Court Opinion

ID: 9642278
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:53:32.671409+00
Date Added: 2024-06-11T18:10:45.447213
License: Public Domain

MARIS, Circuit Judge
(dissenting in part).
I concur in the decision of the Court to reverse the Board as to the years 1932 and 1933, but I should reverse as to the year 1934 also, since I cannot agree with the conclusion of my colleagues that the trust involved in this case was an association within the meaning of the Revenue Acts. The majority rely upon Morrissey v. Commissioner, 296 U.S. 344, 56 S.Ct. 289, 80 L.Ed. 263, which is undoubtedly the leading case upon the subject. In his opinion in that case, however, Chief Justice Hughes said (296 U.S. at page 357, 56 S.Ct. at page 295, 80 L.Ed. 263) : “In what are called ‘business trusts’ the object is not to hold and conserve particular property, with incidental powers, as in the traditional type of trusts, but to provide a medium for the conduct of a business and sharing its gains.” He further said with regard to a suggestion made in an argument by counsel (296 U.S. at page 360, 56 S.Ct. at page 29$, 80 L.Ed. 263) : “The suggestion ignores the postulate that we are considering those trusts which have the distinctive feature of being created to enable the participants to carry on a business and divide the gains which accrue from their common undertaking, trusts that thus satisfy the primary conception of association and have the attributes to which we have referred, distinguishing them from partnerships.”
I do not think that the trust involved in the present case meets these tests of a “business trust.” The donors did not create it in order to act together in the businéss of administering their land. As tenants in common immediately before the conveyance they were already jointly engaged in that enterprise. On the contrary it seems clear that they created the trust for the opposite reason, namely, in order that they might withdraw as much as possible from the administration of the land and place that responsibility upon a single trustee.
As I see it, the trust was in every respect a typically traditional one “to hold and conserve particular property, with incidental powers,” as Chief Justice Hughes put it in Morrissey v. Commissioner, supra, 296 U.S. at page 357, 56 S.Ct. at page 295, 80 L.Ed. 263. The trust estate comprised a particular property which required a minimum of attention since at the time of conveyance it was subject for the entire term of the trust to a lease which provided that taxes were to be paid and repairs made by the tenant. The trustee was given only the usual powers incidental to a trust involving real estate. Aside from refinancing the mortgage and revising the lease the activities of the trustee were confined to the collection of the rents and the payment therefrom of interest and installments of principal on the mortgage, personal property taxes and its own compensation and the distribution of the balance to the four beneficiaries. In the light of the fact that the trust estate consisted of a single tract of land entirely occupied by an exists ing business building leased to a single department store, the powers of the trustee to borrow money to construct a building on the land and to sell the whole or any part of the trust estate lose their significance.
The majority of the court point to certain characteristics which in their view stamp the trust as a business one, but all of these are.present in the ordinary type of traditional trust. Indeed I find it hard to conceive of a type of trust which would be more typically traditional and less of a business trust than this. It seems to me that under the decision of the court in this case every trust in which one or more trustees hold and administer real property for two or more beneficiaries must be held to be a taxable association and that the “traditional trust” of which the Chief Justice spoke does not exist. I cannot believe that the Revenue Acts intended any such result.