Court Opinion

ID: 4591270
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:05:26.6741+00
Date Added: 2024-06-11T07:59:22.614614
License: Public Domain

C. H. ATHERTON, ALFRED L. CASTLE, W. W. CHAMBERLAIN, H. S. JOHNSON, AND L. TENNEY PECK, TRUSTEES OF THE KAAUILA LAND TRUST, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Atherton v. CommissionerDocket Nos. 28263, 29547.United States Board of Tax Appeals19 B.T.A. 1172; 1930 BTA LEXIS 2253; May 27, 1930, Promulgated *2253 Held, that the "trust" here involved was not carrying on business during the taxable years and is not taxable as a corporation for such years.  Bernhard Knollenberg, Esq., for the petitioners.  Bruce A. Low, Esq., and L. H. Rushbrook, Esq., for the respondent.  TRAMMELL *1173  These proceedings which were consolidated for hearing and decision are for the redetermination of deficiencies in income tax as follows: Docket No.YearDeficiency282631922$667.572954719234,811.142954719259,091.87The matters in controversy as agreed upon at the hearing are (1) whether the Kaauila Land Trust was an association taxable as a corporation, and (2) if taxable as a corporation, whether in the computation of profit on the sale of certain real estate the basis should be the value of such property at the time of acquisition on May 1, 1922, or the value on March 1, 1913, in the hands of the preceding owner.  From a stipulation and oral evidence we make the following findings of fact.  FINDINGS OF FACT.  The petitioners are trustees under a deed of trust dated May 1, 1922, by which the Honolulu Rapid Transit Co., *2254  Ltd., a Hawaiian corporation, conveyed to them certain lands of said company for the benefit of the shareholders of said company, as is hereinafter set forth more particularly.  The Honolulu Rapid Transit & Land Co., hereinafter referred to as the company, was organized in 1898 under the laws of the Republic of Hawaii.  The act under which the company was organized and which constituted its franchise was very liberal.  In addition to being empowered to operate a street railway the company had the power "to purchase, hold, sell and deal in lands or such other property as may from time to time be deemed proper by the board of directors for the purpose of furthering the interests of said corporation and of extending the business of said railway; to purchase, lease, own or otherwise procure and conduct, maintain and operate such place or places of public resort and amusement, not being theaters, at or adjacent to any terminus or along the line of the railways of said corporation, as it may be deemed in the interests of the corporation to establish and maintain and to provide food, refreshment and entertainment at such place or places." The company accordingly acquired various tracts*2255  of land, including a baseball park.  From 1911 various endeavors were made to arrive at a new franchise.  In the fall of 1920 the Public Utilities Commission of Hawaii, after exhaustive public hearings, at which were present representatives of the company and the city and county governments, *1174  drew up a proposed franchise which was submitted to the legislature of 1921 and which was ultimately enacted into law in that year.  The basic principle of this franchise was to confine the company to a "fair return on the total property of said company actually used for public utility purposes." An informal agreement was made with the Utilities Commission that the company would dispose of its nonutility lands at an early date after acceptance of the franchise.  The new franchise was actually accepted on February 23, 1922, and on the following March 16, a committee was appointed by the directors of the company to consider and report to the directors, submitting a list of all property owned by the company which could not be utilized for public utility or railway purposes.  This committee made its report to the directors on March 21, 1922, and they approved it on the same day.  At*2256  this time the market for real estate in Honolulu was not particularly favorable for the sale of all of the company's real estate holdings and it was decided not to sell all of them at that time, and distribute to the stockholders the proceeds therefrom.  The directors decided upon a plan for placing the property in the hands of trustees who would hold it for the stockholders and who would sell it from time to time when it could be sold for a fair value.  The minutes of a meeting of the board of directors of March 21, 1922, provide in part as follows: WHEREAS, in order to segregate the non-utility property from the utility property of the company, and at the same time to recognize the rights of the present shareholders of the company, it seems advisable and just to convey the non-utility property of the company to trustees for the benefit of its present shareholders by the medium of a real estate trust, THEREFORE, BE IT RESOLVED, that the following parcels of real estate be set aside and designated as property not used or useful for public utility purposes: [Here appears a description of seven parcels of property with indicated book values totaling $59,283.77.] BE IT FURTHER*2257  RESOLVED, that the foregoing parcels be conveyed to trustees for the benefit of the stockholders of this company as of a date to be fixed by the stockholders by the medium of a real estate trust approved by the company's attorneys and subject to the approval of a special meeting of the stockholders to be called for the purpose.  