*1165 ASSOCIATION TAXABLE AS A CORPORATION. - A trust to hold real estate for a partnership using the premises as a restaurant, which trust merely received enough rent to defray expenses, was not an association taxable as a corporation.
*157 The Commissioner determined deficiencies as follows:
| Year | Income tax | Excess profits tax |
| 1934 | $674.90 | $269.83 |
| 1935 | 685.00 | 334.79 |
| 1936 | 1,046.77 | 1,075.70 |
The principal issue for decision is whether the petitioner is an association taxable as a corporation. If it is, alternative issues are presented.
FINDINGS OF FACT.
A partnership known as Pieroni Brothers & Co. has been in the restaurant business in Boston for a number of years. There were twenty-four partners at one time, but the number has varied from time to time. The partnership purchased a building at Park Square in which to conduct its business. The purchase was made in 1929 and title was taken in the name of one of the partners. The partnership at all times *158 material hereto was*1166 the sole occupant of the building and used all of the building in its business. It intended to continue the same use of the building. The partners decided in 1931 to form a trust for the purpose of holding the real estate at Park Square for the benefit of the partnership. The property was then subject to a mortgage of $210,000.
The declaration of trust creating the petitioner was executed on June 22, 1931. The trust was to terminate not later than twenty years after the death of the survivor of the two original trustees but could be terminated sooner. The trustees were to convert the property into money and distribute that to the owners of beneficial interests upon termination of the trust. The trustees were given broad powers to manage and deal with the property during the continuation of the trust. They could make distributions of receipts as they deemed proper in proportion to the beneficial interests. They could acquire additional property to protect or develop the original property. Certificates of interest were issued to the beneficiaries in units of $100 par value. They were transferable. The trustees could issue new certificates for new capital. The liability*1167 of the certificate holders was limited to their interest in the trust. A trustee could appoint another to fill a vacancy. The trustees could change the terms of the trust but had to obtain the consent of the beneficiaries for any change materially affecting their interests.
The property on Park Square was transferred to the trustees in 1931 and has been held by them ever since. No new property has been acquired. No change has been made in the trust. Beneficial interests have been transferred as changes of partners occurred, so that at all times the partnership interests have corresponded to the beneficial interests in the trust. The partners fix the rent to be paid the trust at an amount estimated as slightly in excess of the expenses of the trust, which consist of taxes, insurance, repairs, and interest on the mortgage. The excess, if any, of rent over expenses is usually applied on the mortgage. No distribution to beneficiaries has ever been made. The activities of the trustees have been limited to receiving the rent and making the disbursements described above.
The petitioner filed income tax returns for the taxable years as a trust with the collector for the district*1168 of Massachusetts and paid the tax shown to be due thereon. It also filed fiduciary returns. It filed capital stock tax returns on May 12, 1938, for the years ended June 30, 1934, 1935, and 1936, in response to a letter from the collector notifying the petitioner that it was held to be an association taxable as a corporation and would have to file capital stock tax returns.
The Commissioner determined the deficiencies by taxing the petitioner as a corporation and allowed no credit for capital stock.
*159 OPINION.
MURDOCK: This trust was not intended "to provide a medium for the conduct of a business and sharing its gains." Cf. ; . It was not to carry on any business of its own or to make profits for the holders of beneficial interests. Its purpose was merely to serve the convenience of the partnership by holding the real estate and receiving only enough rent to pay its expenses and meet the obligation of the mortgage. Cf. *1169 ; appeal dismissed, ; . That is all it ever did and during these taxable years it was not an association taxable as a corporation. Cf. Commissioner v.Gibbs-Preyer Trusts Nos. 1 and 2,, affirming ; . This case is distinguishable from , by the fact, already mentioned, that it was not "created as a joint enterprise for the carrying on of a business and sharing its gains" but was merely to hold and conserve a particular property, with incidental powers, as in the traditional type of trusts.
Decision will be entered under Rule 50.