[470]*470OPINION.
Murdock :
The petitioner contends and the respondent contravenes that under the stipulated facts in this case a valid trust was created, that it was thereafter a separate taxable entity and payments made [471]*471to it were deductible from gross income of the petitioner as ordinary and necessary expenses of carrying on a trade or business. In arriving at a decision of this question the rules of law governing the creation of a trust must be examined and applied to these facts.
Perry on Trusts, 6th ed., section 82, states the law as follows:
Any agreement or contract in writing, made by a person having the power of disposal over property, whereby such person agrees or directs that a particular parcel of property or a certain fund shall be held or dealt with in a particular manner for the benefit of another, in a court of equity raises a trust in favor of such other person against the person making such agreement, * * * and the statute of frauds will be satisfied if the trust can be manifested or proved * * * by any writing in which the fiduciary relation between the parties and its terms can be clearly read.
There is abundant authority to support this statement. The Supreme Court of the United States used almost the identical language in Colton v. Colton, 127 U. S. 300. Mr. Justice Sharswood of the Supreme Court of Pennsylvania expressed the rule succinctly as follows in Helfenstein’s Estate, 77 Pa. St. 328:
There is no prescribed form for the declaration of a trust. Whatever evinces the intention of the party that the property, of which he is the legal owner, shall beneficially be another’s, is sufficient.
See also Holden v. Circleville Light & Power Co., 216 Fed. 490; Heartley v. Nicholson, L. R. 19 Eq. 233; Fox v. Fox, 250 Ill. 384; 95 N. E. 498; Orr v. Yates, 209 Ill. 222; 70 K E. 731.
In the case we are considering the money paid or contributed by the employer, together with the other money paid into the fund and all accretions, was to be and was held and dealt with for the benefit of the employees under the terms of the agreement. Immediately there was a separation of the legal and equitable estates in the money. So long, at least, as the fund was not liquidated, the employer ceased to be the beneficial owner of the part it had contributed. The respondent argues that “ the employer had the same power with reference to this fund, in so far as its own contributions were concerned, as it had with reference to its other funds.” But this is not so. For the reasons just stated, as soon as it made a payment to the fund it ceased to have any rights in that payment except a possibility of reversion upon liquidation of the fund. The money could be used for certain purposes prescribed in the regulations and for no other purpose. A court of equity could restrain any attempt to use the fund otherwise than for the purposes of the trust.
Mr. Justice Pitney, in Chicago, Milwaukee & St. Paul Ry. Co. v. Des Moines Union Ry. Co., 254 U. S. 196, citing Colton v. Colton, supra, said:
It needs no particular form of words to create a trust, so there be reasonable certainty as to the property, the objects, and the beneficiaries.
[472]*472See In re Smith's Estate, 144 Pa. St. 428; 22 Atl. 916, where the whole subject is exhaustively treated.
Counsel for respondent attacked the alleged trust on the ground that a trust was not intended and that sufficient words to create a trust were not used, but he cited no authorities in support of his contention. Looking at the agreement of the parties in its entirety and applying the above stated rules of law to the facts, we are led to a different conclusion — that all the elements of a valid trust are present. Our conviction is strengthened by the subsequent acts of the parties.
The employer offered a pension-fund plan to its employees which they accepted. The contract between them went into detail as to the manner of creating the fund, the use of it, and the beneficiaries; it carefully defined the subject of the proposed trust, made certain the object, and contained a sufficient declaration of the terms of the trust. In accordance with the terms of this contract a specific fund arose for the benefit of the specific beneficiaries. The trust has functioned for eighteen years to the apparent satisfaction of all concerned. It is vain to say that no trust existed.
Having decided that the essential elements of a trust are present, let us see if there is anything so repugnant to the contention that a trust was created as to refute it.
No express words of trust were used, but it has been decided many times that none are necessary. Perry on Trusts, 6th ed., section 122: Colton v. Colton, supra; In re Smith's Estate, supra; Richards v. Delbridge, L. R. 18 Eq. 11-13. The employees might change, but this fact is immaterial. Coe v. Washington Mills, 149 Mass. 543; 21 N. E. 966; Walters v. Pittsburgh & Lake Angeline Iron Co., 201 Mich. 379; 167 N. W. 834. Whether the Pension Fund was to “ remain in the custody of the employer ” or was to be “ controlled by a pension committee" is immaterial also, as in either case a trust might or might not exist, depending upon the presence or absence of other essential features. As a matter of fact the Pension Fund Committee accepted and had both the custody and the control of the fund, a situation most favorable to the trust theory.
