Clovis v. Commissioner , 32 B.T.A. 646 ( 1935 )

C. H. CLOVIS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

G. P. ROBERTS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

BLANCHE C. HOGE, AS EXECUTRIX OF THE ESTATE OF ARTHUR K. HOGE, DECEASED, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Clovis v. Commissioner

Docket Nos. 68433-68435.

United States Board of Tax Appeals

32 B.T.A. 646; 1935 BTA LEXIS 916;

May 23, 1935, Promulgated

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The Clovis Gas Trust was not, during the year 1929, an "association" within the meaning of section 701(a)(2) of the Revenue Act of 1928 and hence is not taxable as a corporation. F. E. McGlone,22 B.T.A. 358">22 B.T.A. 358; affirmed in Commissioner v. Duckwitz, 68 Fed.(2d) 629; Commissiner v. Brouillard, 70 Fed.(2d) 154; and Burnet v. Burns, 63 Fed.(2d) 313.

Robert P. Smith, Esq., for the petitioners.

P. M. Clark, Esq., for the respondent.

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MCMAHON

These are proceedings, duly consolidated for hearing and opintion and also consolidated for hearing only with the proceeding in Docket No. 63269, for the redetermination of the liability of the petitioners for the income taxes, if any, due from the Clovis Gas Trust for the year 1929. The respondent determined that there is a deficiency due from the Clovis Gas Trust for the year 1929 in the amount of $13,031.99 and that there is interest due in the amount of $1,707.01. He held that Clovis, Roberts, and Hoge were transferees of the assets of such trust, and that they became liable for such deficiency and interest under section 311 of the Revenue Act of 1928.

It is alleged that the respondent erred in (1) holding that the Clovis Gas Trust was, in 1929, an association taxable as a corporation; (2) determining the income of the Clovis Gas Trust; and (3) holding that Clovis, Roberts, and Hoge were transferees of the Clovis Gas Trust.

The respondent affirmatively alleged that Clovis, Roberts, and Hoge became liable as transferees of the Clovis Gas Trust.

FINDINGS OF FACT.

The petitioner, C. H. Clovis, is an individual with residence at Wheeling, West Virginia. The petitioner, G. P. Roberts, is an individual with residence at Pittsburgh, Pennsylvania. The petitioner, Blanche C. Hoge, is the duly qualified and acting executrix of the estate of Arthur K. Hoge, deceased, under the authority of the County Court of Ohio County, West Virginia.

About 1925 C. E. Clovis, other members of his family, and some of their neighbors and friends, including Arthur K. Hoge of Wheeling, West Virginia, and G. P. Roberts, determined to develop certain gas and oil properties in northern West Virginia. Each agreed to take a certain interest and contribute a certain amount, their shares to be in proportion to the amount of money contributed About 1925 C. E. Clovis obtained a lease upon the farm of his family for this purpose. About that time his brother, C. H. Clovis, obtained leases on the Charles White farm and the Alex hennen Farm.

By an agreement entered into on March 1, 1926, fourteen individuals, including C. H. Clovis, G. P. Roberts, and Arthur K. Hoge, agreed to purchase from C. E. Clovis, as tenants in common, specified interests in the oil and gas rights which C. E. Clovis had obtained under the lease upon the Clovis farm, C. H. Clovis to get a share of two fifteenths, Arthur K. Hoge to get a share of one tenth, and G. P. Roberts to get a share of one third. Therein C. E. Clovis agreed to assign the lease to C. H. Clovis, G. P. Roberts, and G. E. Crow, of Hundred, West Virginia, as trustees or managers to hold the same for the parties in interest. It was therein provided that the trustees by signing the agreement thereby acknowledged that they held the property in trust for the coowners. It was therein provided that all the business in regard to the development of the oil and gas lease should be conducted under the name of Clovis Oil & Gas Trust. The other provisions of the agreement with regard to the business of developing the property, the rights and duties of the trustees, of C. E. Clovis as attorney in fact, and of the coowners and the nature of the ownership of the coowners, are substantially similar to corresponding provisions of an agreement subsequently executed on January 1, 1928, the substance of which is set forth hereinafter.

By a similar agreement entered into on November 1, 1926, twelve individuals agreed to purchase from C. H. Clovis interests in the oil and gas lease which he had obtained upon the Alex Hennen farm, Arthur K. Hoge to get an interest of two fifteenths, G. P. Roberts to get an interest of twenty-three sixtieths, and C. H. Clovis to get an interest of nine sixtieths. C. H. Clovis therein agreed to transfer the lease to Hoge, Roberts, and C. H. Clovis, who were therein designated trustees or managers to hold the lease. It was provided that the business of developing the oil and gas lease should be conducted under the name of Alex Hennen Farm Oil & Gas Trust.

