Brooklyn Trust Co. v. Commissioner

BROOKLYN TRUST COMPANY, AS TRUSTEE UNDER ITS DECLARATION OF TRUST BEARING DATE APRIL 22, 1929, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Brooklyn Trust Co. v. Commissioner Docket No. 71673. United States Board of Tax Appeals 31 B.T.A. 1070; 1935 BTA LEXIS 1025; January 17, 1935, Promulgated *1025 The petitioner is a New York banking corporation and pursuant to the laws of that state it conducts a large trust business. In 1929 it organized, by a declaration of trust, a fund known as "Composite Fund, Series A", to which trust funds of both large and small trusts, with the consent of the trustors, were transferred and commingled for investment purposes. The composite fund was managed by a committee composed of senior officers and directors of the petitioner. Certificates of beneficial interest were issued to the petitioner as trustee for the beneficial owners. The profits of the composite fund were computed at the end of every month and credited to or ditributed to the beneficial owners. Held, that in respect of the composite fund the petitioner was, in 1930, an association taxable as a corporation. Francis L. Durk, Esq., for the petitioner. J. M. Leinenkugel, Esq., for the respondent. SMITH *1070 The respondent has determined a deficiency in petitioner's income tax for 1930 in the amount of $23,481.65. The petitioner protests the deficiency upon the ground that the respondent has erroneously determined that it was an association*1026 taxable as a corporation. The parties are not in dispute as to any of the basic facts. They have agreed that, with the addition of certain documentary evidence, this proceeding should be submitted upon the evidence adduced in Brooklyn Trust Co. v. Corwin,5 Fed.Supp. 287, which was an action brought by the petitioner in the United States District Court for the Eastern District of New York against the collector of internal revenue for the first district of New York, for recovery of a stamp tax in the amount of $8,752.55, levied pursuant to section 800, Schedule A-2, Title VIII, of the Revenue Act of 1926. The court in that case rendered a decision in favor of the petitioner, holding that the petitioner was not an association or "corporation" within the meaning of that term as used in the section of the statute referred to above. FINDINGS OF FACT. The Brooklyn Trust Co. is a banking corporation, organized and existing under and by virtue of the laws of the State of New York, and having its principal place of business at No. 177 Montague Street, in the Borough of Brooklyn, New York City. Pursuant to authorization contained in its corporate charter and the*1027 provisions *1071 of the Banking Law of the State of New York, the petitioner, as trustee, conducts a large trust business involving the handling of all forms of trust estates. On or about April 22, 1929, the petitioner was acting as trustee of a large number of trusts involving trust funds of a value in excess of $250,000,000. Up to that time the funds of each trust were invested separately and the investments were limited to those authorized by the Banking Law of the State of New York for the investment of trust funds. For those reasons small trusts in amounts of less than $20,000 or $25,000 could not be handled profitably and were not accepted by the petitioner. In order to afford the settlors of trusts, by deed or by will, a medium by which relatively small sums of money could be invested in diversified securities without delay or undue expense and under conditions which would permit of ready liquidation of the investment, the petitioner, by declaration of trust dated April 22, 1929, created the so-called "Composite Fund, Series A." The declaration of trust was executed as aforesaid after it had been approved as to legality under the Banking Law of the State of New York*1028 by the attorney general and by the superintendent of banks of that state. It was, at all times herein material, valid and subsisting under and pursuant to the Banking Law of the State of New York. The declaration of trust set forth the terms and conditions upon which the petitioner would receive from itself as trustee of personal trusts, and from no one else, trust funds to be deposited in a composite fund for investment. It described in detail the manner in which funds held by the petitioner, as trustee of personal trusts, should be deposited in the composite fund; the certificates evidencing such deposit; the manner in which certificates should be redeemed; the manner in which the net income and principal should be calculated and paid our; the manner in which the trust funds should be invested and reinvested; the method to be employed in keeping books and records; and the method of paying taxes assessed in respect of the composite fund. The declaration of trust provides in part as follows: BROOKLYN TRUST COMPANY hereby declares the terms and conditions upon which it will receive trust funds to be deposited in a COMPOSITE FUND for investment as herein authorized and the right, *1029 title and interest of the