*2098 Where real property, situated in New York, is conveyed to one person for the benefit of another, the legal and equitable title vests in the latter under the laws of the State. No part of the rents or profits from the sale of such property is income to the person in whose name the property is held.
*537 The Commissioner determined deficiencies in income and profits taxes due from the A.T. Seventh Corporation, a New York corporation, for the periods and in amounts as follows:
| July 1 to December 31, 1921 | $ 15,455.00 |
| Calendar year 1922 | 6,650.65 |
| Calendar year 1923 | 5,810.47 |
| Jan. 1 to July 31, 1924 | 39,759.34 |
| 67,675.46 |
The liability for these taxes has been asserted against the petitioner as transferee of the assets of the A.T. Seventh Corporation.
The petitioner brings this proceeding for a redetermination of its tax liability. It is alleged that the Commissioner erred in determining (1) that legal and equitable title to certain real property, located in New York City*2099 and known by the street number 176 West 87th Street, was vested in the A.T. Seventh Corporation; (2) that the A.T. Seventh Corporation was entitled to the income from said property and the proceeds from the sale thereof; (3) that the A.T. Seventh Corporation should have reported the income and the profits arising from the sale of said property in its tax returns for the taxable periods here in question.
In an amendment to the petition the following errors and allegations are assigned: (a) Section 280 of the Revenue Act of 1926 under which the deficiency is asserted is unconstitutional and void (b) If liable as a transferee, the petitioner is not liable to the full extent of the taxes claimed from him. (c) Upon dissolution of the A.T. Seventh Corporation, the petitioner did not receive from it and as its assets the sum of $67,675.46.
FINDINGS OF FACT.
Petitioner is an individual residing at 251 West 89th Street, New York City.
*538 In 1916 Robert Ferguson, John B. Ferguson, William Ferguson and the petitioner decided to erect an apartment house at the southeast corner of 87th Street and Amsterdam Avenue in the Borough of Manhattan, City of New York, known as 176*2100 West 87th Street.
An agreement was entered into between the parties which provided as follows:
AGREEMENT made this thirty-first day of July, 1916, between ROBERT FERGUSON, hereinafter referred to as the party of the first part, WILLIAM FERGUSON, hereinafter referred to as the party of the second part, JOHN B. FERGUSON, hereinafter referred to as the party of the third part, and STEWART FORSHAY, hereinafter referred to as the party of the fourth part.
WHEREAS, the party of the first part owns the real property situate at the southeasterly corner of 87th Street and Amsterdam Avenue, in the Borough of Manhattan, City of New York, fronting ninety-seven feet six inches on said street and one hundred twenty-six feet five inches on said Avenue, subject to a mortgage for One Hundred and fifty thousand dollars, which real estate the parties hereto agree is of the value of upwards of Two hundred and fifty thousand dollars.
Now this agreement WITNESSETH:
FIRST: The parties hereto shall cause to be incorporated a corporation having the name of 176 WEST 87th STREET CORPORATION or other name to be agreed upon between the parties.
SECOND: The party of the first part shall*2101 convey said real property subject to said mortgage to said Corporation and shall accept in payment for his equity therefor, the bond and purchase money mortgage of the Corporation for One hundred thousand dollars, together with all of the capital stock of said corporation. The party of the first part will direct that one-half of said capital stock be issued to and divided among the parties of the second, third and fourth parts in equal shares. Said purchase money mortgage shall be subject to a building loan and permanent mortgage for Five hundred and fifty thousand dollars and to all amounts to be advanced thereon, and it is the intention of the parties that such purchase money mortgage shall not be recorded.
THIRD: The parties of the second, third and fourth parts agree with the party of the first part and with each other, that they will furnish and loan to said Corporation all of the additional money which said Corporation shall require in order to erect and complete and pay all of the expenses connected with the erection and completion of a thirteen story and basement apartment dwelling house on said land. The loans so to be made by the parties of the second, third and fourth*2102 parts as well as said purchase money bond and mortgage, shall not become due until such Corporation shall sell its said real estate, but any of said indebtedness may be paid earlier at the option of said Corporation.
FOURTH: The following officers shall be elected in said Corporation:
President, Robert Ferguson
Vice President, William Ferguson
Secretary, John B. Ferguson
Treasurer, Stewart Forshay.
The said president shall receive a salary of Nine thousand dollars per annum and each of said officers shall receive a salary of Three thousand dollars per annum.