By another similar agreement entered into on July 20, 1926, 10 individuals agreed to purchase from C. H. Clovis interests in the oil and gas lease which he had obtained upon the Charles White farm, Roberts to get an interest of one third, Hoge to get an interest of one fifth, and C. H. Clovis to get an interest of one tenth. C. H. Clovis therein agreed to transfer the lease to Roberts, Hoge, and C. H. Clovis, who were therein designated as trustees or managers to hold the lease. It was provided that the business in regard to the development of the oil and gas lease should be conducted under the name of Charles White Farm Oil & Gas Trust.

The members of each group in interest under each of the above trust agreements signed a subscription agreement, which was separate therefrom, showing the amount to be subscribed by each, part to be paid at specified dates and part to be paid as needed.

The trustees or managers of, and the holders of interests in, the three above described enterprises agreed in writing to merge their interests into a single enterprise under a trust to be known as "The Clovis Gas Trust", to consist of 840 equal interests to be issued to the holders of interests in the former enterprises, effective at the close of business September 14, 1927.

The agreement of merger referred to above was followed by an agreement entered into January 1, 1928, by the same parties; and it was therein stated that the merger took effect at the close of business September 15, 1927. By such agreement Roberts, C. H. Clovis, and Hoge were designated as trustees to hold the leaseholds and all other property of the three predecessor enterprises. It was provided that they should continue in office for one year, at the end of which time and annually thereafter, a meeting of the coowners should be had, from among whom three persons should be elected by a majority in interest, to exercise the duties and act as trustees. It was provided that two of the trustees should have power to act for the trustees. By this agreement 25 individuals obtained interests totaling 840 shares of the par value of $100 per share in the single enterprise. The number of shares, and the par value thereof, of each are set forth in this agreement. Roberts obtained 295 shares of a par value of $29,500, Hoge obtained 110 shares of a par value of $11,000, and C. H. Clovis obtained 94 shares of a par value of $9,400. The agreement contained a provision as follows:

It is agreed that this organization shall not be in any sense a partnership; that the interested persons shall continue to be tenants in common; that the only persons having authority to create any obligations are the trustees in office or any two of them; and that the agreements and provisions above outlined are made only for convenience in drilling and operating the premises belonging to the organization.

By the agreement C. E. Clovis of Hundred, West Virginia, was appointed to serve as secretary for a year or until his successor should be elected by the trustees. By such agreement the coowners appointed C. E. Clovis, and his successor as secretary, to be their attorney in fact to sell the oil at such price to such parties and at such times as he might deem best. C. E. Clovis was also appointed treasurer for a year or until his successor should be appointed by the trustees. The trustees were given full power to conduct all business, except the sale of oil. They were granted the power to sell, assign, convey, and set over at any time to any party and at a price to be fixed by themselves, any part or parts of the property which might belong to the trust or to the coowners, or their assigns, provided, however, "that no sale of any land, leasehold interests, oil rights or gas rights shall be valid unless one-half in interest of the co-owners shall join in or ratify such sale." It was provided that the trustees, with the written consent of a majority in interest of the coowners, might drill additional wells, in which event they should have authority to located such well or wells and drill or contract for the drilling of the same, that they might apply accumulated profits or the property to the costs, that they might secure, by loan or otherwise, money necessary for the completion of the same, or that, by consent of the majority of the coowners, they might assess the estimated amount of costs of such well or wells against the coowners in proporation to their respective interests. It was further provided that no coowner should acquire any interest in any additional wells unless he should duly pay his assessed share of the estimated costs. It was further provided that, if any coowner should default in respect of such payment, then the payment should stand as a prior claim or lien against his share in the trust and the treasurer was empowered to apply any or all moneys due such coowners from the dividends, profits, sales of property, or otherwise in payment of such assessment. It was provided that upon the death or resignation of any trustee the remaining trustees should have full authority to appoint his successor.

The Clovis Gas Trust is the enterprise with which we are concerned herein. The instruments referred to above are in the form used in the community for establishing the respective interests of a group organized for the purpose of drilling oil and gas wells, and they took this form for that reason.