several trust estates whose funds are so deposited. ARTICLE I NATURE OF THE FUND The Fund covered by this declaration of trust shall consist of such moneys as Brooklyn Trust Company, acting in a fiduciary capacity and with express authority so to do, shall deposit with itself hereunder for investment and reinvestment *1072 and such other disposition as is specified by this declaration and shall be known as: BROOKLYN TRUST COMPANY COMPOSITE FUND SERIES A ARTICLE II MANAGEMENT OF THE FUND Brooklyn Trust Company shall manage the Composite Fund without compensation and shall have no financial interest therein. The Trust Company shall defray from the Fund all charges and expenses lawfully incurred in the management thereof, including those defind in Article IX hereof. ARTICLE III CERTIFICATES OF OWNERSHIP For all sums deposited in the Composite Fund Brooklyn Trust Company shall promptly execute and deliver to itself as trustee of the particular trust whose funds have been so deposited a certificate of ownership in form as follows: - CERTIFICATE OF OWNERSHIP BROOKLYN TRUST COMPANY COMPOSITE FUND SERIES A THIS IS TO CERTIFY*1030 that BROOKLYN TRUST COMPANY has received from itself as Trustee under an agreement with dated the sum of Dollars ($ ) to be deposited in its COMPOSITE FUND - Series A - upon all the terms and conditions specified in a Declaration of Trust executed by it and bearing date April 22nd, 1929, which said sum entitles the owner and holder of this certificate to a participating interest in the Composite Fund aforesaid to the extent of units of the face value of $100 each. The terms upon which this certificate shall be valued, redeemed or assigned are fully set forth in the Declaration of Trust aforesaid, the original of which is lodged with Brooklyn Trust Company at its principal office, 177 Montague Street, Borough of Brooklyn, City of New York, and copies of which are available upon request to all persons beneficially interested hereunder. IN WITNESS WHEREOF, BROOKLYN TRUST COMPANY has caused this Certificate to be signed by one of its officers thereunto duly authorized and its corporate seal to be hereunto affixed, this day of , 19 . BROOKLYN TRUST COMPANY, By Vice-PresidentAssistant Secretary. (SEAL) *1073 [On the back of certificate] ASSIGNMENT *1031 For and in consideration of the sum of Dollars ($ ), the receipt of which is hereby acknowledged, the undersigned, owner and holder of this Certificate hereby assigns to BROOKLYN TRUST COMPANY as Trustee under an agreement with , dated , all of its right, title and interest in and to this Certificate of Ownership and the Composite Fund therein described. BROOKLYN TRUST COMPANY, as trustee under an agreement with , dated . By Vice-PresidentAssistant Secretary. %(seal)/ Other material provisions of the declaration of trust are: That the composite fund shall consist of units of the face value of $100 each in such number as the petitioner shall determine. (Article IV.) That the owner of any certificate may call for redemption by serving upon the trustee a notice in writing, and cash redemption shall take place thereafter; that certificates may be assigned in the form of assignment printed on the back thereof, and when so assigned shall be presented to the trustee for cancellation and issuance of a new certificate in the name of the assignee; that every assignment shall be made for a cash consideration only, and shall be made only on the business*1032 day next succeeding a day on which the net value of the fund shall have been calculated - the cash consideration to be a sum equal to the net value of the units assigned as so calculated; that the trustee shall surrender all canceled certificates to the assignors as evidence of the transaction. (Article V.) Article VI prescribes in what manner the net income of the composite fund shall be calculated and distributed; that such income shall be computed on the last business day of every month by dividing the total amount of income by the number of units of the face value of $100 each, constituting the composite fund on the date of such calculation, and that the amount of income so calculated for each unit shall be credited and, when and if collected, paid over by the petitioner to the owners and holders of certificates of participation outstanding. Article VII provides the manner for calculating the net value of principal of the composite fund and the several participating ownerships therein for the purpose of redemption or assignment of certificates of ownership. Article IX prescribes the following powers to be exercised by the petitioner in managing the composite fund: To invest*1033 and reinvest all sums of money deposited in the composite fund; to sell and/or exchange at any time any and all securities belonging to the composite fund; to make such investments were should see fit to select in the exercise of its sole discretion, including common stocks and commercial paper, irrespective of whether such investments were prescribed by law for the investment of trust funds; to vote all stock held in the