Court Opinion

ID: 4483096
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:53.255962+00
Date Added: 2024-06-11T14:54:02.769374
License: Public Domain

Quealy, J., dissenting: I do not question that a literal application of respondent’s regulations would require me to concur with the opinion of the majority. However, I am unwilling to be bound by regulations which are patently erroneous, even though respondent may not be prepared to disaffirm those regulations. I think it is the duty of the Court to decide a case in accordance with the law, and where the law is clear, the regulations must give way to the law. That the law is clear is amply evidenced by the fact that the original opinion in this case was adopted after review by the Court. Phillip G. Larson, docket Nos. 5530-72, 5266-73, 5267-73, opinion filed Oct. 21, 1975, and withdrawn Nov. 7, 1975. By inference, at least, even petitioner’s counsel would seem to concede that in the absence of the so-called “Kintner regulations” these limited partnerships would be taxable associations.1 Nor do I believe that there can be any dispute with respect to the absurdity of the “Kintner regulations.” From the outset, the Congress has applied the tax on corporations, organized as such under an act of Congress or the laws of the various States, to other forms of transacting business having similar characteristics. See the Corporation Tax Act of Aug. 5, 1909, ch. 6, sec. 38, 36 Stat. 11, 112. Following the adoption of the 16th amendment, a tax on income was first enacted as section II of the Tariff Act of Oct. 3,1913, ch. 16, sec. G, 38 Stat. 114, 172. In that act, the normal tax imposed on individuals was likewise imposed on the incomes of “every corporation, joint-stock company or association, and every insurance company, organized in the United States, no matter how created or organized, not including partnerships.” Similar language appeared in section 10 of the Revenue Act of 1916. Beginning with the Revenue Act of 1918, there was initiated the practice of defining separately the various terms used in the act. Section 1 of that act provided, in part, “The term ‘corporation’ includes associations, joint-stock companies, and insurance companies.” Substantially the same provision has been carried forward in subsequent revenue acts and appears virtually unchanged as section 7701(a)(3) of the 1954 Code.2  Section 7701(a)(2) defines “partnership” and “partner” for the purposes of the Internal Revenue laws as follows: (2) PARTNERSHIP and partner. — The term “partnership” includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a trust or estate or a corporation; and the term “partner” includes a member in such a syndicate, group, pool, joint venture, or organization. Section 7701(a)(3) further defines a “corporation” for purposes of the Internal Revenue laws to include other forms of organizations described as follows: (3) CORPORATION. — The term “corporation” includes associations, joint-stock companies, and insurance companies. Accordingly, the taxation as a separate entity of business ventures is not limited to those enterprises which may be formally chartered as corporations under the laws of various States. Conversely, a “partnership” is defined to include various forms of association which are not, within the meaning of the revenue laws, trusts, estates, or corporations. Thus, depending upon their characteristics, business trusts, partnerships, and other forms of association may be taxable as corporations. The determination whether the limited partnership agreements in these proceedings gave rise, in fact, to a taxable association within the meaning of section 7701(a)(3) is not controlled by State law. Commissioner v. Tower, 327 U.S. 280 (1946); Burk-Waggoner Association v. Hopkins, 269 U.S. 110 (1925). It is a question which must be decided within the context of the Internal Revenue laws, giving effect to the intent of the Congress as embodied in those laws. Morrissey v. Commissioner, 296 U.S. 344 (1935); Swanson v. Commissioner, 296 U.S. 362 (1935); Helvering v. Combs, 296 U.S. 365 (1935); Helvering v. Coleman-Gilbert Associates, 296 U.S. 369 (1935). The principles to be considered in determining whether an association or partnership should nevertheless be taxable as a corporation were enunciated in Morrissey v. Commissioner, supra, and have been further defined and implemented in the current regulations.3  Section 301.7701-2(a)(l), Proced. & Admin. Regs., sets forth the major characteristics of taxable associations as enumerated in the Morrissey case. These characteristics consist of (1) associates, (2) joined together to carry on a business and divide the gains therefrom, (3) with continuity of life, (4) centralization of management, (5) limited liability, and (6) transferability of interests. The regulations then proceed to eliminate from consideration those characteristics which are common both to partnerships and to corporations as not