the trusteeship of other trusts, clearly is not engaged in the business of being a trustee. It is submitted that both under the construction given to statutory language similar to the language of the statute here involved and under the express provisions of the current regulations interpreting the statute, petitioner was not engaged in an unincorporated business under the circumstances here, and, therefore, should not be subjected to the New York State unincorporated business tax for the years 1966-1968.