Detroit Trust Co. v. Commissioner

DETROIT TRUST CO. AND W. FRANK MAXWELL, EXECUTORS, ESTATE OF GEORGE A. ROBINSON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

FREDERICK H. ROBINSON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

JANE B. ROBINSON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

MARION L. ROBINSON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Detroit Trust Co. v. Commissioner

Docket Nos. 17327, 20257, 20258, 20289, 20290, 33169.

United States Board of Tax Appeals

16 B.T.A. 207; 1929 BTA LEXIS 2625;

April 25, 1929, Promulgated

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The beneficiaries of a trust held not entitled to deductions for depletion on account of the removal of ore from mining properties constituting the corpus of the trust.

Fred C. Goddard, Esq., for the petitioners.

F. R. Shearer, Esq., for the respondent.

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LANSDON

The respondent has asserted deficiencies in income taxes as follows:

	Year	Amount
Estate of George A. Robinson:
Docket No. 17327	1921	$1,116.15
Docket No. 20289	1922	1,165.40
Docket No. 33169	1923	721.04
Frederick H. Bobinson:
	1921	241.39
Docket No. 20257	1922	231.42
Jane B. Robinson:
Docket No. 20258	1921	$2,238.60
Marion L. Robinson:
	1921	23.11
Docket No. 20290	1922	142.69
	1923	185.72

The only issue presented for determination is whether the petitioners, who are beneficiaries of a trust, are entitled to deductions for depletion on account of the removal of ore from mining properties constituting the corpus of the trust.

These proceedings were consolidated for hearing and decision, the issue raised being common to all. The material facts are stipulated.

FINDINGS OF FACT.

The petitioners in Docket Nos. 17327, 20289 and 33169 are the executors of the estate of George A. Robinson, who died April 15, 1925, a resident of Wayne County, Michigan. The petitioner, Marion L. Robinson, who has married since this proceeding was filed and whose name is now Marion Robinson Swart, and the petitioner, Frederick H. Robinson, are residents of Detroit, Michigan. The petitioner, Jane B. Robinson, is a resident of Pasadena, Calif.

On May 1, 1913, George O. Robinson and Jane B. Robinson, his wife, conveyed by deed to their sons Fred A. Robinson and George A. Robinson, as joint tenants with rights of survivorship, all their rights, title and interest to certain lands and mineral rights in lands situate in the County of St. Louis, Minnesota. Contemporaneously therewith Fred A. Robinson and George A. Robinson executed a declaration of trust, the material provisions of which are as follows:

WHEREAS, George O. Robinson, of the City of Detroit, Wayne County, Michigan, is the owner of certain undivided interests in lands and mineral rights in lands situate in the County of St. Louis in the State of Minnesota;

AND WHEREAS, The said George O. Robinson is desirous of freeing and relieving himself from the burden and care of the charge and management of the said lands and his other business affairs;

AND WHEREAS, To the end that he may so free and relieve himself from the care of, and application to, his business, it has been arranged between said George O. Robinson and his son Fred A. Robinson and his son George A. Robinson that in consideration of certain agreements and undertakings by the said Fred A. Robinson and George A. Robinson, as hereinafter specified, and certain trusts, as hereinafter acknowledged and declared by the said Fred A. Robinson and George A. Robinson, the said George O. Robinson is to convey and warrant to the said Fred A. Robinson and George A. Robinson his said interests in the lands in the County of St. Louis in the State of Minnesota;

AND WHEREAS, According to the tenor and effect of said arrangement, and in consummation and fulfilment thereof, the said George O. Robinson and Jane B. Robinson, his wife, have contemporaneously with the execution and delivery of this instrument, executed and delivered their warranty deed, conveying to the said Fred A. Robinson and George A. Robinson, as joint tenants with right of survivorship, all and singular the rights and interests of the said George O. Robinson in and to said lands and mineral rights situate in the County of St. Louis in the State of Minnesota.