being material in attempting to distinguish between a taxable association and a true partnership, leaving for consideration continuity of life, centralization of management, limited liability and transferability of interest. In setting forth the criteria to be applied in determining whether an organization formed as a limited partnership possesses the requisite characteristics which would make such an organization more nearly akin to a corporation, the regulations are bottomed on the proposition that a limited partnership organized under the Uniform Limited Partnership Act cannot be taxable as an association.4 For example, the regulations state that “a limited partnership subject to a statute corresponding to the Uniform Limited Partnership Act” lacks continuity of life. Sec. 301.7701-2(b)(3), Proced. & Admin. Regs. Again, the regulations state that “limited partnerships subject to a statute corresponding to the Uniform Limited Partnership Act, generally do not have centralized management.” Sec. 301.7701-2(c)(4), Proced. & Admin. Regs. The regulations state that “in the case of a limited partnership subject to a statute corresponding to the Uniform Limited Partnership Act, personal liability exists with respect to each general partner,” with certain very limited exceptions. Sec. 301.7701-2(d)(l), Proced. & Admin. Regs.5 In section 301.7701-3(b)(2), example (2), the regulations then indicate that if the limited partnership lacks two of the four enumerated characteristics it is not more nearly akin to a corporation than it is to something else. As a practical matter, no partnership would fail to meet the test prescribed in the regulations in order to avoid being taxed as an association, whether formed under the common law, the Uniform Limited Partnership Act, or the California Uniform Limited Partnership Act. At least two of the requisite characteristics will always be lacking. First, with respect to continuity of life, in order to have a partnership you must have a general partner. Regardless of any provision to the contrary, whether by agreement or in accordance with State law, the bankruptcy of a general partner results in the “dissolution” of that partnership. Uniform Partnership Act, secs. 29, 31(5), and 6; Cal. Corp. Code, secs. 15029, 15031(5), and 15006. See also, sec. 5(i) of the Bankruptcy Act, 52 Stat. 845,11 U.S.C., sec. 23(i); Rowley on Partnership, secs. 31.5 and 46.2 (2d ed. 1960). This does not mean that the remaining partners cannot continue the business. All the term “dissolution” means is that from the standpoint of those doing business with the partnership, its status has been altered. See Uniform Partnership Act, secs. 29-43 and 6; Cal. Corp. Code, secs. 15029-15043 and 15006. See also Rowley on Partnership, secs. 29.1, 30.1, and 46.11 (2d ed. 1960). Cf. Cal. Corp. Code, sec. 15520 (West Supp. 1976). Since respondent’s regulations adopt “dissolution” as the sole test in determining whether there is the requisite continuity, no partnership can have continuity of life. Secondly, under the respondent’s regulations, limited liability is lacking unless the general partner has “no substantial assets (other than his interest in the partnership)” and is a “dummy.” Read literally, the regulations would impose a double-barreled requirement, namely, that the general partner have no assets which can be reached by the creditors and be a “dummy.” However, the term “dummy” is a word of art in the law. Black’s Law Dictionary (Rev. 4th Ed. 1968) defines the term at page 591 as follows: “DUMMY, n. One who holds legal title for another; a straw man.” If the sole general partner is, in fact, a “dummy” the limited partners would be liable generally for the debts of the partnership. Uniform Limited Partnership Act, sec. 7; Cal. Corp. Code, sec. 15507. See also Holzman v. De Escamilla, 86 Cal. App. 2d 858, 195 P. 2d 833 (1948); Rowley on Partnership, sec. 53.7 (2d Ed. 1960). Their liability would no longer be limited. Therefore, even if the general partner is a “dummy,” there could be no limited liability. From this it follows, that under the regulations no partnership would lack the requisite characteristic of limited liability, whether organized under common law, the Uniform Limited Partnership Act, or the California Uniform Limited Partnership Act.6  Finally, respondent’s regulations go on to state that if two of the requisite four characteristics are lacking, the association is not more nearly akin to a corporation than to some other form of organization and is not taxable as an association within the meaning of section 7701. I must concede that the opinion of the majority is fully supported by the language of respondent’s regulations. I think, however, that the majority would likewise agree that this produces an absurd result. We differ only in whether or not upon the record in this case, the Court is constrained to reach that result. I do not think so. Although the respondent has not sought