The agreement creating the Clovis Gas Trust was never recorded. No deeds or conveyances or other written transfers were made to the trustees of the Clovis Gas Trust covering the leaseholds.

The interest of ownership in the Clovis Gas Trust were represented by shares, and certificates representing the interests were issued. These were fully paid and nonassessable, and were transferable only on the books of the trustees. The certificates were signed by the trustees. After the creation of the Clovis Gas Trust a number of wells were drilled. Some of the owners of shares did not meet their subscriptions and therefore the certificates did not show their correct interests in the property. However, the certificates themselves were never changed and no new certificates were ever issued when the proportionate interests thus changed. In the final distribution the distributee did not in each case get the amount called for by his certificate, due to failure to comply with the subscription agreement.

The trustees of the Clovis Gas Trust never held any meetings, nor did the trustees of the predecessor trusts or the shareholders. No officers were ever elected. C. E. Clovis, who resided at the scene of the oil operations, was the one who actually ran the operations. None of the three trustees ever specifically told him anything to do in regard to these properties. When he decided to drill another well or secure funds the coowners who were located in the vicinity would reach an agreement in regard thereto among themselves. Those located in the neighborhood were C. E. Clovis, F. J. Clovis, B. F. Clovis, and E. C. Clovis. None of the three trustees lived in the locality. Under the agreement C. E. Clovis was authorized to call meetings for the purpose of carrying on the business of the organization. However, he never exercised that function and no meetings were ever called. The subscription list was made up setting forth just what would be done and it was passed around from one to another of the parties interested. The funds were then paid over to C. E. Clovis and he disbursed them. He signed all the checks and kept all the records. He looked after the drilling of the wells and secured the drilling contracts. He signed them for his associates and as representative of the group. Under the agreement the trustees had the authority to drill wells and make contracts but they never exercised these functions. C. E. Clovis performed all these functions by consent. The property of the Clovis Gas Trust was sold in 1929 to the Pittsburgh & West Virginia Gas Co. C. E. Clovis and Roberts carried on the negotiations for the sale of the property. C. E. Clovis had asked a price of $225,000, and Roberts took that offer to the Pittsburgh & West Virginia Gas Co. That company, however, would offer no more than $165,000. C. E. Clovis, who had suggested the sale, finally said that that was agreeable to the Clovis family and he accepted the price. None of the other parties in interest objected. They were willing to fllow his advice. The purchaser of the property required that each of the coowners should sign the deed transferring the property. The trustees were required to sign both as trustees and also in their individual capacities, and they did so sign. The purchaser refused to purchase otherwise. The purchaser also required the signature of the spouse of each party in interest. C. E. Clovis received and disbursed the proceeds of the sale. A bank account was kept for the Clovis Gas Trust in its own name. C. E. Clovis signed checks on it as follows: "Clovis Gas Trust, by C. E. Clovis, Treasurer." When the property was disposed of in 1929 payment therefor was made by check payable to the Clovis Gas Trust. Such check was deposited in this bank account.

From the time of the organization of the Clovis Gas Trust until it disposed of its assets, receipts for gas sold were made payable to C. E. Clovis as agent. He consummated an agreement for the sale of gas, as agent. Roberts, one of the trustees, helped to arrange for the sale of gas. Besides the receipts for gas sold and the selling price upon the final disposition of the property, the only receipts of the Clovis Gas Trust were contributions by the parties in interest. Sometimes the contributions were made to C. E. Clovis personally and sometimes they were made to the Clovis Gas Trust.

No minutes were kept by the Clovis Gas Trust. C. E Clovis kept a record book of receipts and disbursements, or cash book. These are all the records that were kept. The pages of the record book containing the entry showing the sale of the property in 1929, except for the first two pages, which are headed in the names of the three predecessor trusts as merged, are captioned "Clovis Gas Trust, Hundred, West Virginia." Its opening entry is on January 1, 1928. The record book kept prior to this book, the sheets of which are captioned "C. E. Clovis, Agent", contains entries which precede the existence of the Clovis Gas Trust, the first entry being on January 9, 1927. It also contains entries up to April 1928. There is thus an overlapping period covered by the two books of record. The duplications in the later book were transferred from the old book. This was done to make that book complete to the first of the year 1928.

For the year 1929 the respondent treated the Clovis Gas Trust as an association taxable as a corporation.