composite fund, or to issue proxies to vote such stock, or to exercise any other powers in respect of such stock or other securities held in the composite fund; to hold the investments of the composite fund in its own name or, in the exercise of its discretion, in the name of a copartnership as its nominee; and to engage the services of brokers and others not in its employ and defray from the composite fund their reasonable charges and disbursements. *1074 Article X provides that the petitioner might cause the redemption of any certificate of ownership in the composite fund, it being the intention that the right to redeem should be reciprocal as between the petitioner and the holders of the certificates of ownership. By Article XI the petitioner is authorized, *1034 in its discretion, to distribute pro rata at any time any capital gains realized through the management of the composite fund. By Article XII the petitioner's liability is limited in respect of losses of the composite fund to those occasioned by malfeasance or gross neglect of its own employees. Article XIV provides that the petitioner is not liable for taxes on any income or capital gains of the composite fund. After execution of the aforesaid declaration of trust, and in accordance with its provisions, any funds of which the petitioner was trustee might be invested in the composite fund and commingled with the funds of other trusts when so authorized in the specific trust agreement between the petitioner and the trustor. Printed forms were prepared by the petitioner authorizing the investment in the composite fund of trust funds which it already had in its possession and were executed in great number. In every instance the trust funds were invested in the composite fund only by specific agreement between the settlor of the trust and the petitioner as trustee. Likewise, in every instance, the petitioner, as trustee conveyed the funds to the composite fund and issued to*1035 itself as trustee the certificates of ownership which it held at all times thereafter, subject to the provisions of the aforesaid declaration of trust. In some instances the petitioner was authorized to invest trust funds of which it was trustee in the composite fund at its own discretion. The composite fund has always consisted only of trust funds of which the petitioner was trustee under separate trust agreements and wills and has never contained any of the petitioner's own funds. The petitioner has never in any way shared in the profits of the composite fund, nor has it ever received any compensation for services in connection with the management and operation of the composite fund, except the commissions prescribed by the separate trust agreements and authorized by law. In other words, the petitioner received no additional financial benefit because of the investment of trust funds in the composite fund. In an advertising pamphlet put out by the petitioner in 1932 it is stated that the composite fund on August 31, 1931, comprised 102 separate securities, exclusive of first mortgages on real estate, including 25 bonds, 32 preferred stocks, and 45 common stocks; that the*1036 proportions of total market value represented by the various classes of assets on that date were, bonds, 28.80 percent; preferred stocks, 33.42 percent; common stocks, 22.58 percent; first mortgages, 12.25 percent; and cash, 2.68 percent; that the total value of the composite *1075 fund on August 31, 1931, was $12,135,278; that 143,311 units were then outstanding; that between February 10, 1931, and August 31, 1931, 14 securities were eliminated from the composite fund and 9 were added to it; that of the other issues some were increased and some were reduced; that the composite fund securities were regarded as long term trust investments, and that no attempt was made to trade on short term swings of the market for common stocks. The investments and management of the composite fund at all times have been in charge of a committee composed of the petitioner's president and other senior officers, and the chairman and other members of the board of directors. They meet once or twice a week, or more often if necessary, and decide upon the sales and investments to be made on behalf of the composite fund. Generally, the securities selected for purchase are of the investment type*1037 as distinguished from those of a speculative type. Securities are not purchased generally for the purpose of a quick profit, but they are sometimes sold within a short time after their purchase wherever, in the discretion of the committee, it is considered advisable. All purchases and sales of securities on behalf of the composite fund are made in the name of "The Brooklyn Trust Company, Trust Department." Separate and independent accounts are kept for the composite fund. A card or separate sheet is kept for each separate trust in which every investment made on behalf of that trust, including investments in the composite fund, is entered. The same kind of records are kept for all trusts of which the petitioner is trustee, whether the