to set aside his regulations, and petitioner rests his case strictly on those regulations, I do not believe that this Court should be limited in its decision-making process by an erroneous interpretation of the law. To do so would put us back where we were prior to the decision in Morrissey v. Commissioner, supra, wherein the Supreme Court said: The question is not one of the power of Congress to impose this tax upon petitioners but is simply one of statutory construction, — whether Congress has imposed it. See Burk-Waggoner Oil Association v. Hopkins, 269 U.S. 110, 114. The difficulty with the regulations as an exposition was that they themselves required explication; that they left many questions open with respect both to their application to particular enterprises and to their validity as applied. * * * [p. 356] In Morrissey v. Commissioner, supra, and the companion cases of Helvering v. Coleman-Gilbert Associates, supra, and Helvering v. Combs, supra, the Supreme Court under varying factual situations made the law which should prevail in these cases. Following the Morrissey group of cases, the Treasury Department attempted to conform its regulations to those decisions. For a period of some 25 years, the law was administered and the courts were guided in their decisions by the Morrissey group of cases and those regulations. A change in the regulations came about only after the licensed professionals sought to organize as taxable associations and that right was sustained by the courts. See United States v. Kintner, 216 F.2d 418 (9th Cir. 1954); United States v. Empey, 406 F.2d 157 (10th Cir. 1969). The Treasury Department thereupon revised its regulations in an effort to prevent the proliferation of the professional associations. In reality, what the Treasury set about to do was overrule the Kintner decision. In effect, these regulations would set aside or overrule all case law in this field from the Morrissey case to the Kintner case. As applied to the professional corporation, the courts have uniformly held invalid much of the current regulations. Kurzner v. United States, 413 F.2d 97 (5th Cir. 1969); O’Neill v. United States, 410 F.2d 888 (6th Cir. 1969); United States v. Empey, supra; Smith v. United States, 301 F. Supp. 1016 (S.D. Fla., 1969); Cochran v. United States, 299 F. Supp. 1113 (D. Ariz., 1969); Wallace v. United States, 294 F. Supp. 1225 (E.D. Ark., 1968); Holder v. United States, 289 F. Supp. 160 (N.D. Ga., 1968). I see no reason to give any greater weight to these regulations where the position of the parties is reversed, and it is the taxpayer who claims that the association should not be taxable as a corporation. While the promulgation of a ruling predicated on the Uniform Limited Partnership Act as the sole criterion might serve the convenience of the administrative agency — in addition to excluding most professional associations — it is clearly incompatible with the decision in the Morrissey case. The regulations cannot obviate the necessity of considering the basic question involved, namely, whether the association in fact more nearly resembles a corporation than it does a trust or partnership. The fact that the Treasury has not seen fit to change its regulations, where those regulations admittedly are predicated upon erroneous concepts, should not serve to limit the right of this Court to consider the broad question whether these and similar limited partnerships are taxable as associations within the principles established in cases such as Morrissey v. Commissioner, supra; Helvering v. Coleman-Gilbert Associates, supra; Helvering v. Combs, supra; and Commissioner v. Tower, supra. Even assuming otherwise, however, I do not believe that Mai-Kai and Somis meet what appears to be a condition precedent to the application of those regulations. The California Uniform Limited Partnership Act is not a statute “corresponding” to the Uniform Limited Partnership Act. There is a substantive difference in the provisions relating to the election and removal of the general partner. Under the California Uniform Limited Partnership Act, a bare majority of the limited partners may remove or expel the general partner and in such event, or in event of the retirement, death, or insanity of the general partner, may elect a new general partner thereby avoiding dissolution of the partnership. Cal. Corp. Code, secs. 15502(l)(a)(XV), 15507(b)(1), and 15520. These provisions are mandatory. See Cal. Admin. Code, tit. 10, sec. 260.140.116.2. No comparable provisions may be found in the Uniform Limited Partnership Act. The petitioners contend that these provisions in the California statute for the election, removal, or replacement of the general partner by a majority vote of the limited partners are merely declaratory of the rights which a limited partner may be granted under the Uniform Limited Partnership Act. However, the California statute provides for the granting of such rights — i.e., “control” — without subjecting the limited partners to liability as general partners. It is this basic distinction between the rights of the limited partners under California law and the rights of limited partners under the Uniform Limited Partnership Act upon which respondent relies in these cases. This distinction relates to a matter of substance.7  Where provision is made either by law or in the partnership agreement for the substitution of a general partner by a vote of a majority of the limited partners in the case of death, disability, resignation, or bankruptcy of the general partner, there is greater continuity than if the association would be terminated or dissolved in such event. Even more significantly, where the general partner may be removed by a vote of the limited partners, or the partnership may be dissolved and liquidated by a vote of the limited partners, the role of the limited partners is more nearly akin to that of the shareholders in a corporation and, a general partner whose authority may be taken away by a stated percentage of the limited partnership interests becomes more closely akin to a “manager,” rather than a “principal.” In effect, under the California statute the role of the general partner in a limited partnership is reduced to that of an elected manager. There exists the same representative management as in the case of a corporation.8 Any lack of transferability of interest loses its significance. A manager cannot transfer his job. Furthermore, such an elected manager provides the requisite centralized management, regardless of his share in the business, which in this case was wholly contingent on the results of his efforts. In determining whether these limited partnerships are taxable as associations, the Court must also look to the association “as a whole,” not solely to any formalistic standards. Morrissey v. Commissioner, 296 U.S. 344 (1935).9 We should not be confused by “labels.” A partnership within the meaning of section 7701(a)(2) is not so defined. Thus the term embraces a syndicate, group, pool, joint venture, or other unincorporated organization which is not “a trust or estate or a corporation.” Therefore, we must look to what the Congress intended by the all-inclusive definition of a corporation under section 7701(a)(3). It must be remembered that at the time provision was first made for taxing unincorporated associations as corporations, the limited partnership as it is known today was not in existence. The Congress primarily had in mind taxing the business (or Massachusetts) trust as a corporation. This type of association was developed by reason of the restrictions in Massachusetts with respect to the holding of real property by a corporation.10  While the associations with which the Court is concerned in this case were organized under the California Uniform Limited Partnership Act and may be referred to as “limited partnerships,” in substance these associations are indistinguishable from the Massachusetts or business trusts to which the provisions for taxing certain “associations” as corporations were initially directed.11 The only difference is the substitution of a corporation, organized for that purpose, as general partner in lieu of the trustee. The “general partner” was nevertheless charged with a “trust,” or fiduciary obligation. Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (1928); Wind v. Herbert, 8 Cal. Rptr. 817 (2d Dist. Ct. App. I960); Nelson v. Abraham, 29 Cal. 2d 745 (1947). In other respects, these limited partnerships more nearly resemble the corporate form than the business or real estate trusts which have been held to be taxable as corporations since the inception of the provision. E.g., Burk-Waggoner Association v. Hopkins, supra; Swanson v. Commissioner, supra; Helvering v. Coleman-Gilbert Associates, supra; Mid-Ridge Investment Co. v. United States, 324 F.2d 945 (7th Cir. 1963); United States v. Stierwalt, 287 F.2d 855 (10th Cir. 1961); Mullendore Trust Co. v. United States, 271 F.2d 748 (10th Cir. 1959); Main-Hammond Land Trust v. Commissioner, 200 F.2d 308 (6th Cir. 1952), affg. 17 T.C. 942 (1951); Bloomfield Ranch v. Commissioner, 167 F.2d 586 (9th Cir. 1948); Marshall’s Heirs v. Commissioner, 111 F.2d 935 (3d Cir. 1940); Wellston Hills Syndicate Fund v. Commissioner, 101 F.2d 924 (8th Cir. 1939); Title Insurance & Trust Co. v. Commissioner, 100 F.2d 482 (9th Cir. 1938); Kilgallon v. Commissioner, 96 F.2d 337 (7th Cir. 1938); Trust No. 5833, Security-First National Bank v. Welch, 54 F.2d 323 (9th Cir. 1931); Little Four Oil & Gas Co. v. Lewellyn, 35 F.2d 149 (3d Cir. 1929); cf. Commissioner v. Gerstle, 95 F.2d 587 (9th Cir. 1938); Elmer Irvin Trust, 29 T.C. 846 (1958); Huron River Syndicate, 44 B.T.A. 859 (1941); Porter Property Trustees, Ltd., 42 B.T.A. 681 (1940), affd. 130 F.2d 276 (9th Cir. 1942); Del Mar Addition, 40 B.T.A. 833 (1939), affd. 113 F.2d 410 (5th Cir. 1940); St. Louis Hills Syndicate Fund, 36 B.T.A. 