The funds of the Clovis Gas Trust were all distributed to the distributees, as received by it. C. H. Clovis, Roberts, and Hoge each received a distribution from the Clovis Gas Trust in excess of the proposed transferee liabilities prior to the issuance to them of the several notices of deficiency. Thereafter no funds or assets were available in the Clovis Gas Trust from which the tax assessed against it could be paid. The tax against the Clovis Gas Trust was duly assessed within the statutory period before deficiency letters were mailed to C. H. Clovis, Roberts, and Hoge and such tax has never been paid by the Clovis Gas Trust.

OPINION.

MCMAHON: The first question to be determined is whether respondent erred in holding that Clovis Gas Trust was, in 1929, an association within the meaning of section 701(a)(2) of the Revenue Act of 1928, ¹ and hence taxable as a corporation under the provisions of section 13 of such act. If he did err in this respect then there is no tax or interest due from the Clovis Gas Trust as an association and there is no necessity for considering the question of whether the respondent has shown that the petitioners are liable as transferees of the Clovis Gas Trust or for considering the assignment relating to the respondent's determination of the amount of income derived by the Clovis Gas Trust.

The word "association" is not defined in the revenue acts. However, in , where the Supreme Court had under consideration an act of Congress providing that every corporation, association, joint-stock company, and insurance company should pay a special excise tax with respect to the carrying on or doing business, the word "association" is defined as follows:

The word "association" appears to be used in the Act in its ordinary meaning. It has been defined as a term "used throughout the United States to signify a body of persons united without a charter, but upon the methods and forms used by incorporated bodies for the prosecution of some common enterprise." 1 Abb. Law Dict. 101 (1879); 1 Bouv. Law Dict. (Rawle's Ed. Rev.) 269; 3 Am. & Eng. Enc. Law (2 Ed.) 162; and Allen v. Stevens, 33 App.Div.) 485, , in which this definition was cited with approval as being in accord with the common understanding. Other definitions are:

"In the United States, as distinguished from a corporation, a body of persons organized for the prosecution of some purpose, without a charter, but having a general form and mode of procedure of a corporation." Webst. New Internat. Dict.

"[U.S.] An organized but unchartered body analogous to but distinguished from a corporation." Pract. Stand. Dict.

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The result in the instant proceeding thus depends upon whether the individuals comprising the Clovis Gas Trust were united or organized upon the methods and forms used by incorporated bodies for the prosecution of some common enterprise. While prior decisions enunciate general principles and illustrate the application thereof to the facts presented in each case, it is apparent that each case must be determined upon its own peculiar facts. ; Commissioner v. Duckwitz, infra; and Coleman-Gilbert Associates v. Commissioner, infra.

Considering all the circumstances in the instant proceeding we feel constrained to hold that the Clovis Gas Trust under the agreement of January 1, 1928, was not, during the year 1929, an association taxable as a corporation. In our opinion this was a joint venture prosecuted by the Clovis family and some of their friends and neighbors. The individuals entered into an agreement providing that the properties should be held and the enterprise be conducted by trustees. However, the evidence establishes that this was merely for convenience and that the reason for using this form was because it was in common usage in the community. It appears that the agreement in question was not carried out according to its letter. No deed was ever executed transferring title to the property to the trustees as was contemplated by the agreement, and the trust agreement itself was never recorded anywhere. By the agreement the individuals became tenants in common in their ownership of the property and, so far as the record discloses, continued in such relationship without doing anything further to transfer the legal title to the trustees. If the agreement, considered together with the predecessor agreements of trust, should be deemed sufficient to vest legal title in the trustees, our holding would have to be that the trustees merely held bare legal title for the tenants in common as a mere convenience, they retaining the beneficial title as tenants in common. Obviously it would have been cumbersome and impractical to execute a conveyance to each coowner of his share of the property. Commissioner v. Duckwitz, infra. In either event they actually conducted the enterprise, not through an organization, but through an agent, C. E. Clovis. Some semblance of organization is necessary to result in an association. Page v. McLaughlin, infra. And the nature and purpose of the trust agreement should be considered in determining whether an association results. Coleman-Gilbert Associates v. Commissioner, infra. While the trust agreement in question provides for the conduct of the business of developing the oil property by the trustees, the proof definitely establishes that this was not carried out. The organization known as the Clovis Gas Trust was something of an empty shell. Neither the trustees nor the shareholders ever held meetings or elected officers. The trustees never made decisions upon the conduct of the business or directed it in any way. On the contrary, C. E. Clovis, who was the moving factor in the enterprise and lived in the vicinity of the operations, performed all necessary functions, including the collection and disbursement of funds. By the agreement Clovis, or whoever might succeed him as secretary, was appointed attorney in fact for the coowners to sell the oil produced at such prices, to such parties and at such times as he might deem best. No one ever succeeded him as secretary. It appears that he also performed all the other necessary functions for the co-owners without any objection on their part and by their consent. Decisions as to drilling and securing funds were made by C. E. Clovis and the other coowners living in the vicinity. None of the trustees lived in that locality. Notwithstanding that C. E. Clovis was, for one purpose or another, designated as attorney in fact, secretary or treasurer, as well as agent, looking at the substance rather than the form, he and not the trustees actually carried on the business of the enterprise, acting for and in behalf of the individuals who were tenants in common.