trust funds are invested in the composite fund or not. All of the records pertaining to the composite fund are kept in the petitioner's trust department by its regular employees and form a part of the petitioner's regular trust records. Statements showing the investments and the status of the composite fund are sent out each month on behalf of every trust, the funds of which are invested in the composite fund. After the execution of the declaration*1038 of trust as aforesaid, and under date of June 12, 1929, the petitioner sent a communication to the respondent describing the composite fund and requesting his ruling as to whether or not for tax purposes the composite fund would be considered as an extension of its trust services and taxed as a trust. In answer to the petitioner's letter, the respondent, on June 25, 1929, wrote the petitioner as follows: It is evident that the composite fund is not created for profit, but as stated by you "It merely supplements and extends the trust service now being given by Brooklyn Trust Company and other trust companies as trustee in that it permits the commingling of trust funds for purposes of investment in cases where the trust instrument expressly authorizes such action." *1076 In view of the foregoing, it is the opinion of this office that the income and profits credited and paid to the holder of certificates of ownership in the Brooklyn Trust Company Composite Fund, Series A, should be returned by the holder of certificates of ownership. The Brooklyn Trust Company, as Trustee of the composite fund should file a fiduciary return of income, Form 1041, showing the income and distributions*1039 made to it as holder of certificates of ownership. Thereafter, the petitioner filed fiduciary returns in accordance with the Commissioner's instructions, in which it reported the operations of the composite fund. Under date of July 20, 1932, the respondent sent a communication to the petitioner stating that his former ruling with respect to the status of the composite fund has been reversed, and that: It is held, therefore, that the trust under consideration is engaged in business in quasi corporate form and that it is, therefore, taxable as an association. The ruling contained in office letter addressed to you under date of June 25, 1929, is, therefore, hereby revoked. On or about July 25, 1932, the collector of internal revenue for the first district of New York served upon the petitioner a formal notice and demand for the payment of $8,752.55 alleged to be due and owing as a documentary stamp tax on the certificates of ownership issued by the petitioner under the aforesaid declaration of trust creating a composite fund. The petitioner paid the amount of $8,752.55 under protest and thereafter brought suit for recovery of the same in the United States District Court for*1040 the Eastern District of New York, which action, as stated above, was decided in petitioner's favor in Brooklyn Trust Co. v. Corwin, supra. In his deficiency notice dated March 3, 1933, the respondent stated: After careful consideration of all of the provisions contained in the trust instrument as above described, it is held by this office that the trust under consideration is engaged in business in quasi corporate form and that it is therefore an association as provided by article 1312, Regulations 74, and taxable under section 13 of the Revenue Act of 1928. OPINION. SMITH: The only question for our determination in this proceeding is whether the petitioner in respect of its trusteeship of the composite fund is an association taxable as a corporation. Section 701 of the Revenue Act of 1928 provides in part as follows: (a) When used in this Act - * * * (2) The term "corporation" includes associations, joint-stock companies, and insurance companies. *1077 Articles 1312 and 1314 of Regulations 74 are as follows: ART. 1312. Association. - Associations and joint-stock companies include associations, common law trusts, and organizations*1041 by whatever name known, which act or do business in an organized capacity, whether created under and pursuant to State laws, agreements, declarations of trust, or otherwise, the net income of which, if any, is distributed or distributable among the shareholders on the basis of the capital stock which each holds, or, where there is no capital stock, on the basis of the proportionate share or capital which each has or has invested in the business or property of the organization. A corporation which has ceased to exist in contemplation of law but continues its business in quasi-corporate form is an association or corporation within the meaning of section 701. ART. 1314. Association distinguished from trust. - Where trustees merely hold property for the collection of the income and its distribution among the beneficiaries of the trust, and are not engaged, either by themselves or in connection with the beneficiaries, in the carrying on of any business, and the beneficiaries have no control over the trust, although their consent may be required for the filling of a vacancy among the