It is argued that the employer’s right under rule 21 to change the rules and regulations is inconsistent with the existence of a trust. In In re Dolan's Estate, 279 Pa. St. 582; 124 Atl. 176, the settlor had similar rights and yet it was held that a trust existed. It must also be remembered that a court of equity could restrain any attempt to change the rules and regulations of the Pension Fund which would not be for the best interests of the beneficiaries, and therefore any change in the rules, under the power reserved, would have to be consistent with the general plan of the trust fund already created.
[473]*473The employer had the right to revoke the trust and to liquidate the fund in the way indicated in rule 22, but it is not essential to the validity of a trust of personal property that it should be irrevocable.
A power of revocation is perfectly consistent with the creation of a valid trust. It does not in any degree affect the legal title to the property. That passes to the donee and remains vested for the purposes of the trust, notwithstanding the existence of a right to revoke it. If this right is never exercised according to the terms in which it is reserved, as in the case at bar, until after the death of the donor, it can have no effect on the validity of the trusts or the right of the trustee to hold the property. Stone v. Hackett, 12 Gray, 227.
See also In re Dolan’s Estate, supra, where the court fully discussed the subject of revocation, cited numerous authorities, and said, in part:
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[470]*470OPINION.
Murdock :
The petitioner contends and the respondent contravenes that under the stipulated facts in this case a valid trust was created, that it was thereafter a separate taxable entity and payments made [471]*471to it were deductible from gross income of the petitioner as ordinary and necessary expenses of carrying on a trade or business. In arriving at a decision of this question the rules of law governing the creation of a trust must be examined and applied to these facts.
Perry on Trusts, 6th ed., section 82, states the law as follows:
Any agreement or contract in writing, made by a person having the power of disposal over property, whereby such person agrees or directs that a particular parcel of property or a certain fund shall be held or dealt with in a particular manner for the benefit of another, in a court of equity raises a trust in favor of such other person against the person making such agreement, * * * and the statute of frauds will be satisfied if the trust can be manifested or proved * * * by any writing in which the fiduciary relation between the parties and its terms can be clearly read.
There is abundant authority to support this statement. The Supreme Court of the United States used almost the identical language in Colton v. Colton, 127 U. S. 300. Mr. Justice Sharswood of the Supreme Court of Pennsylvania expressed the rule succinctly as follows in Helfenstein’s Estate, 77 Pa. St. 328:
There is no prescribed form for the declaration of a trust. Whatever evinces the intention of the party that the property, of which he is the legal owner, shall beneficially be another’s, is sufficient.
See also Holden v. Circleville Light & Power Co., 216 Fed. 490; Heartley v. Nicholson, L. R. 19 Eq. 233; Fox v. Fox, 250 Ill. 384; 95 N. E. 498; Orr v. Yates, 209 Ill. 222; 70 K E. 731.
In the case we are considering the money paid or contributed by the employer, together with the other money paid into the fund and all accretions, was to be and was held and dealt with for the benefit of the employees under the terms of the agreement. Immediately there was a separation of the legal and equitable estates in the money. So long, at least, as the fund was not liquidated, the employer ceased to be the beneficial owner of the part it had contributed. The respondent argues that “ the employer had the same power with reference to this fund, in so far as its own contributions were concerned, as it had with reference to its other funds.” But this is not so. For the reasons just stated, as soon as it made a payment to the fund it ceased to have any rights in that payment except a possibility of reversion upon liquidation of the fund. The money could be used for certain purposes prescribed in the regulations and for no other purpose. A court of equity could restrain any attempt to use the fund otherwise than for the purposes of the trust.
Mr. Justice Pitney, in Chicago, Milwaukee & St. Paul Ry. Co. v. Des Moines Union Ry. Co., 254 U. S. 196, citing Colton v. Colton, supra, said:
It needs no particular form of words to create a trust, so there be reasonable certainty as to the property, the objects, and the beneficiaries.
[472]*472See In re Smith's Estate, 144 Pa. St. 428; 22 Atl. 916, where the whole subject is exhaustively treated.
Counsel for respondent attacked the alleged trust on the ground that a trust was not intended and that sufficient words to create a trust were not used, but he cited no authorities in support of his contention. Looking at the agreement of the parties in its entirety and applying the above stated rules of law to the facts, we are led to a different conclusion — that all the elements of a valid trust are present. Our conviction is strengthened by the subsequent acts of the parties.
The employer offered a pension-fund plan to its employees which they accepted. The contract between them went into detail as to the manner of creating the fund, the use of it, and the beneficiaries; it carefully defined the subject of the proposed trust, made certain the object, and contained a sufficient declaration of the terms of the trust. In accordance with the terms of this contract a specific fund arose for the benefit of the specific beneficiaries. The trust has functioned for eighteen years to the apparent satisfaction of all concerned. It is vain to say that no trust existed.