*539 FIFTH: After the payment of all of the indebtedness and salaries above mentioned or provided for, and payment of any other indebtedness which shall be contracted by the Corporation, the balance of the net proceeds of the sale of the said real estate, or in other words, all of the profits of the enterprise, shall be divided among the several parties hereto in the following proportions:
| Robert Ferguson | 1/3 |
| William Ferguson | 2/9 |
| John D. Ferguson | 2/9 |
| Stewart Forshay | 2/9 |
For the accomplishment of this purpose, the party of the first part agrees that at the time of the sale of said*2103 property by said Corporation, he will, if requested by any other party hereto, assign to the parties of the second, third and fourth part, one-sixth of the stock of the Corporation so as to leave him possessed with only one-third thereof instead of one-half as will be the situation at the inception of the Corporation.
SIXTH: The agreements herein contained shall bind and enure to the benefit of the parties hereto and their heirs, executors, administrators and assigns.
IN WITNESS WHEREOF the respective parties hereto have hereunto set their hands and seals the day and year first above written.
(Signed) ROBERT FERGUSON (L.S.)
WILLIAM FERGUSON (L.S.)
JOHN B. FERGUSON (L.S.)
STEWART FORSHAY (L.S.)
A corporation known as 176 West 87th Street Corporation was organized and the property located at 176 West 87th Street conveyed to it July 25, 1916. Thereafter, this corporation functioned as an ordinary business corporation. It conducted the business of running the apartment house, declared dividends, and filed income and profits-tax returns. In 1921 the capital stock outstanding was $30,000, and was owned by the petitioner and the Fergusons.
In 1921 the petitioner and*2104 the Fergusons decided to change the plan of ownership of the property at 176 West 87th Street. On the advice of their attorney a corporation known as the A.T. Seventh Corporation was organized to take title to this property.
The A.T. Seventh Corporation was organized June 27, 1921, with a capital stock of 10 shares of the par value of $100 each. Employees of the firm of attorneys advising petitioner and his associates acted as incorporators, and for a time, as the directors and holders of the stock issued.
Prior to the transfer of the property at 176 West 87th Street to the A.T. Seventh Corporation, the following authorization was executed by three of the four stockholders of the 176 West 87th Street Corporation:
WE, JOHN B. FERGUSON, WILLIAM FERGUSON and STEWART FORSHAY, being three of the stockholders of 176 West 87th Street Corporation, and each of us owning 60 shares of the capital stock of said corporation, hereby authorize the said 176 WEST 87th STREET CORPORATION, that upon or before its dissolution *540 it convey to, A.T. SEVENTH CORPORATION, a corporation organized under the laws of the State of New York, the real property known as 176 West 87th*2105 Street, in the Borough of Manhattan, City of New York, which grantee corporation will hold title to said premises for the benefit of all the stockholders of 176 West 87th Street Corporation in proportion to their respective present stockholdings in the 176 West 87th Street Corporation.
(Signed) JOHN B. FERGUSON (L.S.)
WILLIAM FERGUSON (L.S.)
STEWART FORSHAY (L.S.)
Pursuant to this authorization the property at 176 West 87th Street was conveyed July 1, 1921, to A.T. Seventh Corporation by the 176 West 87th Street Corporation and the 176 West 87th Street Corporation was dissolved.
At the first meeting of the board of directors of the A.T. Seventh Corporation held July 6, 1921, the following officers and directors, who were all the directors named in the certificate of incorporation, were present: president, Arthur G. Quinn; treasurer, Lulu Franklin; secretary, Clara E. Simondet. At this meeting the following resolution was passed:
Upon motion duly made, seconded and carried the following resolutions were adopted:
RESOLVED that this corporation accept from *2106 176 WEST 87TH STREET CORPORATION a conveyance of the premises situate on the southeast corner of Amsterdam Avenue and 87th Street, in the Borough of Manhattan, City of New York, and known by the street Number 176 West 87th Street, subject to the existing encumbrances thereon, and hold the same for the benefit of Robert Ferguson, William Ferguson, John B. Ferguson and Stewart Forshay, such persons being all the stockholders of the said 176 West 87th Street Corporation, which said corporation is now in process of dissolution, in the following interests, the extent of said interests being determined by their respective stock ownership in the said 176 West 87th Street Corporation, viz: Robert Ferguson, a three-ninths interest, and William Ferguson, John B. Ferguson and Stewart Forshay each a two-ninths interest; and be it
FURTHER RESOLVED that this Corporation through its President issue and deliver to each of the persons for whom title to said premises has been taken, duly executed, certificates of interest or ownership showing the respective interests or ownership of said persons in the premises hereinabove mentioned.
