*4207 Amount set aside by petitioner for perpetual care of niches, urns, and valuts held to be within gross income.
*65 Deficiencies in income taxes have been determined for the years 1919, 1920, 1921, and 1922, in the respective amounts of $5,764.69, $4,402.68, $4,519.65, and $2,192.25. The facts were stipulated.
FINDINGS OF FACT.
Petitioner was organized under the laws of the State of Oregon, for the purpose of the construction, maintenance and operation of crematories and columbaria and the conducting of the business of incinerating human remains and the burial and perpetual care of the ashes resulting therefrom, and of conducting the business of funeral director and undertaker. During the years 1919 to 1922, inclusive, petitioner was engaged in the business of operating a crematorium in the City of Portland, Oreg., for the incineration of human remains and owning and operating a building in which were niches for the repository of urns containing the ashes of incinerated human bodies and vaults for the burial of the dead.
During*4208 the said years petitioner sold niches and vaults for the aforesaid purposes and gave to purchasers deeds covering such niches and vault spaces. The deeds given to purchasers of vaults and niches were identical in form except as to the description of the particular niche or vault conveyed, and contained a covenant running to the grantee and his heirs that the petitioner would maintain the columbarium containing said niche or the vault forever.
At a meeting of the directors held on March 4, 1913, the following resolution was adopted:
On motion it was ordered by the board that ten per cent of all receipts for sale of niches and vaults be set apart as and for a maintenance fund.
On December 1, 1918, the present stockholders acquired all of the stock of petitioner, but from and after that date until March 3, 1920, *66 there was no legally constituted board of directors and there were no legally elected officers, but E. M. Welch, Olive Jones, and George W. Baldwin acted as directors and officers of the petitioner. No formal meeting of the stockholders was held from the date of their purchase of the stock until December 11, 1919, at which time the stockholders met and adopted*4209 a resolution ratifying and confirming all acts after December 1, 1918, of E. M. Welch, as president, and Olive Jones, as secretary of the corporation. At this meeting the stockholders also adopted a resolution recommending to the board of directors that from and after January 1, 1919, 20 per centum of the receipts from the sale of niches, urns and vaults be paid and set aside to the maintenance fund of the association, instead of the 10 per centum theretofore authorized to be set aside, which 10 per cent, it was recited, was not sufficient for said maintenance fund.
On March 3, 1920, there was held a formal meeting of the directors who ratified, confirmed and approved all acts of E. M. Welch, as president, and Olive Jones, as secretary, during the period from December 1, 1918, to the date of the meeting. The directors adopted a set of by-laws which contained no reference to a maintenance fund. The directors adopted the following resolution to put into effect the recommendation of the stockholders that the maintenance fund be increased:
WHEREAS, at a meeting of the stockholders of this corporation, held December 11, 1919, the following resolution was unanimously adopted:
*4210 WHEREAS, at a meeting of the Board of Directors of this corporation held on the 4th day of March, 1913, a resolution was adopted authorizing and directing that ten per cent. of all receipts for niches, urns and vaults be set aside as a maintenance fund; and
WHEREAS, ten per cent. of said receipts is not sufficient for said maintenance fund;
NOW, THEREFORE, Be It Resolved that the stockholders recommend to the Board of Directors that from and after January 1, 1919, twenty per cent. of the receipts from the sale of niches, urns and vaults be paid and set aside to the maintenance fund of this corporation.
and,
WHEREAS, twenty per cent. of the maintenance fund has been set aside in accordance with said resolutions from January 1, 1919:
NOW, THEREFORE, Be It Resolved that from and after the 1st day of January, 1919, twenty per cent. of all receipts from the sale of niches, urns and vaults be and the same is hereby set aside to the maintenance fund of this corporation.
During the years 1919, 1920, 1921, and 1922 petitioner placed in a permanent maintenance fund 20 per centum of the gross selling price of all urns, niches and vaults sold by it, the amounts placed in such fund*4211 for each of the years being as follows:
*67
| Year | Amount |
| 1919 | $12,827.16 |
| 1920 | 17,906.20 |
| 1921 | 17,076.73 |
| 1922 | 17,538.03 |
The deductions of 20 per centum of the gross selling price of the urns, niches and vaults for the maintenance fund were made during 1919 pursuant to informal agreement of the acting board of directors and officers and confirmed by the stockholders and directors as hereinbefore set forth. During the years 1920, 1921, and 1922, all additions to the maintenance fund were made pursuant to and under authority of the above mentioned resolutions. All sales by the petitioner were made with the representation to the purchasers that the covenant to maintain the property was backed by a permanent maintenance fund and that a portion of the purchase price paid by said purchaser would be placed in the maintenance fund. It was also represented to each purchaser that the maintenance fund could not and would not be used for any other purpose. No specific representation was made as to the handling and control of the fund unless the purchaser made specific inquiry, in which event he was informed that the handling and control were with the petitioner. *4212 The income from the maintenance fund has at all times been used for the maintenance and upkeep of the property sold, but always through the regular income and expense accounts of the corporation. The income from the maintenance fund was mingled with other income of petitioner and expended for maintenance along with other funds of petitioner. The income from the maintenance fund was for each of the years in question credited directly to the profit and loss account of petitioner.
