Gardiner v. United States

49 F.2d 992, 9 A.F.T.R. (P-H) 1538, 1931 U.S. App. LEXIS 3291, 1931 U.S. Tax Cas. (CCH) 9401

• Court: Court of Appeals for the First Circuit
• Decided: May 28, 1931
• Docket: 2531
• Status: Published

Opinions

ANDERSON, Circuit Judge.

This appeal raises the single question whether the Samuel Hammond Real Estate Trust is an association subject to taxes as a corporation for the five years ending June 30, 1926.

By stressing the facts that this trust succeeded to a testamentary trust, and that its actual business activities have been little more than those of the testamentary trustees, learned counsel for the appellant has made a fairly plausible argument that it should be classed with such concerns as the Wilson Syndicate Trust [Blair v. Wilson Syndicate Trust (C. C. A.) 39 F.(2d) 43] and the Costella Trust [White v. Hornblower (C. C. A.) 27 F.(2d) 777]. Both of these trusts were held organized for liquidation, not “for the purpose of doing business for profit.”

But we think the court below [43 F.(2d) 450] was right in holding this trust an' association conducting business for profit, and taxable as though a real corporation. Flint v. Stone & Tracy Co., 220 U. S. 107, 171, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312.

While it originated under a decree of the probate court authorizing testamentary trustees to transfer real and personal property to themselves as trustees, and to issue therefor transferable shares to a large number of beneficiaries-' — instead of selling a property described in the petition to that court as “of considerable and increasing value” — examination of the terms of this trust instrument shows that its potentialities went far beyond liquidation. It was dated June 1, 1910, nearly seventeen years before this suit was brought. No step towards liquidation seems to have been taken in this fairly long period. Article 1 reads:

“This trust is formed for the purpose of purchasing certain property held by the Trustees under the will of Samuel Hammond, late of Boston, and of purchasing, improving, selling or holding any personal property and any other real estate in the city of Boston, in the Commonwealth of Massachusetts, or within, twenty-five miles thereof, either in fee simple or for any less estate, or sole owners or ag tenants in common with other owners, or as subscribers to other trust agreements for the purchase of any real estate included in the above description, or territory.”

Under article 4, the trustees were given very broad business powers.

Articles 7 and 9 provide for the possible issue of $100 shares, additional to the 7,507 shares issued for the property initially taken over.

Article 11 originally gave three-fourths in value of the shareholders’ powers to require the termination of the trust, to turn the property over to a new trust or to a corporation, to remove trustee, and to amend the trust deed. < This was amended by a new article 13, on November 29, 1919, somewhat limiting the powers of the shareholders as to removal of trustees.

Article 12' contains careful provisions for meetings of shareholders át the calling of a trustee or at the request of shareholders owning not less than one-tenth in value of the shares.

With such hroad powers of doing business, the facts that the trustees have made few changes in the original investments, and have leased most of their real estate so as to avoid furnishing janitor, elevator, and heating service, cannot distinguish this concern from the Hecht and Haymarket Trusts. Hecht v. Malley, 265 U. S. 144, 44 S. Ct. 462, 68 L. Ed. 949. See, also, United States v. Neal (C. C. A.) 28 F.(2d) 1022, certiorari denied, 278 U. S. 659, 49 S. Ct. 250, 73 L. Ed. 567; compare Crocker v. Malley, 249 U. S. 223, 39 S. Ct. 270, 63 L. Ed. 573, 2 A. L. R. 1601.

The judgment of the District Court is affirmed.