There being no further business, the meeting adjourned.
*2107 (Signed) CLARA E. SIMONDET,
Secretary.
At a meeting of the board of directors of the A. T. Seventh Corporation held November 17, 1921, the officers and directors resigned and William Ferguson, John B. Ferguson and Stewart Forshay were elected directors and officers. On November 29, 1921, the corporation having been authorized to increase the number of directors, Robert Ferguson was elected a director and officer. Thereafter, *541 the following persons were the officers and directors of the corporation:
Robert Ferguson, president.
William F. Ferguson, vice president.
John B. Ferguson, secretary.
Stewart Forshay, treasurer.
The stock of the A.T. Seventh Corporation was transferred and thereafter held as follows:
| Date of | ||
| transfer | Shares | |
| John B. Ferguson | Nov. 17, 1921 | 2 2/9 |
| William Ferguson | do | 2 2/9 |
| Stewart Forshay | do | 2 2/9 |
| Robert Ferguson | Jan. 4, 1922 | 3 1/3 |
In December, 1921, an agreement was executed which provided in part as follows:
AGREEMENT made this day of December, 1921, between ROBERT FERGUSON, hereinafter referred to as the party of the first part, WILLIAM FERGUSON, hereinafter referred to as the party*2108 of the second part, JOHN B. FERGUSON, hereinafter referred to as the party of the third part, and STEWART FORSHAY, hereinafter referred to as the party of the fourth part.
WHEREAS the parties hereto entered into an agreement dated July 31st, 1916, providing for the acquisition of certain real estate therein described situate at the Southeast corner of Amsterdam Avenue and 87th Street in the Borough of Manhattan, in the City of New York and for the incorporation of 176 WEST 87TH STREET CORPORATION to hold the title to said premises, and
WHEREAS such premises were conveyed to said corporation and it did hold title to said premises until July 1st., 1921, and
WHEREAS the parties hereto have caused said corporation to be dissolved and said premises to be conveyed to A.T. Seventh Corporation to be held by the last named corporation for them, and
WHEREAS it is thought best that the accounts of the parties shall be stated and agreed upon, and
WHEREAS the amounts of money personally advanced by the parties of the second, third and fourth part pursuant to paragraph third of said agreement dated July 31, 1916, was as follows:
* * *
NOW THIS AGREEMENT WITNESSETH that*2109 the parties hereto, in consideration of their mutual agreements do hereby agree with each other as follows: -
FIRST: They ratify and confirm the conveyance made upon dissolution to A.T. SEVENTH CORPORATION, for their benefit and in the proportions hereafter provided of the real property heretofore owned by 176 West 87th Street Corporation.
SECOND: The mortgage given to the party of the first part covering said premises and to secure the payment of $100,000 is a good and valid lien against said premises for said entire principal sum and accrued interest.
THIRD: Pursuant to the original agreement between the parties hereto, at the time of the acquisition of said real estate by said corporation, which was to remain in force until such real estate and new building should be sold, the *542 parties agree that, until such real estate shall be sold, the party of the first part, his heirs, executors and administrators shall be paid out of the earnings therefrom interest at the rate of six per cent per annum on said $100,000, mortgage and a further sum of $3,000 per year making $9,000 in the aggregate all payable in monthly payments; and each of the other parties hereto, their*2110 heirs, executors and administrators shall at the same time be paid the sum of $3,000 per annum each, out of such earnings, in monthly payments, less, however the interest upon the loans from E. H. Kruse and M. J. Forshay from and after August 1st, 1921, which shall be paid and charged in equal proportions to the parties of the second, third and fourth part.
FOURTH: The parties agree that such real estate, and their interests therein hereby takes over and assumes the following debts owing by 176 West 87th Street Corporation upon its dissolution.
| Notes Payable | $9,000.00 |
| E. H. Kruse | 27,000.00 |
| M. J. Forshay | 27,500.00 |
| William Ferguson | 5,962.77 |
| John B. Ferguson | 6,862.78 |
| Stewart Forshay | 6,662.77 |
| $82,988.32 |
If such debts last above mentioned be not paid before the real property is sold, then the same shall be paid out of the proceeds of sale, next after the payment of the $100,000 mortgage held by the party of the first part. Such debts last above listed shall be entered upon the joint account books of the parties as debts of such "joint account" to the parties above named and the same shall be considered the debts of such joint account.