Having decided that the essential elements of a trust are present, let us see if there is anything so repugnant to the contention that a trust was created as to refute it.
No express words of trust were used, but it has been decided many times that none are necessary. Perry on Trusts, 6th ed., section 122: Colton v. Colton, supra; In re Smith's Estate, supra; Richards v. Delbridge, L. R. 18 Eq. 11-13. The employees might change, but this fact is immaterial. Coe v. Washington Mills, 149 Mass. 543; 21 N. E. 966; Walters v. Pittsburgh & Lake Angeline Iron Co., 201 Mich. 379; 167 N. W. 834. Whether the Pension Fund was to “ remain in the custody of the employer ” or was to be “ controlled by a pension committee" is immaterial also, as in either case a trust might or might not exist, depending upon the presence or absence of other essential features. As a matter of fact the Pension Fund Committee accepted and had both the custody and the control of the fund, a situation most favorable to the trust theory.
It is argued that the employer’s right under rule 21 to change the rules and regulations is inconsistent with the existence of a trust. In In re Dolan's Estate, 279 Pa. St. 582; 124 Atl. 176, the settlor had similar rights and yet it was held that a trust existed. It must also be remembered that a court of equity could restrain any attempt to change the rules and regulations of the Pension Fund which would not be for the best interests of the beneficiaries, and therefore any change in the rules, under the power reserved, would have to be consistent with the general plan of the trust fund already created.
[473]*473The employer had the right to revoke the trust and to liquidate the fund in the way indicated in rule 22, but it is not essential to the validity of a trust of personal property that it should be irrevocable.
A power of revocation is perfectly consistent with the creation of a valid trust. It does not in any degree affect the legal title to the property. That passes to the donee and remains vested for the purposes of the trust, notwithstanding the existence of a right to revoke it. If this right is never exercised according to the terms in which it is reserved, as in the case at bar, until after the death of the donor, it can have no effect on the validity of the trusts or the right of the trustee to hold the property. Stone v. Hackett, 12 Gray, 227.
See also In re Dolan’s Estate, supra, where the court fully discussed the subject of revocation, cited numerous authorities, and said, in part:
It is urged that under the deed of trust the settlor had complete dominion and control of the property; she could alter or amend the trust at any time; no investment or reinvestment could be made without the consent of the husband, and the trustee could be removed at her will; property might be added, and, finally, that the power of revocation effectually retained the title and control completely in her until death, when the trust, qua trust, would effectually operate.
# # ⅜ * * * *
* * * But the right to revoke, unexercised, is a dead thing. Its presence in a deed does not alter the character of the instrument or estate granted; to all intents and purposes, title and possession pass just as effectively as any deed or grant could make it, continuing in that state so long as the power of revocation lies dormant.
To the same effect, see In re Smith’s Estate, supra; Dickerson’s Appeal, 115 Pa. St. 198; 8 Atl. 64; Lines v. Lines, 142 Pa. St. 149; 21 Atl. 809; People v. Northern Trust Co., 289 Ill. 475; 124 N. E. 662; In re Carnegie’s Estate, 203 App. Div. 91; 196 N. Y. S. 502 (affirmed on appeal without opinion in 236 N. Y. 517; 142 N. E. 266).
We are not impressed with the argument that the composite effect of all of the provisions governing the fund is inconsistent with the idea of a trust.
This Board has already held in the Appeal of Frank H. Sullivan, 1 B. T. A. 93, that the question whether expenses are paid for business purposes is always determined from the facts of the particular case. We have also said in the Appeal of Thomas Shoe Co., 1 B. T. A. 124, that contributions must have a reasonable relation to the petitioner’s business to be deductible as business expenses.
It is stipulated that the payments were paid or incurred during the taxable years in which they were deducted, and that they did not make the total compensation of each employee unreasonable in amount. We think they were reasonably connected with the petitioner’s business, since under the agreement they were to be and. were used to benefit and pension employees of the petitioner, thus making employment more attractive and satisfactory to th¿ employee [474]*474and inducing him to' give and compensating him for faithful service. Employment with the taxpayer entitled the employee, to participate in the benefits of the fund, and all employees took advantage of the opportunity. How can it be said that the employer was not benefited by its contributions to the fund % Appeal of Poinsett Mills, 1 B. T. A. 6; Elm City Cotton Mills v. Commissioner, 5 B. T. A. 309. Under all of the facts in the case, we are convinced that the payments made by the petitioner to the Pension Fund were ordinary and necessary expenses of carrying on its trade or business and, as such, were deductible from gross income.
Judgment will be entered for the fetitioner.
Littleton dissents.
Geeen did not participate.