BE IT FURTHER RESOLVED, that the Directors recommend the foregoing procedure and conveyance to the stockholders of the company and a special meeting of the stockholders be called for April 4th to consider the same.  By letters from the president of the company dated March 23, 1922, and April 13, 1922, the Public Utilities Commission was informed of the action of the board of directors.  On April 13, 1922, the Public Utilities Commission authorized the company to transfer the property from its books subject to the examination by the Commission's auditor as to the book values placed on such properties *1175  by the company.  The book values were certified to by the auditor of the Commission on April 15, 1922.  The book value or cost of the properties was $59,283.77.  The method of disposal and the action of the board of directors was approved by the*2258  stockholders of the company at a special meeting on April 18, 1922.  At the same time amendments were made to the charter, among which was one by which the words "and Land" were dropped from the name of the company, and its name became "Honolulu Rapid Transit Company, Limited." On May 1, 1922, the company conveyed the seven parcels of property to five individuals in trust as set forth in the following instrument: KAAUILA LAND TRUST THIS DECLARATION OF TRUST, Made this 1st day of May, in the year one Thousand nine hundred and twenty-two, WITNESSETH: WHEREAS, the HONOLULU RAPID TRANSIT COMPANY, LIMITED, a corporation organized and existing under and by virtue of the laws of the Territory of Hawaii, has conveyed to CHARLES HENRY ATHERTON, ALFRED LOWREY CASTLE, WILLIAM WARREN CHAMBERLAIN, HENRY STUART JOHNSON and LEVI TENNEY PECK, all of said Honolulu, by deed of even date and to be recorded herewith, certain real estate in the City and County of Honolulu, Territory of Hawaii, particularly described in said deed, reference to which is hereby made to be held by them upon the trusts hereinafter set forth; NOW THEREFORE, We, the said CHARLES HENRY ATHERTON, ALFRED LOWREY CASTLE, *2259  WILLIAM WARREN CHAMBERLAIN, HENRY STUART JOHNSON and LEVI TENNEY PECK do hereby declare said trusts as follows: 1.  The Trustees shall issue certificates in substantially the form hereinafter set forth and as therein provided for Twenty Thousand shares herein to the stockholders of the said Honolulu Rapid Transit Company, Limited, of record April 18, 1922, share for share.  The entire interests of the cestuis que trustent, or certificate holders, in the property held or to be held by the Trustees is represented at this date by said Twenty Thousand Shares to be issued as above provided.  [Here appears form of certificate.] 2.  The said certificate holders are not to have any legal title to the trust property itself, real or personal, held from time to time by the Trustees, and, in especial, they shall have no right to call for any partition; they shall have no equitable estate in the lands and appurtenances thereto belonging constituting the trust property, but their interest shall consist only of an interest in the money to arise from the sale or other disposition thereof by the Trustees, as herein provided, and of the rights herein mentioned previously to such sale and the*2260  shares shall be personal property carrying the rights, as herein set forth, of division of proceeds and profits and the other rights and matters concerning the trust property, and shall be transmissable and transferable as personal estate.  3.  The death of a certificate holder during the continuance of this trust, or the transfer of the interest by operation of law, shall not operate to determine the trust, nor shall it entitle the legal representatives of a deceased certificate holder to an account, or to take any action in the courts, or otherwise, against *1176  the trust or the Trustees; but the executors, administrators or assigns of the deceased shall succeed to all rights of said deceased under this trust, upon the surrender of the certificate of such share.  4.  The Trustees may from time to time, at their discretion invite and receive subscriptions to additional shares at a price to be fixed by them for the purpose of increasing the capital of the trust, giving preference, upon such terms and conditions as they shall deem best, to existing certificate holders.  All subscriptions shall be subject to the terms of this Declaration of Trust.  5.  The books of said*2261  Trustees shall always be open to the inspection of certificate holders.  6.  No assessment shall ever be made upon the certificate holders.  The Trustees shall not have power to bind the certificate holders personally, and all persons or corporations extending credit to, contracting with, or having any claim against the Trustees shall look only to the funds and property of the trust for payment under such contract or claim, or for the payment of any debt, damage, judgment or decree, or of any money that may otherwise become due or payable to them from the Trustees, so that neither the Trustees nor the certificate holders, present or future, shall be personally liable therefor.  In every written order, contract or obligation which the Trustees shall give or enter into, it shall be the duty of the Trustees to refer to this declaration and to stipulate that neither the Trustees nor the certificate holders shall be held to any personal liability under or by reason of such order, contract or obligation.  7.  