trustees or for a modification of the terms of the trust, no association exists, and the trust and*1042 the beneficiaries thereof will be subject to tax as provided by sections 161-170 and by articles 861-891. If, however, the beneficiaries have positive control over the trust, whether through the right periodically to elect trustees or otherwise, an association exists within the meaning of section 701. Even in the absence of any control by the beneficiaries, where the trustees are not restricted to the mere collection of funds and their payment to the beneficiaries, but are associated together with similar or greater powers than the directors in a corporation for the purpose of carrying on some business enterprise, the trust is an association within the meaning of the Act. The petitioner contends first that in respect of the composite fund it was not an association taxable as a corporation in 1930, the taxable year before us, but was a trust. It further contends that this issue is res judicata, having been determined by the United States District Court for the Eastern District of New York in Brooklyn Trust Co. v. Corwin,5 Fed.Supp. 287, and, if not, that it should be decided in the petitioner's favor under the doctrine of stare decisis. *1043 In deciding that the composite fund did not constitute an "association" and that the certificates of beneficial interest were not subject to the stamp tax imposed on corporate shares, the court, in Brooklyn Trust Co. v. Corwin, supra, expressed the opinion that the composite fund was merely an extension of the trust services performed by the petitioner in accordance with the law of the State of New York. In Investment Trust of Mutual Investment Co.,27 B.T.A. 1322, we held that an organization created for the purpose of carrying on a securities investment business for profit and actively engaged in such business on a large scale was an association taxable as a corporation. *1078 The facts in that case bear a strikingly close resemblance to those in the instant case. In each instance the beneficial shareholders turned over funds to a single trustee for investment purposes and received the profits in the form of dividends or similar distributions. In each instance the trust funds were commingled and the investments made as a single business enterprise. In *1044 Investment Trust of Mutual Investment Co., supra, the taxpayer was organized by an agreement executed by and between the Mutual Investment Co. and the Empire Trust Co. Under the agreement the latter company held the legal title to the funds while the active management was entrusted to the Mutual Investment Co. Certificates were issued to, and the profits from the fund distributed to, the beneficial shareholders. In the instant case the composite fund was created by a so-called declaration of trust executed by the petitioner under the terms of which the petitioner was to act in a dual capacity as trustee for the separate trust funds comprising the composite fund and also as manager of the composite fund. The certificates of beneficial interest here were not issued directly to the beneficial owners, but to the petitioner as trustee for such owners. In our opinion in Investment Trust of Mutual Investment Co., supra, we said: It was apparently the intention of Congress to tax as corporations, associations of men, other than copartnerships, organized for the purpose of carrying on a business. We think that where men associate themselves together*1045 and contribute money to a common fund to be held by one or more trustees for a business purpose, the profits thereof to inure to them, the entity thus created is properly classifiable as an association, regardless of the power of control held over the trustee by the associates; of their authority freely to transfer their shares of beneficial interests; or of any orovision for meetings of the certificate holders. Upon the entire record we are of the opinion that the petitioner was an association taxable as a corporation for 1928. On appeal, that case was affirmed by the Circuit Court of Appeals for the Second Circuit without opinion, 71 Fed.(2d) 1009. Since the promulgation of our decision in that case the same court, the Circuit Court of Appeals for the Second Circuit, decided Ittleson v. Anderson, 67 Fed.(2d) 323, affirming Ittleson v. Anderson,2 Fed.Supp. 716, which we relied upon strongly in Investment Trust of Mutual Investment Co., supra. The facts in Ittleson v. Anderson were that a single grantor conveyed to himself and to others as cotrustees certain property, consisting entirely of stocks, *1046 to be held in trust for the benefit of the holders of certificates of beneficial interest. Two certificates representing the entire beneficial interest were issued to the grantor. The trustees received the income from the funds, consisting of dividends and interest, which they either distributed to the sole beneficiary or reinvested. In holding that *1079 the trust was an association taxable as a corporation and that the certificates of interest issued were subject to the capital stock tax, the court said: An examination of these cases [the cases referred to being Hecht v. Malley,265 U.S. 144; Sloan v. Commissioner, 63 Fed.