Swanson v. Commissioner of Internal Revenue

• Decision Date: 16 December 1935
• Docket Number: No. 108,108
• Citation: 80 L.Ed. 273,296 U.S. 362,56 S.Ct. 283
• Parties: SWANSON et al. v. COMMISSIONER OF INTERNAL REVENUE
• Court: U.S. Supreme Court

296 U.S. 362

56 S.Ct. 283

80 L.Ed. 273

SWANSON et al.

v COMMISSIONER OF INTERNAL REVENUE.

No. 108.

Argued Nov. 21, 22, 1935.

Decided Dec. 16, 1935.

Mr. Arnold R. Baar, of Chicago, Ill., for petitioner.

The Attorney General and James W. Morris, Asst. Atty. Gen., for respondent.

Mr. Chief Justice HUGHES delivered the opinion of the Court.

The question presented is whether the income of the 'Lake View Land Association' for the years 1925 and 1926 was subject to tax as the income of a trust under section 219 of the Revenue Act of 1926,¹ or as the income of an 'association' by virtue of section 2(a)(2) of that act.² The Circuit Court of Appeals held the taxpayer to be an 'association' and affirmed the decision of the Board of Tax Appeals to that effect. 76 f.(2d) 651, 652. This Court granted a writ of certiorari. See Morrissey v. Commissioner, 296 U.S. 344, 56 S.Ct. 289, 80 L.Ed. 263, decided this day.

The material facts as found by the Board of Tax Appeals are as follows: Joseph E. Swanson and Ralph C. Otis, in 1914, acquired a piece of vacant land in the city of Chicago with the view of improving it by the erection of an apartment house, the title being taken by Swanson. An apartment house was built. Subsequently, in 1915, at the suggestion of their attorney, they entered into a trust agreement for the purpose of carrying the title to the property. The trust was designated as the 'Lake View Land Association.' The first trustees were Ralph C. Otis, Joseph E. Swanson, and Allen G. Mills. Petitioners set forth the following summary of the trust agreement, taken from the opinion of the Circuit Court of Appeals:

'Under the trust agreement, the trustees were given the complete management and control of the property, to exchange, reconstruct, remodel, sell, or improve at their discretion or to borrow money secured by the property. They were authorized to rent suitable quarters for the transaction of the business of the trust and employ such assistants as they required. The agreement provided for the issuance of 'receipts to evidence the interests of the beneficiaries, representing 1,000 shares at the par value of $100 each. It was provided that the receipts were evidences of the ownership of personal property and not real estate. They might be transferred by assignment. Originally, one-half of the shares were issued to Otis and one-half to Swanson, who later transferred their interests to their wives, who owned the shares during 1925 and 1926. The agreement provided that the trust could sue and be sued;³ that neither the trustees nor the beneficiaries should be personally liable, and that all persons dealing with the trustees must look only to the property of the trust; that it should be terminated at the expiration of twenty years after the death of the last survivor of certain named persons or by the trustees in their discretion at any time before the expiration of the twenty years by selling all the property held by them as such and distributing the net proceeds of such sale. The trust had succession and was not terminated by the death of a trustee or beneficiary.'

The Court of...