Court Opinion

ID: 5784583
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:56:36.117297+00
Date Added: 2024-06-11T08:42:04.213158
License: Public Domain

Kane, J. (dissenting).
Concededly the singular reason for taxing the trustees was the ownership of real property by the trust withifi this State. The definition of “ corporation ” includes ‘ ‘ any business conducted by a trustee or trustees ’ ’ (Tax Law, § 208, subd. 1). Mere investment of funds and the collection of income with incidental replacement of securities do not constitute conducting a business (Matter of Burrell v. Lynch, 274 App. Div. 347), but an investment trust whose shares were sold to the public, involving heavy trading in securities, was subject to the franchise tax (Matter of City Bank Farmers Trust Co. v. Graves, 272 N. Y. 1). These holdings are consistent with the definition of “ doing business ” adopted by the commission as including ‘ ‘ all activities which occupy the time and labor of men for profit ” (20 NYCRR 1.6). It is not maintained that petitioner was engaged in business activity and, therefore, without a strict reliance on subdivision 2 of section 209 of the Tax Law, the determination of the commission would have no basis in fact or law. Subdivision 2 of section 209, as it read in 19,61, provided in part: ‘ ‘ The holding of real property in this state shall be deemed to be doing business in this state within the meaning of this article. ’ ’ The legislative history of this section demonstrates that it was solely concerned with taxation of foreign corporations1, a conclusion which must still prevail. A domestic corporation is subject to the tax regardless of whether it does business or owns real property (58 N. Y. Jur., Taxation, § 336).
Consideration must also be given to the fact that the United States Treasury Department ruled that the subject trust was not taxable as a corporation for Federal income tax purposes because no business was conducted and the trust was revocable. This ruling was made in advance of the trust creation, and the contrary ruling subsequently made by the commission caused a *82digression from this State’s policy of conformity with Federal tax standards2.
In addition, the very terms of the trust agreement (which the adherence to is not in issue) prohibit engaging in any business or accumulating or investing income. The truste.es had no employees, maintained no office, and had trust meetings about four times a year. The lease which the trust took the title subject to was totally binding on the trustees who had no power or authority to enter further leases nor to sell all or part of the property during the life of the trust. Truly the collection of rents and distribution of the net income (and the maintenance of bank accounts for expenses) was purely a ministerial function requiring absolutely no discretion and did not constitute the conduct of a business.
Accordingly, the determination should be annulled, with costs, and the matter remitted for further proceedings not inconsistent herewith.
Greenblott and Sweeney, JJ., concur with Staley, Jr., J. P.; Kane and Reynolds, JJ., dissent and vote to annul the determination and remit the matter for further proceedings in an opinion by Kane, J.
Determination confirmed, with costs, and petition dismissed.

. See subdivision 5 of section 209 (L. 1971, eh. 1199) as to real estate investment trusts incorporates all relevant provisions of the Internal Revenue Code, with some modifications, taxing only those trusts subject to Federal taxation.