The testimony of G. P. Roberts, one of the trustees, is illuminating and shows that if any trust was ever actually created, it was merely a passive trust to hold title to the property. He testified, in part, that the agreement to sell gas was consummated by C. E. Clovis as agent and he himself was not in touch with the matter except from time to time; that he went down to the scene of operations once and saw wells drilled; that he helped to arrange the sale of gas and later the sale of the property, but he was not interested in it actively; that he never exercised the authority granted by the agreement to him as trustee to drill wells, make contracts, and sell gas; that neither the trustees of the original trust nor those of the merged trust ever held any meetings; that the form of agreement used was the form used in that community showing the respective interests of the group, as stated by C. E. Clovis, and he never went into it beyond that; that he signed the certificates of interest; that this certificate form was prepared by C. E. Clovis; that he himself had nothing to do with the preparation of it, but objected to it on the ground that there was a possibility of a change in the interest if the contributions were not continued and that the certificates might misrepresent the interest involved; that after the issuance of the certificates there was a change in the interests in regard to one well where the contributions were not received; that the distributees in the final distribution did not get the amounts called for by the certificates; that he knows of no other function that he performed as trustee during the life of this trust except signing the certificates; that there were never any meetings of the shareholders; that no officers were ever elected; that "I felt that I was in a family proposition, and, * * * that Mr. C. E. Clovis was there on the ground, and was the man that we had originally expected to run this, and he actually was running it, and that, since he was, it would be presumptuous for me, being absent, to attempt to tell him what to do"; that he accepted what C. E. Clovis had done at all times; that there was no discrimination and no argument about it; and that, except for signing the certificates, he never exercised any function whatever other than "I would for Dr. Clovis or C. E. Clovis in any friendly capacity."

Proceedings in which somewhat similar facts and circumstances were presented are reported in , in which there were numerous petitioners. There, four individuals acquired an oil and gas lease and in order to obtain funds to drill a well they decided to sell an undivided one-half interest therein. They conveyed an undivided one-half interest therein to trustees and retained the other undivided one-half interest. The trustees were to sell the undivided one-half interest transferred to them. The interest purchased by any person was to be in proportion to his payment as compared with the total value of the entire lease. The trustees were to execute conveyances and assignments to the purchasers. Such trustees were to act until enough money was obtained, when, it was provided, a meeting of all the parties interested in the lease was to be called for the purpose of electing trustees to serve for one year or until their successors should be elected. It was provided that the prospective purchasers should participate in the earnings or profits in proportion to their interests. By the trust agreement the trustees had the power to collect all moneys from oil and other sources, to pay expenses, to distribute the profits proportionately among the owners, to borrow money, and to develop the property by drilling wells if deemed advisable by them. One hundred and ten individuals purchased interests from the trustees and received certificates of interest. There were sales and transfers of these interests. The enterprise was, by consent, called the "Iowa-Burk Syndicate." It had no charter, no bylaws, held no formal meetings and had no officers or directors. Wade, one of the trustees, handled the money and looked after most of the business by common consent. The lease was subsequently sold and the proceeds were distributed to the owners in proportion to their interests. The respondent determined that the syndicate was an association taxable as a corporation, determined a tax against it, and asserted liabilities therefor against the petitioners in those proceedings as transferees.

We there held that the syndicate was not an association taxable as a corporation. We stated that while the agreement provided that the purchasers did have a voice in the management through their right to elect trustees periodically, there was nothing in the record to show that this plan was carried out, that no meeting was ever held, and that Wade acted as manager by common consent. We held that at the time the trustees sold all of the undivided one-half interest the trust ceased and that both the legal and equitable title to the interests sold vested in the purchasers by operation of law and that they became tenants in common with the other owners of the whole lease. We further stated that in the absence of any partnership or other agreement their relation with each other depended solely upon their title.

