Morrissey v. Commissioner

296 U.S. 344 (1935)

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Morrissey v. Commissioner

United States Supreme Court
296 U.S. 344 (1935)

Facts

A group of developers formed a real estate trust in Los Angeles to develop golf courses and related incidental businesses. The trustees were authorized to manage the estate as if they were true owners of its assets. Beneficial interests were issued in the form of common and preferred shares, both of which were freely transferable. The trustees improved, subdivided, and sold a large portion of the trust property. On the remainder, the trustees developed a golf course and clubhouse, both of which they conveyed to a newly formed corporation in exchange for the corporation’s stock. The trustees collected received dividends from the corporation that they then distributed to the shareholders of the trust. The trustees filed tax-trust tax returns and paid taxes accordingly. The Internal Revenue Service (IRS) assessed additional income taxes against the trust, claiming that it was an association and was thus taxable as a corporation rather than as a trust. The trustees sued. The United States Board of Tax Appeals affirmed the IRS ruling, and the Circuit Court of Appeals for the Ninth Circuit affirmed the United States Board of Tax Appeals. The United States Supreme Court granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Hughes, C.J.)

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