There shall*2111 be charged against the several parties hereto upon such books all of the sums paid to them respectively from time to time and at the end of each year or other fiscal period there shall be credited in such accounts the sums provided to be paid, in Paragraph "third" hereof, to wit: to the party of the first part, his heirs, executors or administrators a sum at the rate of $9,000 per year, and to each of the other parties hereto, their respective heirs, executors or administrators a sum at the rate of $3,000 per year to each. All remaining of such net earnings from said real estate during each year or other fiscal period shall be credited to the parties hereto at the end of each year or other fiscal period in the following proportions:
To Robert Ferguson, one-third
William Ferguson, two-ninths
John B. Ferguson, two-ninths
Stewart Forshay, two-ninths
So also, if and when said real estate be sold, the net proceeds of sale, after the payment to that date of the sums provided to be paid in Paragraph "Third" hereof, and the payment of said $100,000 mortgage held by the party of the first part, and the payment of the debts mentioned in paragraph "Fourth" hereof, and of all renewals*2112 of the same, shall be divided among the parties hereto, in the last mentioned proportions.
FIFTH: The A.T. Seventh Corporation shall issue to the parties hereto certificates certifying that it holds title to said real estate for the parties hereto in the proportion and subject to the liabilities above mentioned.
This agreement shall be binding upon and shall enure to the benefit of the parties hereto, their heirs, executors, administrators and assigns.
*543 IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written.
(Signed) ROBERT FERGUSON (L.S.)
JOHN B. FERGUSON (L.S.)
WILLIAM FERGUSON (L.S.)
STEWART FORSHAY (L.S.)
In addition to certificates of stock the A.T. Seventh Corporation in accordance with a resolution of its board of directors, issued to John B. Ferguson, William Ferguson, Stewart Forshay, and Robert Ferguson, a certificate of interest in the property held by the corporation. This certificate recited as follows:
A.T. SEVENTH CORPORATION DOES HEREBY CERTIFY that it has accepted title to the real estate and improvements situate at the southeasterly corner of Amsterdam Avenue and 87th Street, *2113 in the Borough of Manhattan, City of New York, being 97 feet 6 inches in width along 87th Street, by 126 feet, 5 inches in depth along Amsterdam Avenue, by a conveyance from 176 West 87th Street Corporation, a domestic Corporation, to the said A. T. SEVENTH CORPORATION.
Said premises are subject to mortgages as follows:
To a first mortgage for Five hundred and Fifty thousand ($550,000.) Dollars, now reduced by payment to Five hundred and thirty-nine thousand ($539,000) Dollars, which said mortgage becomes due March 1, 1927, and bears interest at the rate of 5 1/2% per annum up to March 1st, 1922, and thereafter and until its maturity at the rate of 5%, said interest being payable semiannually on the 1st days of March and September in each year.
To a second mortgage for One Hundred Thousand ($100,000.) Dollars, which said mortgage becomes due on March 1, 1927, and bears interest at the rate of 6% per annum, payable monthly.
Said A.T. Seventh Corporation FURTHER CERTIFIES that it holds title to the above mentioned premises for the benefit of Robert Ferguson, William Ferguson, John B. Ferguson and Stewart Forshay, in the proportions set forth in subdivision (e).
The holder*2114 of this certificate agrees with said A.T. SEVENTH CORPORATION and with each other holder of a similar certificate, (and to evidence such agreement has executed a counterpart hereof) as follows:
(a) Certain debts of 176 West 87th Street Corporation, a domestic corporation, existing at the time of the winding up of the affairs of said corporation and which then aggregated $82,988.32 shall be a charge against said premises, and be paid out of the proceeds of sale thereof, before any distribution of such proceeds under subdivision (d).
(b) That until said property be sold there shall be paid out of its earnings to Robert Ferguson $9,000 per year in equal monthly payments, which amount includes interest on a mortgage for $100,000 held by him.
(c) That until said property be sold there shall be paid out of its earnings to William Ferguson, John B. Ferguson and Stewart Forshay each the sum of $3,000 per year in equal monthly payments.