The Commissioner prosecuted a petition for review against one of the petitioners in that case, Duckwitz, who was one of the purchasers of an interest from the trustees, in the United States Circuit Court of Appeals for the Seventh Circuit. The court in that case, , affirmed the holding of the Board that the syndicate was not an association taxable as a corporation, and stated in part:

If we read the evidence and the trust agreement together it seems tolerably plain therefrom that a small group of people in Charles City, Iowa, planned a simple and inexpensive method of handling a small venture in Texas oil speculation.

A single tract of ten acres was the field of their operation. Nowhere was there a suggestion that the trustees or members contemplated any oil mining activities outside of this tract. Those who conceived the project planned that this local group, who were willing to back their hopes with a contribution sufficient to drill an oil well, should divide the profits. The contributions of each were so small that a conveyance of a fractional interest in the real estate would have been cumbersome and impractical. Confidence and trust in one of the members led to the deposit of money with him, which in many instances was paid without his giving the payer any written document whatever.

While not determinative of the question before us, it is interesting to note that the Court of Appeals for the Eighth Circuit in the case of , held that the four original investors were, for purposes of taxation, tenants in common and not members of an association.

Under all the circumstances, we do not feel justified in disturbing the Board's finding that the interest which each investor took was an interest in the land and that they stood in the relation, each to the other, of tenants in common. In reaching this conclusion we are adhering to the rule previously announced by us in , and , decided December 15, 1933, which makes the decision in each case turn on the facts of said case. * * *

The Commissioner also prosecuted petitions for review against two of the original investors, Brouillard and Burns, in the United States Circuit Court of Appeals for the Tenth Circuit and the United States Circuit Court of Appeals for the Eighth Circuit, respectively. In , and , those courts affirmed the decision of the Board that the four original investors were not members of an association taxable as a corporation. The Board had held that an undivided one-half interest in the lease had remained, at all times, the property of the four original owners as tenants in common and that the profit accruing to their one-half interest was taxable to them individually. In , the court stated:

Certainly one who is a cotenant * * * does not render himself liable to pay taxes as a corporation because he permits his cotenant to manage his property and account to him for his share of the profits.

Petitions to review were prosecuted in the Circuit Courts of Appeals by the respondent against others who were petitioners in , but they were dismissed by the courts on motion of the Commissioner. Helvering v. Bradbury (C.C.A., 6th Cir., Sept. 26, 1934); ; Commissioner v. Holden (C.C.A., 6th Cir., Oct. 3, 1934); Helvering v. Angell (C.C.A., 9th Cir., Oct. 8, 1934); Helvering v. Linnell (C.C.A., 9th Cir., Oct 8, 1934); and .

We see no fundamental difference in principle between , and the instant proceedings. As to all of the petitioners in the F. E. McGlone case, excepting the four original owners, there is considerable basis for the view that the Commissioner made out a better case there than he has made out here. See also the following cases, where under more or less similar facts and circumstances a similar result was reached: ; ; ; Wodehouse v. Tarleton (Dist. Ct., Territory of Hawaii, July 3, 1934); , affirming ; , affirming an unreported decision of the Board; ; and . In the last cites case the court stated in part:

The imposition of a double tax upon the income of a trust viz.: a tax, first, on the income of the trust as an entity, and a further tax upon the distributive shares of the beneficiaries should clearly be warranted under the Acts of Congress, and should not have as its basis some remote resemblance to a corporation. If there is doubt, it should be resolved in favor taxpayer. Crocker v. Malley, supra, p. 233; Hecht v. Malley, p. 160. To warrant a tax as a corporation, we think that not only should the trustees be actively conducting a business chiefly for profit and in the form and manner of directors of a corporation, but where there is doubt, it should not be determined wholly by a resemblance in form, but the nature and purpose of the trust agreement should be considered in determining whether a trust is an association within the intent of Congress. * * * [Emphasis supplied.]

We have not overlooked , affirming an unreported decision of the Board, or . They are distinguishable.

The determination of the respondent that the Clovis Gas Trust was an association taxable as a corporation during the year 1929 is disapproved.

Reviewed by the Board.

Decision will be entered as to each petitioner that there is no liability for taxes or interest of the Clovis Gas Trust for the year 1929.

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Footnotes

• 1. (a) When used in this Act -

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  (2) The term "corporation" includes associations, joint-stock companies, and insurance companies. ↩