The compensation of the Trustees for their personal services shall be not to exceed in the aggregate, five per cent (5%) per annum of the gross income of the trust property as they*2262  shall determine, and in case of a sale of the trust property or any part thereof one per cent (1%) of the price for which the same is sold.  8.  The Trustees under this instrument are authorized to expend any money coming to them from time to time from the subscribers to this instrument and their assigns, or otherwise, and such portion of the income from the property held by them, as may seem best to them, in their uncontrolled discretion, in the payment of any liens or other obligations against the trust property, or in the improvement of the real estate the subject of this trust, or in the payment of any obligation of the trust; they may also invest in such property as they deem desirable; they shall have as such Trustees as absolute control over and disposal of all property held by them at any time under this trust as if they were the sole beneficial owners thereof, including, but not hereby restricting the preceding generality, the power to sell for cash or credit at public or private sale, free and discharged of all trusts (and no purchaser shall be liable for the application of money paid), to lease or hire for a term beyond the duration of this trust, or for any less term, *2263  to let, to exchange, to release, and to partition and also to compromise and settle claims of every name and nature against them or the trust property.  They may also create, obtain and release easements, may adjust boundaries, and generally may make, execute and deliver all manner of deeds, agreements and conveyances for the purpose of managing and controlling or conveying the trust property which shall at any time seem to them desirable or expedient.  They shall also have power to borrow money for the purposes of this trust and give notes therefor binding the assets of the trust but not the Trustees or certificate holders personally, and shall not owe at any one time an amount greater than fifty per cent (50%) of the fair value of the property then owned by this trust; but no lender of money to said Trustees shall be bound to inquire as to the indebtedness of the Trustees to any other person or persons, nor be liable in any way for the application of the money lent.  *1177  They shall have the exclusive management of all the property at any time held by them, and shall manage said property as they shall deem for the best interest of the certificate holders.  9.  The Trustees*2264  may acquire, by purchase or otherwise, any real estate or any interest therein in the Territory of Hawaii, if, in their judgment, such acquisition will in any manner tend to facilitate the development of the real estate this day conveyed to them, or will, in their judgment, further the interests of the certificate holders, and the judgment of the Trustees in both instances shall be final.  They may lay out, construct, or discontinue any streets or ways on the property at any time held by them, or dedicate the same to the public use, or convey to the Territory or the City and County of Honolulu, with or without compensation therefor, such part or parts of any property at any time held by them as in their judgment will enhance the value of their remaining property to a degree equal to or greater than the value of the part or parts thereof so dedicated or conveyed, and their judgment shall be final and conclusive upon said matter.  10.  The Trustees may from time to time, in their discretion, determine which of their receipts and expenditures shall be treated as capital and which as income, and in making such determination they shall be guided by their judgment as business men, having*2265  regard to the character and development of the trust property, rather than by any strict rule of law, and their determination shall be final.  They may divide the whole or any part of the net income of the property held by them under this trust among the certificate holders annually or oftener in their discretion, and in any fiscal year in which the net income of the trust property exceeds Five Thousand Dollars they shall divide at least three-fourths of the net income.  The decision of the Trustees as to what constitutes net income shall be final.  The Trustees may set aside for a reserve or contingent fund or use for the improvement of the trust property any net income not divided as above provided.  11.  The Trustees may from time to time, in their discretion, sell all or any part or parts of the trust property and distribute the proceeds thereof, either in whole or in part, among the certificate holders, or they may, in their discretion, reinvest the proceeds, either in whole or in part, in the purchase of further real estate.  In the event that the entire property of the trust is sold and the proceeds distributed among the certificate holders, then this trust shall terminate. *2266  12.  Any Trustee under this instrument may resign his trust by a written instrument signed by him and acknowledged in the manner required for the acknowledgment of deeds; and such instrument shall be recorded in the Hawaiian Registry of Conveyances.  When any vacancy occurs at any time in the office of Trustee all property in the trust shall vest in the remaining Trustees or Trustee, and such vacancy shall be filled by the remaining Trustees or Trustee by an instrument in writing acknowledged and recorded as aforesaid, and the title to all the property of the Trust shall vest in any new Trustee and the other Trustees, and such new Trustee shall have the same powers as if originally named herein.  