The maintenance and upkeep of the property during each of the years in question required more money than the income from the maintenance fund. The deficiency was supplied from the income of the petitioner and not from the principal of the maintenance fund. Prior to November 3, 1920, there was no separate investment account maintained in petitioner's books for the maintenance fund, but the amounts in said investment fund were in part mingled with other assets of the petitioner. On November 3, 1920, the petitioner invested $29,816.51 in United States Liberty Loan bonds, and these bonds were carried in the account entitled "Investment-Reserve for Maintenance (Liberty Bonds, W.S.S., etc.)." There were no*4213 changes in this account to December 31, 1920, at which time it showed a balance of $29,816.51. Additions to the investment account representing Liberty bonds and War Savings stamps were made during 1921, the balance in the account at December 31, 1921, *68 being $35,548.09, all of which was invested in Liberty bonds and War Savings stamps. In 1922 there were added to the account items of Liberty bonds, corporate stocks, War Savings stamps and cash, and there was also a withdrawal of Liberty bonds, which left a balance in the account at December 31, 1922, of $65,348.12, included in which was a loan of $20,000 made by the maintenance fund to the petitioner, which loan was used by the petitioner for its corporate purposes.
On its books of account the petitioner reported as gross sales the amounts received from the purchase of urns, niches and vaults less 20 per centum thereof which was placed in the maintenance fund and which did not appear as a part of the item "gross sales."
No dividends were declared by the petitioner during any of the years 1919 to 1922, inclusive.
OPINION.
STERNHAGEN: All the facts are stipulated, and thus the Board is limited precisely in the*4214 scope of its consideration. It is contended that a commercial cremation corporation, by voluntarily setting aside a reserve called a "maintenance fund" for the purpose of performing some of its ordinary contractual obligations the actual cost of which is not known, which fund is so free from outside constraint that the corporation may "borrow" from it at will and so far as appears may limit its amount at will, has created a trust, itself the trustee. It is not an express trust, so it must be implied. The implication seems to rest on the covenant in the deed, the resolution of the directors establishing the fund, and the salesmen's "representations to purchasers." But these constitute no more than a contractual obligation cognizable at common law and a means privately adopted by the corporation to fulfill it. We can find no ground upon which a court of equity would imply a trust or administer it. The decisions of the Board which proceed upon an express trust either written or oral or under a state law, are not controlling here, there being neither words of trust nor public command. And of course the powers of this Board are such that its holding does not establish the trust or*4215 estop the petitioner to deny it if a grantee were to seek to enforce a trust obligation in chancery, as in ; . If it were a trust it would require consideration of section 219, but it does not appear whether the petitioner had regarded itself as required by that section to file a return as a trustee.
In our opinion, all of the amounts received by petitioner were within its gross income, and there is no warrant for treating any part of it as a separately identified sum as if petitioner never received it. Of course such sum as it expends or incurs annually in the performance *69 of its business functions, whether of maintenance or otherwise, is a proper deduction. See ; .
Reviewed by the Board.
Judgment will be entered on 15 days' notice, under Rule 50.
SMITH did not participate.
ARUNDELL, dissenting: I can not agree with the majority opinion, as I think that the question here involved has been settled by decisions of the Board In Metairie Cemetery Association v. Commissioner,4 B.T.A. 903">4 B.T.A. 903,*4216 and Inglewood Park Cemetery Association v. Commissioner,6 B.T.A. 386">6 B.T.A. 386. In the Metairie case contracts were issued to plot owners providing for perpetual care, but containing no provisions (except in a few cases) as to the use to which the purchase price of the plot was to be put. It was, however, orally represented to purchasers that the purchase price was to be held in trust, and after the taxable years such representation was declared of record by formal resolution of the association. The Board there held that the parol agreement was sufficient to create a valid trust. In the present case there is, in addition to the parol agreement, a formal resolution during the taxable years setting aside the amounts for perpetual care. In the Metairie case there was a state law providing that owners of burial plots may convey their plots back to the cemetery company to hold perpetually in trust. It does not appear from the findings of fact and opinion of the Board that any plots were conveyed to the association and so it can not be said that the state law had anything to do with the case. In the Inglewood case there was a state law containing mandatory*4217 provisions with respect to the use of perpetual care funds and that seems to be the only material distinction between that case and the one here under consideration. The presence of a state law forbidding the use of perpetual care funds for any other purpose may aid in establishing the fact of the existence of a trust, but no one will say that an equally valid trust may not be created by the acts of the parties.
The prevailing opinion refers to other "decisions of the Board which proceed upon an express trust either written or oral." None of the decisions indicate whether they were predicated on the nature of the trust and they do not say whether as a matter of law the Board found the trust to be express or implied. In both the Metairie and Inglewood cases there were express covenants concerning perpetual care, but there was nothing, other than oral representations to purchasers, as to the fund to be held in trust. If an express trust can be gathered from oral representations in those cases, why does not *70 the same rule apply here? But I do not think it necessary to decide in any of these cases whether the trust is express or implied; it is sufficient if either*4218 kind can be found. It has been often held that no technical language nor specific words are necessary to create a trust. As is said in :
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. .
There is here no lack of certainty, as urged by the respondent. The representations to purchasers and the deeds given them establish the purpose to which the funds were to be put and who the beneficiaries were. The records of the corporation determine the amount of the fund.
The acts of the petitioner in representing to purchasers that it had a permanent maintenance fund, in covenanting for perpetual care, and in formally setting aside a specified portion of the amounts received, we think were dufficient to create an enforceable trust. In , it is said:
It is a well recognized principle of equity that where a person accepts money or property to be used by him for the benefit of some other person or persons, or for*4219 the advancement of some lawful enterprise, such money or property constitutes a trust fund.
The prevailing opinion cites the decision in . An essential difference between the cases is that in the Springdale case, it was found as a fact that:
The corporation's by-laws contained no provisions for appropriating any part of the receipts from the sale of lots as such perpetual care fund, and no resolution to that effect was passed by the directors.
Nor does the case of , seem to be in point. There the sole question was whether a certain part of the amount due the taxpayer for paving work which was withheld by a municipality was income to the taxpayer; there was no question of whether any part of the amount received by the taxpayer was exempt from tax.
LANSDON, TRUSSELL, and LOVE concur in this dissent.