(d) That after making the foregoing distribution of earnings, all remaining earnings shall be divided among said four parties in the following proportions:
TO ROBERT FERGUSON, one-third
WILLIAM FERGUSON, two-ninths
JOHN B. FERGUSON, two-ninths
*2115 STEWART FORSHAY, two-ninths
*544 (e) That upon any sale of said real estate the net proceeds of sale, after the payment of said $100,000 mortgage, and the payment of the debts mentioned in subdivision (a) above, and any renewals thereof, the remaining net proceeds of such sale shall be divided among and distributed to such four parties in the following proportions:
TO ROBERT FERGUSON, one-third
WILLIAM FERGUSON, two-ninths
JOHN B. FERGUSON, two-ninths
STEWART FORSHAY, two-ninths
Each of said four parties in consideration of One Dollar and other valuable considerations to him in hand paid, covenants and agrees with the said A.T. SEVENTH CORPORATION, and with each and all of the other three as follows:
FIRST: That he will not institute, or consent to the institution of, any action or proceeding for the partition of the said premises, and that he will not bring or cause to be brought, any other action with respect to the title to said premises, without the consent of the other three of said parties.
SECOND: That a sale of the premises may be made, and the said A.T. SEVENTH CORPORATION is authorized to sell, convey, lease, mortgage or otherwise deal with said*2116 premises, upon a written direction from three of said four parties. Each reference to a party herein shall be deemed to include his heirs, executors, administrators and assigns.
IN WITNESS WHEREOF said A.T. SEVENTH CORPORATION has caused its corporate seal to be hereunto affixed and these presents to be signed by its President and each of the other parties above named have hereunto set their hands and seals this day of December, 1921.
(Signed) A.T. SEVENTH CORPORATION,
By Robert Ferguson
Robert Ferguson (L.S.) William Ferguson (L.S.) John B. Ferguson (L.S.)Stewart Forshay (L.S.)
The board of directors of the A.T. Seventh Corporation held no meetings after November 29, 1921, and no dividends were ever declared by the corporation. An agent collected the rents from the tenants of the apartment house and paid all the running expenses of the building. At the end of each month the agent gave a statement with a check for the balance to Robert Ferguson, William Ferguson, John B. Ferguson and Stewart Forshay. This check was deposited in an account under the name of the "87th Street Special Account." Leases with tenants were signed by any one of the*2117 four parties in interest. On October 25, 1923, an agreement for the sale of the property known as 176 West 87th Street was entered into between Robert Ferguson, Stewart Forshay, John B. Ferguson, and William Ferguson, described as sellers, and the Halsworth Holding Corporation, described as purchaser. On the same date an agreement was entered into between Robert Ferguson, Stewart Forshay, John B. Ferguson, and William Ferguson, described as sellers, and Byrne and Bowman, *545 described as a broker. This agreement provided for a commission of $8,425 to be paid the broker for the negotiation of the sale of 176 West 87th Street. No agreement for the sale of the property or the payment of commissions was signed by A. T. Seventh Corporation, nor was there any meeting of its stockholders or board of directors held to authorize or ratify such sale. The property was sold for a consideration of $1,030,000, and transferred by deed executed by the A. T. Seventh Corporation on January 4, 1924. The purchaser assumed the first mortgage; the second mortgage was paid and the difference was paid to Stoddard and Mark, attorneys for petitioner and his associates. A check for the net amount*2118 of $368,280.50 was given by Stoddard and Mark to Robert Ferguson, John B. Ferguson, William Ferguson, and Stewart Forshay, and deposited by them to the "87th Street Special Account." Distribution was made from this account. Of the amounts so distributed petitioner received $70,000. No part of the sale price was deposited or paid to the order of A. T. Seventh Corporation. The A. T. Seventh Corporation was dissolved May 15, 1924.
During the taxable years 1922, 1923, and 1924 returns were filed on Form 1065 in the name of Robert Ferguson, John B. Ferguson, William Ferguson and Stewart Forshay, in which were included income of premises known as 176 West 87th Street and showing the distributive shares of stock and certificate holders for these years, and the individuals included in their individual tax returns their share of the income realized from such property.
During all the years in controversy A. T. Seventh Corporation, as such, filed income-tax returns. In such returns the word "none" was written in the spaces for income and deductions. It also filed Federal capital-stock returns in which the statement was made that the corporation had no assets. The property known as*2119 176 West 87th Street was the only property to which it held title.