The Trustees may from time to time, by a written instrument signed by them and acknowledged in the manner required for the acknowledgment of deeds, and recorded in the Hawaiian Registry of Conveyances, authorize any three of their number to exercise any or all of the powers hereunder, and such authority may be so given to any three Trustees hereunder by name or to any three of the persons who may at any time be lawfully acting as Trustees hereunder, *1178  without naming them.  The*2267  Trustees may appoint some person who shall act as Treasurer, for the purpose of transfering trust certificates and such other duties as may be given him by said Trustees.  When any Trustee is absent from the Territory, or incapable by reason of illness or otherwise, the other Trustees shall have all the powers hereunder; provided that in no case shall less than three Trustees actually exercise the powers hereunder except as aforesaid, the term "The Trustees" wherever used herein shall be deemed to mean those who are or may be Trustees for the time being.  No Trustee shall be required to give a bond.  13.  At and upon the expiration of twenty years after the death of the last survivor of the following named persons, being the original Trustees hereunder, Charles Henry Atherton, Alfred Lowrey Castle, William Warren Chamberlain, Henry Stuart Johnson, and Levi Tenny Peck, or at such earlier time as the certificate holders may at any time by an instrument or instruments in writing signed by the owners of not less than two-thirds of the shares and acknowledged by the signers in the manner prescribed for the acknowledgment of Deeds, and recorded in said Hawaiian Registry of Conveyances, *2268  direct the said Trustees to terminate this trust and sell the trust property and distribute the proceeds proportionately among the certificate holders, or to convey the trust property to new or other Trustees, under a new Declaration of Trust, or to a corporation to be organized for the purpose, as they may direct, and the Trustees shall obey such directions, being first duly indemnified for any outstanding obligations, and compliance with such direction shall relieve the said Trustees from any further liability to any person whatsoever; and the certificate holders may in like manner remove a Trustee or Trustees under the instrument, or revoke the appointment of a trustee by the surviving or remaining Trustee, or Trustees, and name a new Trustee or Trustees under this instrument, who shall succeed to the title of the former Trustee or Trustees in the said trust property, and become a party to this instrument as fully as if he or they had been the original Trustees hereunder, upon the acceptance of the trust by him or them in writing duly acknowledged and recorded in said Registry of Conveyances; they shall in like manner appoint a new Trustee or Trustees, in case of the failure of*2269  the surviving or remaining Trustee or Trustees to do so; or in the case of the death or disability of all the Trustees; and the certificate holders in like manner may amend this instrument in any respect, except to extend the duration of this trust, and such amendments and all instruments signed and recorded as above directed shall be binding upon all the certificate holders, and upon the Trustees, but the vested rights of third persons shall not be affected thereby.  14.  The Trustees or any of them, in their individual capacity, or in any other fiduciary capacity, acting alone or in conjunction with others, may purchase and hold any shares issued hereunder and also may subscribe for and purchase, on the terms offered to third persons generally, any notes or bonds authorized or issued by the Trustees, and may purchase at public auction any real estate or any interest therein offered for sale by the Trustees.  The five trustees were the president, manager, treasurer and two directors of the Honolulu Rapid Transit Co., Ltd.  Certificates in the Kaauila Land Trust were issued to stockholders in the Honolulu Rapid Transit Co., Ltd., on the basis of one certificate in the trust for*2270  each share held in the company.  At that time the Honolulu Rapid Transit Co., Ltd., had 20,000 shares of stock outstanding.  *1179  The beneficiaries under the trust have not held any meetings nor have they ever exercised the right under the trust instrument to remove any trustee and name his successor or to amend the trust certificate.  About the time the property was transferred to the trustees they informed all the dealers in real estate in Honolulu it was for sale.  Bids on the property were submitted to one Davis, who was employed in the office of the Honolulu Rapid Transit Co., Ltd., and he in turn informed the trustees as to the highest offer obtained.  If the trustees considered the bid an acceptable one, they would sell the parcel of property to the bidder.  In 1922 the trustees began to sell parcels of the property acquired by them under the trust and continued to sell it as rapidly as possible, considering the condition of the market.  The fair market value on March 1, 1913, the fair market value at the time of transfer to the Kaauila Land Trust on May 1, 1922, the sale price and the year in which sold of the seven parcels of property are as follows:  Year Sale price Fair market Fair market value soldvalue on Mar.at time of trans-1, 1913fer to Kaauila Land Trust on May1, 1922Alexander Street1922$25,650.00$17,208.34$25,650.00Kalihi Street19224,250.001,672.504,250.00Pacific Heights19222,000.002,442.112,000.00Palolo192350,000.0011,500.0021,889.4014-acre tract1925100,000.0021,000.0054,359.00Baseball grounds(1)13,818.0431,785.40Kakaake(1)9,964.7718,515.00Total77,605.76158,448.80*2271 The parcels of real estate involved in these proceedings are those indicated above as having been sold in the respective years.  