NOW, THEREFORE, We, the undersigned, Fred A. Robinson and George A. Robinson, in order to give effect to the arrangement and agreement hereinabove referred to, in consideration of which the said conveyance by the said George O. Robinson and Jane B. Robinson, his wife, is made contemporaneously herewith, do hereby acknowledge, agree and declare, that the said rights and interests in lands in the County of St. Louis, State of Minnesota, described in said warranty deed, have been so conveyed to us, and are to be held by us IN TRUST for the uses and purposes hereinafter declared to wit: -

1st. During the joint lives of us, the undersigned, Fred A. Robinson and George A. Robinson, and the life of the survivor of us, to hold, possess, care for, manage and control the said interests in lands and mineral rights so as aforesaid conveyed to us by the said George O. Robinson and Jane B. Robinson, his wife, and in such management and control to use and exercise our best judgment, skill and ability to conserve and promote the interests of those beneficially concerned therein, and to faithfully devote thereto so much of our time, thought, attention and effort as shall be requisite or desirable for such care, control and management, making the business connected with the management and care of said property the first and paramount claim upon our time, attention and endeavor. In the management of said property full power and authority is hereby conferred upon us as Trustees, or the survivor of us, to sell and convey, in combination with the co-tenants of said lands or mineral rights in lands, either by one joint instrument or by separate instrument concurrently with said co-tenants, the undivided interests so as aforesaid conveyed to us by said George O. Robinson and Jane B. Robinson his wife, or any part thereof, whenever it becomes necessary in connection with Village Lots, tax titles, rights-of-way, or other cases deemed important by us, or the survivor of us, and the co-tenants of the other undivided interests, and in case of any such sales the proceeds realized therefrom shall become a part of the principal or body of the trust property, and shall be invested or reinvested as shall be deemed by us, or the survivor of us, to be for the best interests of the trust estate, and full power and authority is also conferred upon us as such Trustees, or the survivor of us, to lease said undivided interests in lands and in said mineral rights, or any of them, in combination with the co-tenants of the other undivided interests therein, either by one joint instrument with our said co-tenants, or by separate instrument concurrently with said co-tenants.

2nd. To receive the rents, royalties, issues, profits, income and proceeds of the said property, and out of the same to pay and discharge all taxes, salaries, wages and office expenses accuring in Minnesota, and all salaries, rents and office expenses at Detroit, Michigan, and all other expenses or charges of every kind and character whatsoever, accruing or incurred in connection with, or incident to, the management and administration of said property.

3rd. During the life of said George O. Robinson, after the payment of all expenses and charges of management and administration as aforesaid, to pay out of the rents, royalties, issues, profits and income of said property to said George O. Robinson the sum of Twenty-six Thousand Dollars ($26,000.00) each year, payable in quarterly instalments of Sixty-five Hundred Dollars ($6,500.00) each on or before the first days of August, November, February and May, and the annual sum of Eight Thousand Dollars ($8,000.00) to each of his two daughters, Caroline R. Chesebrough and Mabel E. Robinson, and to Jane B. Robinson, wife of said George O. Robinson, so long during the life of said George O. Robinson as she may live, the annual sum of Eight Thousand Dollars ($8,000.00), the same being all payable in quarterly instalments, and on the dates, as above specified for the payments to said George O.Robinson, and to retain to ourselves as our full and sole and only compensation for our services rendered in connection with said trust during the life of said George O. Robinson, the surplus of said rents, royalties, issues and income of said property after the payment of the charges and expenses of management and administration of said property and the sums hereinabove provided to be paid to said George O. Robinson, Jane B. Robinson, Caroline R. Chesebrough and Mabel E. Robinson, respectively.

4. In the case the said June B. Robinson, wife of said George O. Robinson, shall survive him, then and in that case, during the life of said Jane B. Robinson, to pay the net annual rents, royalties, issues, profits and income arising or derived from said trust estate after the payment of all expenses and disbursements connected with the management and administration thereof in manner following, to wit: One third (1/3) thereof to said Jane B. Robinson, one-sixth (1/6) thereof to said Caroline R. Chesebrough, one-sixth (1/6) thereof to said Mabel E. Robinson, one-sixth (1/6) thereof to said Trustee, Fred A. Robinson, and one-sixth (1/6) thereof to said Trustee, George A. Robinson; it being expressly provided that in the expense of administration and management of said trust estate after the decease of said George O. Robinson, there shall be included as a part thereof an annual salary of Eight Thousand Dollars ($8000.00) to said Trustee, Fred A. Robinson, payable quarterly, and an annual salary of Six Thousand Dollars ($6000.00) to said Trustee George A. Robinson, payable quarterly. The payments hereinabove in this paragraph provided to be made to said Jane B. Robinson, wife of said George O. Robinson, and the said children or said George O. Robinson, are to be made quarterly on or before the first days of August, November, February and May of each and every year.

