Question

Following a style similar to the technique set forth in Legal Research, writing and Analysis prepare a brief of the following case: Morrissey et al. v. Commissioner of Internal Revenue 296 U.S.344

Answer 1

Case No. ___

MORRISSEY et al. v. COMMISSIONER OF INTERNAL REVENUE

Argued: Oct. 18, 1935.

Decided: Dec. 16, 1935

Mr. Theodore B. Benson, of Washington, D.C., for petitioners.

The Attorney General and James W. Morris, Asst. Atty. Gen., of Washington, D.C., for respondent.

Mr. Chief Justice HUGHES delivered the opinion of the Court

Facts of the case:-

In the year 1921 petitioners made a declaration of trust of real estate in Los Angeles. They were to be designated in 'their collective capacity' as 'Western Avenue Golf Club.' The trustees were author zed to add to their number and to choose their successors; to purchase, encumber, sell, lease, and operate the 'described or other lands'; to construct and operate golf courses, club houses, etc.; to receive the rents, profits, and income; to make loans and investments; to make regulations; and generally to manage the trust estate as if the trustees were its absolute owners. The trustees were declared to be without power to bind the beneficiaries personally by 'any act, neglect or default,' and the beneficiaries and all persons dealing with the trustees were required to look for payment or indemnity to the trust property. The beneficial interests were to be evidenced solely by transferable certificates for shares which were divided into 2,000 preferred shares of the par value of $100 each, and 2,000 common shares of no par value, and the rights of the respective shareholders in the surplus, profits, and capital assets were defined. 'Share ledgers' showing the names and addresses of shareholders were to be kept.

The trustees might convene the shareholders in meeting for the purpose of making reports or considering recommendations, but the votes of the shareholders were to be advisory only. The death of a trustee or of a beneficiary was not to end the trust, which was to continue for twenty-five years unless sooner terminated by the trustees.

During the years 1921 and 1922, the trustees sold beneficial interests and paid commissions on the sales. About 42 acres (of the 155 acres described by the declaration of trust) were plotted into lots which were sold during the years 1921 to 1923, most of the sales being on the installment basis. On the remaining property a golf course and club house were constructed, and in 1923 this property with the improvements was conveyed to Western Avenue Golf Club, Inc., a California corporation, in exchange for its stock. Under a lease from the corporation petitioners continued the operation of the golf course until January 12, 1924. After that date petitioners' activities were confined to collections of installments of principal and interest on contracts of purchase, the receipt of interest on bank balances and of fees on assignments by holders of purchase contracts, the execution of conveyances to purchasers, the receipt of dividends from the incorporated club, and the distribution of moneys to the holders of beneficial interests. On December 31, 1923, the total number of outstanding beneficial interests was 3,016 held by 920 persons; by December 31, 1926, the number of interests had been gradually decreased to 2,172, held by 275 persons. The holdings by the trustees ranged approximately from 16 to 29 per cent.

Petitioners contend that they are trustees 'of property held in trust,' within section 219 of the Revenue Acts of 1924 and 1926, and are taxable accordingly and not as an 'association.' They urge that, to constitute an association, the applicable test requires 'a quasi corporate organization in which the beneficiaries, whether or not certificate holders, have some voice in the management and some control over the trustees and have an opportunity to exercise such control through the right to vote at meetings'; and that, in any event, the activities in which petitioners were engaged, during the tax years under consideration, did not constitute 'a carrying on of business' within the rule applied by this court.

The government insists that the distinction between associations and the trusts taxed under section 219 is between 'business trusts on the one side' and other trusts 'which are engaged merely in collecting the income and conserving the property against the day when it is to be distributed to the beneficiaries'; that Congress intended that all 'business trusts' should be taxed as associations.

Judgement:-

Treasury Regulations No. 65, Art. 1504, October, 1924. It does not appear that there were regulations or rulings in force, at the time of the return for the taxable year 1924, under which the trust in this instance would be taxable as a trust and not as an association.

The judgment is affirmed.

Affirmed.

Source of information:-

https://www.law.cornell.edu/supremecourt/text/296/344