The earlier sales for small amounts were for cash or for cash within a short time.  The sale in 1925 was for $40,000 cash at the time of the sale and $60,000 in cash within a short time thereafter.  In disposing of the property the trustees did not take mortgages on other property or stocks or bonds or other properties in exchange as the sales were always made on the basis of cash being paid or to be paid.  Where the entire amount of cash was not paid at the time of the sale and notes were taken, the trustees did not try to have them discounted.  No improvements were made by the trustees to any of the properties and the petitioners have done no business except to collect rent on the real estate involved until it was sold, to pay taxes and the expenses on the property and to distribute the net proceeds to the certificate holders in the Kaauila Land Trust as such proceeds *1180  became available.  The Kaauila Land Trust never had any office as such, the law office of one of the trustees being used for that purpose.  No salaries*2272  were paid the trustees, their only compensation being the commissions provided for on the distribution of the proceeds from the sales of the properties.  The only books kept were a record of the meetings of the trustees, and of the receipts and disbursements of the money.  The two parcels remaining unsold are not under lease and are being held awaiting a favorable opportunity for sale.  Some time between March 1 and March 15, 1923, Castle, a trustee of the Kaauila Land Trust and one of the petitioners herein, had a brief conference with the collector of internal revenue at Honolulu at the latter's office with respect to how the 1922 return for the trust should be filed.  After a conference of only a few minutes, during which the formation of the Kaauila Land Trust was discussed very briefly, the collector informed Castle orally that he thought the return should be filed as a trust.  The collector was not shown a copy of the trust agreement nor did he confirm the conversation in writing.  The opinion given by the collector was only "an off-hand, curbstone opinion." The returns for 1922, 1923, and 1925 were filed as a trust.  The respondent in determining the deficiencies here*2273  involved held the trust to be an association taxable as a corporation.  In determining the deficiencies the respondent used the fair market value of the parcels of property on March 1, 1913, as the basis for computing the profit from the sale thereof in the respective years.  The notice of the determination of a deficiency for 1922 was mailed to the petitioner on March 14, 1927, and the petition against such determination was filed on May 9, 1927.  The notice of the determination of deficiencies for 1923 and 1925 was mailed to the petitioners on June 15, 1927, and the petition against such determination was filed on July 8, 1927.  OPINION.  TRAMMELL: At the hearing counsel for the respondent conceded that no gain or loss resulted from the sale of the property in 1922 and that the taxable gain from the property sold in 1923 was $28,110.60.  This leaves for our consideration the questions (1) whether the Kaauila Land Trust was for the years 1922, 1923, and 1925 taxable as a trust or as a corporation, and (2) if taxable as a corporation, whether the fair market value at March 1, 1913, or the fair market value at May 1, 1922, the date of the transfer to the Kaauila Land Trust, is*2274  the basis for determining the profit on the sale of the property in 1925.  The respondent's admissions with respect to the profits on the sales of property in 1922 and 1923 appear *1181  to arise from computations based on the fair market value of the properties at the time of acquisition by the Kaauila Land Trust instead of the fair market value at March 1, 1913.  The petitioners contend that the Kaauila Land Trust is a trust and not an association within the meaning of the income-tax laws.  In support of this contention they urge that the trust was not organized as a business enterprise, nor was it carrying on business during the taxable years here involved.  The form of organization here involved is what is commonly known as a Massachusetts trust.  These trusts have heretofore been considered by us on various occasions.  See ; ; ; affd., ; and *2275 . Respecting this type of trusts, we said in the Pritchett case: So-called Massachusetts trusts may be divided into two classes.  The first class consists of those where the trustees merely invest and collect dividends or interest or rental (from a single lease) and distribute such income among the shareholders.  These are held to be common law trusteeships, as where a trustee under a will collects income and distributes it among the beneficiaries.  The second class is composed of business trusts, the trustees of which carry on active business enterprises for profit.  These are simply unincorporated joint-stock associations.  Cook on Corporations, vol. III, 8th ed. 2251, et seq., where it is further stated: These two lines of decisions probably mark the true line of distinction.  Certainly those who carry on an active business for profit, through others, are principals and not merely beneficiaries, irrespective of how much or how little power of management and control they may exercise, actually or by the terms of the original agreement.  