(2d) 666; Merchants' Trust Co. v. Welch, 59 Fed.(2d) 630; Trust No. 5833, Security-First Nat. Bank, v. Welch, 54 Fed.(2d) 323; Little Four Oil & Gas Co. v. Lewellyn, 35 Fed.(2d) 149; United States v. Neal, 28 Fed.(2d) 1022; Lansdowne Realty Trust v. Commissioner, 50 Fed.(2d) 56; Gardiner v. United States, 49 Fed.(2d) 992; *1047 Allen v. Commissioner, 49 Fed.(2d) 717] indicates the rule to be that whether or not a particular trust is taxable as an association depends not so much upon the extent of the powers given to the trustees in the deed of trust, but rather upon the nature of the activities of the trustees and the use they make of the powers given to them. Gardiner v. United States, supra. A distinction is to be drawn between the activities of trustees under a strict trust as distinguished from the activities under a business trust. Even in the strict trust the activities of the trustees, in preserving the trust estate, may partake of the nature of business transactions. It is a matter of degree. When, on the one hand, the trustees promote and conduct a particular business enterprise with the trust estate, it is considered an association. The usual type is a trust for the development of real estate (Trust No. 5833, Security-First Nat. Bank v. Welch, supra ) or for the active management of developed real estate (U.S. v. Neal, supra). When, on the other hand, a trustee is merely engaged in the amount of business activity necessary*1048 to preserve the corpus and otherwise discharge the functions traditionally attributable to a strict trust, it is not treated as an association. Lansdowne v. Com'r, supra; Gardiner v. Com'r, supra; Allen v. Com'r, supra. Between these extremes is the field where trustees in the management of trust property engage in considerable business activity, and the question then presented is whether they function as a business organization or merely as trustees under the modern conception of what a strict trustee has a duty and right to do. * * * In the modern use of the trust device a trustee of the strict trust, traditionally concerned with preservation, may engage in some activities with a view of an accretion to the corpus. A distinction between a strict and business trust cannot be made solely upon the presence or absence of the profit motive. When that motive exists in a strict trust, it is to a restricted extent. When the trustee of an estate consisting of securities engaged in considerable business activity and is trading those securities and loans and invests the proceeds so that he is in reality conducting an investment business for profit, then the estate is*1049 in business and is taxable as an association. * * * Activities such as the purchase and sale of stock and bonds of corporations not connected with the corporations represented in the original corpus and the purchase of an interest in an oil syndicate for profit (May Stores stock, U.S. Public Service Bonds; Amster Syndicate) were sufficient upon which to base a finding that this was a business trust, although the other activities of the trustees considered alone might well have been within the limits of a strict trust. In our opinion the question here in issue is substantially the same as that involved in Ittleson v. Anderson, supra, and in Investment Trust of Mutual Investment Co., supra, and under authority of those *1080 opinions we must hold that, in respect of the composite fund, the petitioner was an association taxable as a corporation in the year before us. There can be no doubt that the management and operation of the composite fund, involving the investment and reinvestment of such a large amount of capital and the collection and distribution of interest and dividends, constituted an active business as distinguished from a passive or*1050 liquidating trust. We said in Investment Trust of Mutual Investment Co., supra: We also think that it was engaged in a business operation. The petitioner argues that it was not doing business within the meaning of the decisions of the courts which have held the transaction of business a factor of importance in the classification of an organization of the character of the petitioner. In its brief the petitioner states: While the buying and selling of securities may become a business, as the Bureau held, such changes in investment as an active trustee reasonably makes in the trust funds in his care to meet the continually changing important economic and financial conditions is investment and not business, and we most emphatically maintain we are doing no more than a wide-awake Trustee should do. We cannot agree that the investment of funds by an entity organized for that purpose does not constitute the doing of business. The evidence of record shows that the petitioner intended to take advantage of wide swings in the market and, in point of fact, a large percentage of the petitioner's net income for 1928 was from frofit on the sale of securities. The*1051 petitioner was doing the business for which it was organized. The fact that most of the work was performed by the managing company and paid for by that company does not make it that the petitioner was not doing business. See also the above quoted language of the court in the Ittleson case upon this point; Twin Bell Oil Syndicate,26 B.T.A. 172; affd., 70 Fed.