5th. Upon the death of both the said Trustees, Fred A. Robinson and George A. Robinson, the trust hereby declared shall cease and terminate, and the property then embraced in said trust shall vest, share and share alike, in the children of said George O. Robinson, to-wit, said Fred A. Robinson, George A. Robinson, Caroline R. Chesebrough and Mabel E. Robinson, or in the survivors or survivor of them, the issue of any of said children who may have died prior to the termination of said trust to represent and take such deceased child's share; and said property and estate shall so vest without any further or other conveyance, assignment or transfer the same to all intents and purposes as if such vesting had, in terms legally apt and effective therefor, been prescribed and provided for in the deed by the said George O. Robinson and wife to the said Fred A. Robinson and George A. Robinson hereinabove recited.

6th. The trust hereby declared is made subject to the following provisions and conditions, to-wit: -

(a) In case of the death of one of said Trustees hereinabove named during the existence of the trust hereby declared, the survivor of them shall become the sole Trustee hereunder and vested with the entire estate vested hereby in both of said Trustees, and clothed with all the powers and authorities in connection with such trust estate hereinabove conferred upon them both, and shall be charged with all the duties, liabilities and obligations hereby imposed upon both of them; and if the said George O. Robinson shall then be living, then thereafter, so long as he shall live, the said survivor shall be entitled to, and shall pay to himself, as his full, sole and only compensation for his services as Trustee hereunder, one-half (1/2) of the annual surplus arising or derived from the management of the trust estate as such surplus is defined in subdivision 3rd of this instrument, and the other half of such surplus shall accrue to, and be paid to, the wife and children of the Trustee so dying in the same proportions, as between them, as they would take and share therein under the laws of Michigan then in force and effect, if the same were paid to them as a part of the distributive residue of the personal property of the estate of the Trustee so dying.

(b) In case of the death of any of said children of said George O. Robinson during the existence of the trust hereby created leaving issue, then and in that case any distributive payment accruing under the terms of this trust to such child so dying, shall belong to, and be paid to, such issue.

The trustee, Fred A. Robinson, died on December 30, 1913. Thereafter, on March 4, 1914, George O. Robinson and his wife, Jane B. Robinson, executed and delivered to George A. Robinson three quitclaim deeds conveying certain surface rights in lands in the town site of Eveleth, Minn., which had been held of record in the name of Fred A. Robinson, Trustee, upon a trust which was to terminate upon the death of said Fred A. Robinson. Contemporaneously with the execution of such deeds, George A. Robinson executed a supplemental declaration of trust, the material portion of which follows:

NOW, THEREFORE, I, the undersigned, George A. Robinson, surviving joint tenant as aforesaid, do hereby acknowledge, agree and declare that all right and interest described in and conveyed to me by said quit claim deeds hereinabove specified, bearing even date with this instrument, have been so conveyed to me and are held by me in trust for the uses and purposes specified and set forth in the declaration of trust by Fred A. Robinson and myself, dated May 1st, 1913, hereinabove referred to, the same to all intents and purposes as if they had been at that time specifically incorporated in, and brought within the operation of, the said warrantly deeds to as aforesaid executed by the said George O. Robinson and Jane B. Robinson his wife, to the said Fred A. Robinson and myself as joint tenants with right of survivorship.

This instrument is supplemental to the said declaration of trust by Fred A. Robinson and myself, dated May 1st, 1913, hereinabove referred to.

George A. Robinson continued to serve as the sole trustee until his death on April 15, 1925, when the trust was terminated. George O. Robinson died on or about January 1, 1916.

The income of the trust which was distributed to the beneficiaries as provided in the original trust instrument was derived principally from royalties paid by various lessees who operated and developed the mineral lands referred to in the declaration of trust.

In the event that the Board should find that the petitioners are entitled to deductions for depletion on account of the removal of ore from the mining properties constituting the corpus of the trust, the deduction to be allowed is stipulated in respect of each proceeding as follows:

Depletion	1921	1922	1923
Estate of George A. Robinson	$5,147.86	$4,191.33	$6,572.80
Frederick H. Robinson	2,574.19	2,458.96
Jane B. Robinson	11,234.01
Marion L. Robinson	2,574.19	2,458.96	3,287.53

OPINION.

LANSDON: The single issue presented in these proceedings is whether the beneficiaries of a trust are entitled to deductions for depletion on account of the removal of ore from mining properties constituting the corpus of the trust.

The principle involved has been carefully considered and disposed of in a number of decisions by the Board and the courts, which we consider controlling in the instant proceedings. , and cases cited therein; ; ; ; ; ; certiorari denied, ; ; affirming ; ; . It follows that the determination of the respondent is approved.

Reviewed by the Board.

Decision will be entered for the respondent.