The Commissioner found the deficiency here in question against the A. T. Seventh Corporation and asserted the entire amount against the petitioner as transferee. No transferee letter has been mailed to Robert Ferguson, John B. Ferguson, or William Ferguson.
OPINION.
PHILLIPS: The question of the unconstitutionality of section 280 of the Revenue Act of 1926 has heretofore been urged, and we have held that where a transferee has elected to appeal to this Board he is precluded from questioning the validity of the statute. .
The Commissioner found the deficiency here in question against the A. T. Seventh Corporation, and has asserted the entire amount *546 against the petitioner as transferee of the assets of that corporation. The record establishes that upon the sale of the property known as 176 West 87th Street petitioner received as his share of the proceeds an amount in excess of the deficiency here in question. It follows that if 176 West 87th Street was the property of the A. T. Seventh Corporation, petitioner became liable at law or in*2120 equity for taxes due from the A. T. Seventh Corporation to the extent of the amount of its assets transferred to him. .
The liability for taxes which may be asserted against a transferee under section 280 of the Revenue Act of 1926 is imposed by reason of his having received property belonging to the taxpayer, or for which he was liable for taxes with respect thereto. See .
Petitioner contends that under the laws of New York the A. T. Seventh Corporation had neither legal nor equitable title to the property known as 176 West 87th Street, and, therefore, was not entitled to any income from said property nor to the proceeds from its sale, and was not liable for any taxes with respect thereto. It is admitted that the record title to this property was in the A. T. Seventh Corporation, but it is urged that the corporation was merely a "dummy" corporation, created for the purpose of holding title and that the equitable and legal title to the property in question vested in petitioner and his associates, who were entitled to all the rents and profits therefrom.
The record discloses*2121 that petitioner and his associates were builders. In 1916 they decided to build an apartment house on property located at 176 West 87th Street, New York City. An agreement was entered into between the parties, which we have included in our findings of fact. This agreement provided, among other things, that the property should be acquired and conveyed to a corporation which the parties would cause to be formed, subject to certain covenants and conditions therein recited. This agreement defined the distributable shares of petitioner and his associates in the net proceeds of the enterprise, arising either from operation or from the sale of the property, to be Robert Ferguson, one-third; William Ferguson, two-ninths; John B. Ferguson, two-ninths; Stewart Forshay (petitioner), two-ninths, and provided that the stock of the corporation should ultimately be held by them in the same proportions. A corporation known as the 176 West 87th Street Corporation was organized and the property located at 176 West 87th St. was conveyed to it. Thereafter until 1921 this corporation functioned as an ordinary business corporation; declared dividends and filed income and profits-tax returns. For*2122 the purpose of this proceeding it is not necessary to *547 determine the interest of the 176 West 87th Street Corporation in the property or whether it held as trustee or otherwise.
In 1921 petitioner and the Fergusons decided to change the plan of ownership of the property at 176 West 87th Street and on the advice of their attorney organized the A. T. Seventh Corporation to take title to the property. Prior to the transfer of the property, three of the four stockholders of 176 West 87th Street Corporation executed an authorization directing that corporation upon or before its dissolution to convey to A. T. Seventh Corporation the property known as 176 West 87th Street, "which grantee corporation will hold title to said premises for the benefit of all the stockholders of 176 W. 87th St. Corporation in proportion to their respective present stockholdings in the 176 West 87th Street Corporation."