575 (1937); Central Republic Bank & Trust Co., Trustee, 34 B.T.A. 391 (1936). Whether organized as a partnership, limited partnership, joint venture, or any other type of unincorporated organizations, these ventures have been defined as a “real estate syndicate.”12 As such, these limited partnerships in California are treated much like any other corporation. A limited partnership interest is regarded as a “security” under California law. To a large degree, the sales of interests in such syndicates were subject, under both State and Federal law, to the same regulation as the sale of stock in a corporation.13  The limited partnership interests in Mai-Kai and Somis were sold through licensed brokers to their individual customers, just as shares in a corporation are sold. The sale of limited partnership shares became so prevalent that the California legislature enacted specific legislation to regulate the business.14  Petitioner was permitted to present proof that the determination of the respondent in this case may be inconsistent with private rulings issued in the cases of other limited partnerships formed under the California law. It is well settled that taxpayers may not rely upon private rulings issued upon the basis of requests made and facts submitted by other taxpayers, whether right or wrong. Goodstein v. Commissioner, 267 F.2d 127 (1st Cir. 1959), affg. 30 T.C. 1178 (1958); Weller v. Commissioner, 270 F.2d 294 (3d Cir. 1959), affg. 31 T.C. 33 (1958) and 31 T.C. 26 (1958); Gale R. Richardson, 64 T.C. 621 (1975). See also, Bookwalter v. Brecklein, 357 F.2d 78 (8th Cir. 1966); Minchin v. Commissioner, 335 F.2d 30 (2d Cir. 1964); W. Lee McLane, Jr., 46 T.C. 140 (1966); Bornstein v. United States, 345 F.2d 558 (Ct. Cl. 1965); Rev. Proc. 72-3,1972-1 C.B. 698, 705. Finally, petitioners allude to the fact that one of the proposals considered and not adopted by the Ways and Means Committee in its preparation of the Tax Reform Bill of 1975 was that any partnership registering the sale of partnership interests with the Securities and Exchange Commission be treated as a corporation. See “Committee Member Selections of Proposals for Consideration in First Phases of Tax Reform,” House Ways and Means Committee Print (Aug. 26, 1975). No inference can be drawn from this incident. A similar argument was rejected in Helvering v. Clifford, 309 U.S. 331 (1940). Rather, comparable legislation enacted by the Congress relating to the “pass through” of income and losses would indicate that the Congress would not have enacted legislation which would permit the deduction of such losses by the limited partners of a real estate syndicate if that matter had been presented for its consideration. In 1960, Congress enacted special provisions for the taxation of real estate investment trusts. (Secs. 856-858.)15 In the case of the real estate investment trust, only the “income” is passed through to the investor. The losses are not deductible by the individual participants. It is only reasonable to assume that if the same or an even more desirable result could be achieved in the guise of a “limited partnership,” the Congress would not have thus restricted the real estate investment trust. Without regard to respondent’s regulations, when we look to the manner in which the Mai-Kai and Somis limited partnerships were organized and their “shares” sold, the purpose for which organized, the relationship between the general partner and the limited partners, the relationship of the limited partners to each other, the separability of the association from its limited partner members, and the limitation of liability enjoyed by the limited partners, it is clear that these limited partnerships are in fact more closely akin to a corporation than to a partnership. Such was the opinion of this Court on October 21,1975, and I see no reason to change my views.   Petitioner’s opening brief, pp. 26-28. See Bloomfield Ranch v. Commissioner, 167 F.2d 586 (9th Cir. 1948).    All statutory references are to the Internal Revenue Code of 1954, as amended, unless otherwise indicated.    T.D. 6503,1960-2 C,B. 409, intended to counteract the decision in the U.S. Court of Appeals for the 9th Circuit in United States v. Kintner, 216 F.2d 418 (9th Cir. 1954). See Kurzner v. United States, 413 F.2d 97 (5th Cir. 1969).    In contrast, the regulations which preceded the “Kintner regulations,” contained the following caveat: (b) The Uniform Limited Partnership Act has been adopted in several States. A limited partnership organized under the provisions of that Act may be either an association or a partnership depending upon whether or not in the particular case the essential characteristics of an association exist. Sec. 39.3797-5(b), Income Tax Regs. 118.    In Kurzner v. United States, 413 F.2d 97, 105 (5th Cir. 1969), the United States Court of Appeals for the Fifth Circuit stated that: “Although each of the corporate elements was defined more restrictively, the real stiletto amongst the fronds was the exclusion of entities subject to a partnership act; the prevalence of such acts ensured the exclusion of most professional groups.”    