(2d) 402; Russell Tyson et al., Trustees,25 B.T.A. 520; affd., 68 Fed.(2d) 584; certiorari denied, 292 U.S. 657. Cf. Morriss Realty Co. Trust No. 1,23 B.T.A. 1076; affd., 68 Fed.(2d) 648. We are not unmindful that the conclusion thus reached by us in this proceeding is, in effect, contrary to that reached by the United States District Court in Brooklyn Trust Co. v. Corwin, supra. With all due respect for the decision of the court in that case, however, we are of the opinion that, in so far as it may stand for the proposition that the petitioner in respect of the composite fund is not to be classified as an association taxable as a corporation for income tax purposes, it is not in harmony with the*1052 majority of the authorities, particularly the Ittleson and the Investment Trust of Mutual Investment Co. cases discussed above. We are also of the opinion that the issue as to whether the petitioner is an association taxable as a corporation for income tax purposes is not res judicata by reason of the decision of the United *1081 States District Court for the Eastern District of New York in Brooklyn Trust Co. v. Corwin, supra.The Supreme Court has held that a judgment in a suit to which the collector of internal revenue is a party does not conclude the Commissioner or the United States Government. Tait v. Western Maryland Ry. Co.,289 U.S. 620; Bankers' Pocahontas Coal Co. v. Burnet,287 U.S. 308. Moreover, the question involved in Brooklyn Trust Co. v. Corwin, supra, was whether the petitioner was liable for the stamp tax upon the certificates issued by the composite fund, whereas the instant proceeding involves the petitioner's liability for income tax under a different provision of the statute. We are of the further opinion that there is no merit in the petitioner's contention*1053 that it is entitled to a judgment in the instant proceeding under the doctrine of stare decisis. We do not understand that the principle of law which the petitioner seeks to apply in this proceeding has been established by the courts of last resort so as to render applicable the doctrine of stare decisis. Reviewed by the Board. Judgment will be entered under Rule 50. GOODRICH GOODRICH, dissenting: Both Investment Trust of Mutual Investment Co., supra, and Ittleson v. Anderson, supra, upon which the majority opinion relies, bottom upon facts so divergent from those in the instant proceeding that those decisions, save for reiteration of principles, offer little basis for the determination of this controversy. These questions must be answered here: Do funds held by petitioner as trustee under instruments creating strict trusts change character when commingled for investment? Does the investment (and reinvestment) of separate trust funds, which is an activity clearly within the duties of the trustee of a strict trust, become a different thing when done on a large scale and simultaneously for a number of such trusts? And do the*1054 commingling of funds, and the carrying on of investment and reinvestment in bulk, so to speak, transform into a quasi-corporate operation such as these statutory provisions aim at, the performance of the duty to which petitioner, as trustee, is committed respecting each separate, strict trust? I am not ready, as apparently are the majority of my brethren, to answer these questions affirmatively and so reach their conclusion in this case. Moreover, I cannot comprehend the composition of the association which, according to the prevailing opinion, here exists. Who is in it? The settlors of the various strict trusts? Not they, for they don't know each other in this arrangement; they have no control of the fund nor voice in its management; they don't have *1082 even an evidence of an interest in it. Or is the association composed of petitioner, standing on one foot as trustee of the several strict trusts, and on the other as manager of the composite fund? If that be the theory, it is one too novel for me to accept without considerably more elucidation, especially since it necessarily was considered and already has been rejected by the district court in its decision on this*1055 issue - Brooklyn Trust Co. v. Corwin, supra. It is immaterial whether, as respondent asserts and petitioner denies, this arrangement under the declaration of trust creating the composite fund was planned to obtain for petitioner the advantages resulting from the operation of an investment trust and yet avoid classification and taxation as an association. That is its effect. And we would do better to recognize the result rather than nullify it by a conclusion so plainly erroneous. ARUNDELL, VAN FOSSAN, MCMAHON, MATTHEWS, and LEECH agree with this dissent.