Thereafter on July 1, 1921, the 176 West 87th Street Corporation conveyed the property to the A. T. Seventh Corporation. On July 6, 1921, the A. T. Seventh Corporation, by its board of directors, adopted a resolution accepting a conveyance of the premises to "hold the same for*2123 the benefit of Robert Ferguson, William Ferguson, John B. Ferguson and Stewart Forshay, such persons being all the stockholders of the said 176 West 87th St. Corporation, * * * in the following interest: Robert Ferguson, a three-ninth interest, William Ferguson, John B. Ferguson and Stewart Forshay each a 2/9 interest." In this resolution it was "further resolved that this corporation through its president issue and deliver to each of the persons for whom title to said premises has been taken, duly executed, certificate of interest or ownership showing the respective interest or ownership of such persons in the premises herein above mentioned." Thereafter the A. T. Seventh Corporation issued to petitioner and his three associates "certificates of interest or ownership" in which the corporation set out that it holds title "for the benefit of" the persons named. There is also incorporated in this instrument to which these persons are parties, provision for the distribution, from the earnings of the property, of certain fixed amounts annually to each of the four parties in interest, and the division among them of "all remaining earnings" and the "remaining net proceeds" upon sale after*2124 payment of the mortgage and certain specified debts, in the proportion of one-third to Robert Ferguson and two-ninths to each of his associates. Further, each holder of the certificate agreed with the A. T. Seventh Corporation "and with each of the other three," that he would "not institute or consent to the institution of any action or proceeding for the partition of said premises * * * without the consent of the other three parties." *548 Finally the certificate provided, and it was agreed by all the parties thereto:
That a sale of the premises may be made, and the said A. T. Seventh Corporation is authorized to sell, convey, lease, mortgage or otherwise deal with said premises, upon a written direction from three of said four parties. Each reference to a party herein shall be deemed to include his heirs, executors, administrators and assigns.
Where instruments relating to the same subject matter are simultaneously executed they are construed together and the general purpose as apparent from the whole will control. *2125 ; ; ; ; ; ; . Considering all the acts of the parties as evidenced by their covenants and agreements as limitations upon the instruments of conveyance, it is clearly evident the corporation did not take title on its own behalf or for its own benefit, but for the benefit of petitioner and the Fergusons. It held only the bare record title, coupled perhaps with a power to sell, convey, lease, mortgage, or otherwise deal with such property for their benefit only upon a written direction from a majority of them. After its organization the corporation did not participate in the active management and control of the apartment house; it held no directors' meetings, and declared no dividends, except for the single act of conveying the title after sale had been made by the parties who had the beneficial interest.
The real property law of New York, being chapter 50 of the Consolidated Laws, provides:
SEC. 91. *2126 Uses and trusts concerning real property, except as authorized and modified by this article, have been abolished; every estate or interest in real property is deemed a legal right, cognizable as such in the courts, except as otherwise prescribed in this chapter.
SEC. 92. Every person, who, by virtue of any grant, assignment, or devise, is entitled both to the actual possession of real property, and to the receipt of the rents and profits thereof, in law or equity, shall be deemed to have a legal estate therein, of the same quality and duration, and subject to the same conditions, as his beneficial interest; * * *
SEC. 93. Every disposition of real property, whether by deed or by devise, shall be made directly to the person in whom the right to the possession and profits is intended to be vested, and not to another to the use of, or in trust for, such person; and if made to any person to the use of, or in trust for another, no estate or interest, legal or equitable, vests in the trustee.
SEC. 96. An express trust may be created for one or more of the following purposes:
1. To sell real property for the benefit of creditors;
2. To sell, mortgage or lease real property*2127 for the benefit of annuitants or other legatees, or for the purpose of satisfying any charge thereon;
3. To receive the rents and profits of real property, and apply them to the use of any person, during the life of that person or for any shorter term, subject to the provisions of law relating thereto;
*549 4. To receive the rents and profits of real property, and to accumulate the same for the purposes, and within the limits, prescribed by law.
SEC. 99. Where an express trust relating to real property is created for any purpose not specified in the preceding sections of this article, no estate shall vest in the trustees; but the trust, if directing or authorizing the performance of any act which may be lawfully performed under a power, shall be valid as a power in trust, subject to the provisions of this chapter. Where a trust is valid as a power, the real property to which the trust relates shall remain in or descend to the persons otherwise entitled, subject to the execution of the trust as a power.
Each class of trusts relating to real property enumerated by the statute provides for an active trust with specific duties to be performed by the trustee. A conveyance*2128 for a purpose not authorized by the statute to a mere passive holder of title, such as we have here, is not included. Whether the conveyance of the property here in question to the A. T. Seventh Corporation created a passive trust, a power in trust, or a mere agency is not material. In either case no estate or interest vested in the corporation, but the parties entitled to the beneficial interest took both the legal and equitable title as tenants in common. ;; ; ; ; ;;; ;; ; ; *2129 ; . Both legal and equitable title being in the tenants in common, as said by the Supreme Court in : "These decisions establish a state rule of property by which, of course, this court is bound. ." Any income from the property was properly that of petitioner and his contenants, as was also the amount received upon the sale. Such amounts were properly reported as income by the individuals, rather than the corporation.
Decision will be entered for the petitioner.