Secs. 39.3797-1 et seq., Regs. 118, which preceded the so-called “Kintner regulations,” do not treat the absence of limited liability as determinative. See Guaranty Employees Association v. United States, 241 F.2d 565, 571 (5th Cir. 1957).    When the question of comparability of the California statute to the Uniform Limited Partnership Act was challenged by the respondent, the California legislature promptly amended its statute.    Petitioners would liken the interest of GHL to that of a common shareholder in a corporation whose interest is subordinated to the preferred shareholders, in this case the limited partners. Petitioners’ reply brief states (p. 71): “Like common stock, GHL’s interest gave it an interest in the partnership capital, subordinate to the ‘preferred’ interests in the partnership: GHL was entitled to a share of the net proceeds from the disposition of the partnership assets or liquidation of the partnership, assuming the terms of the subordination provisions were met. And like preferred stock, the limited partners’ interests gave them first call upon the partnership cash flow until they had received a specified return. But the fact that there were differences in the preferences given to the various partnership interests does not render GHL’s interests illusory. Rather the Court must determine whether, taking the subordination provision into account, GHL still had a substantial stake in each venture.”    This was the rationale of the regulations prior to the promulgation of the so-called “Kintner regulations.” (See sec. 39.3797 etseq., Regs. 118.)    In Henn, Law of Corporations, p. 86, (2d ed. 1970), the origin of the business trust is described as follows: “The business trust (otherwise known as ‘Massachusetts trust’ or common-law trust or voluntary or business association founded under a deed or declaration of trust) is an unincorporated business association set up by a declaration of trust. It resembles somewhat the English joint-stock company established by deed of settlement to trustees. “The business trust was developed in Massachusetts from 1910 to 1926 to achieve limited liability and to avoid restrictions then existing there on a corporation’s acquiring and developing real estate, by adoption of the trust device developed in the English chancery courts in the 16th century. As such, it perpetuated a tradition in the exercise of equitable ingenuity: (a) by the invention of the use as early as the 11th century; (b) then, by the development of the trust after the enactment of the Statute of Uses in 1535; and (c) by the creation of the business trust a half century ago — a tradition carried on by (d) the modern investment trusts, and (e) the real estate investment trusts (REIT).” [Fn. ref. omitted.]    “The status of passive .shareholders in a limited business trust has some analogy to the status of limited partners under the Uniform Limited Partnership Act * * *.” Ballantine Corporations, 22 (Rev. ed., 1946).    As amended, sec. 10251 of ch. 4 of the Business and Professions Code, defined a real estate syndicate as follows: (a) “Real estate syndicate” means any general or limited partnership, joint venture, unincorporated association, or similar organization (but not a corporation) owned beneficially by no more than 100 persons and formed for the sole purpose of, and engaged solely in investment in or gain from an interest in real property, including, but not limited to, a sale, exchange, trade, or development. An interest held by a husband and wife shall be considered held by one person. [Cal. Bus. & Prof. Code sec. 10251(a) (West Supp. 1976).]    Comment, SEC Regulation of California Real Estate Syndicates, 61 Cal. L. Rev. 205 (1973).    Real Estate Syndicate Act, Cal. Stats. 1969, ch. 928, operative Jan. 2,1970.    In reporting the bill (H.R. 12559) providing for the special treatment of real estate investment trusts, the Ways and Means Committee said: “As is pointed out in the next part of this report, H.R. 12559, to the full extent feasible, makes the requirements and conditions now applicable to regulated investment trusts, applicable to the real estate investment trusts. In addition, your committee has also taken care to draw a sharp line between passive investments and the active operation of business, and has extended the regulated investment company type of tax treatment only to income from the passive investments of real estate investment trusts. Your committee believes that any real estate trust engaging in active business operations should continue to be subject to the corporate tax in the same manner as is true in the case of similar operations carried on by other comparable enterprises. ’’[Emphasis added.] H. Rept. No. 2020,86th Cong., 2d Sess. (1960), 1960-2 C.B. 819,821. .