A silent participant in the profits of a business concern is liable*2276  for its debts, even though he takes no part in its management.  The theory that these trusts should be divided according to whether the shareholders exercise great or little powers of control is only confusing.  The trust instrument may be drawn either way.  * * * The real test is whether the shareholders or trustees or both combined carry on business; if so, they are a business trust, with liability for debts and taxes.  In holding certain trusts taxable as associations, the court in , said: We conclude, therefore, that when the nature of the three trusts here involved is considered, as the petitioners are not merely trustees for collecting funds and paying them over, but are associated together in much the same manner as the directors in a corporation for the purpose of carrying on business enterprises, the trusts are to be deemed associations within the meaning of the Act of 1918; this being true independently of the large measure of control exercised by the beneficiaries in the Hecht and Haymarket cases which much exceeds that exercised by the beneficiaries under the Wachusett Trust.  We do not believe that it was*2277  intended that organizations of this character - described as "associations" by the Massachusetts statutes and subject to duties and *1182  liabilities as such - should be exempt from the excise tax on the privilege of carrying on their business merely because such a slight measure of control may be vested in the beneficiaries that they might be deemed strict trusts within the rule established by the Massachusetts courts.  It appears that the court discards the test of control in determining whether a trust is an association, under the revenue acts, and makes the test whether such trust was or was not organized for purely business purposes.  To us this seems to be the true test.  See The Honolulu Rapid Transit Co., Ltd., in accepting its new charter found it desirable and advisable to divest itself of certain real estate holdings which had no relationship with or use in the operation of its public utility activities.  Local real estate conditions not then being favorable to the disposition of all these holdings at a fair value, the Kaauila Land Trust was formed for the purpose of taking title to the holdings and retaining them until*2278  such time as they could be sold advantageously, and then selling them and distributing the proceeds to the certificate holders who in the first instance were stockholders in the Honolulu Rapid Transit Co., Ltd.  The trustees began selling the land in 1922 and continued to sell it as rapidly as possible, considering market conditions therefor.  While the trustees under the trust instrument were given broad powers and under such powers could undoubtedly have entered into extensive business undertakings, yet the record clearly shows that they have observed closely the purpose for which the trust was formed, namely, the liquidation of the real estate holdings transferred to them by the Honolulu Rapid Transit Co., Ltd., and the payment of the proceeds to the certificate holders.  The collection of rent on such holdings until they were sold and the payment of taxes and expenses were in our opinion only incidental.  The court, in affirming , said: It is contended that the test is whether the respondent was conducting a business and the beneficiaries had control of the trustees. *2279  To sustain this a number of cases dealing with the doing of business are cited.  They need not be reviewed as it may be considered settled, within the meaning of the taxing laws, that if a corporation is doing that for which it was organized, for the purpose of earning profit, very slight activity is sufficient to constitute the doing of business.  . On the other hand, if a corporation is not organized for profit but merely to hold real estate for ultimate disposal and liquidation it is not doing business although it incidentally collects the rents and distributes them.  , . * * * The difference between the respondent and the Massachusetts Trusts considered in , is very marked.  The respondent was not organized for the purpose of doing business for profit, nor for doing business at all.  Its purpose was to liquidate and distribute an estate.  The beneficiaries, *1183  other than its creator, had no vested interest in the property and no voice in instituting*2280  the trust.  They received their distributive portions purely as donations from their mother and could not dispose of their interests, except by an equitable assignment of their rights, subject to the orderly administration of the trust.  Such slight business activities as the trustee conducted were in furtherance of the ultimate purpose of liquidation and distribution.  The similarity as to the provisions for terminating the trust, amending the deed and removing and electing trustees are hardly material as they are not unusual in express trusts.  We think the foregoing is applicable here, and are accordingly of the opinion that the Kaauila Land Trust was not organized for doing business for profit nor was it doing business during the years here involved, and that the respondent was in error in determining that it is taxable as a corporation.  Having found that the Kaauila Land Trust is not taxable as a corporation, it becomes unnecessary to determine the basis for computing the profit on the property sold in 1925.  Reviewed by the Board.  Judgment will be entered under Rule 50.Footnotes1. Not sold. ↩