poration or association organized and operated exclusively for religious, charitable, or educational purposes, no part of the net income of which inures to the benefit of any private stockholder or individual. Corporations liable to the tax. (See also cases under Dissolved corporations, Excepted corporations, Foreign corporations, Receivers, and under "Doing business.") Buying and selling real estate incidental to the business carried on by the lessee being exceptional and "trifling in amount" does not make the company liable. (Traction Companies v. Collectors, 223 Fed. 984, 1915. Reversing Dayton & Western Traction Co. v. Gilligan, etc., T. D. 2000.) A corporation subjects itself to the tax by exercising the privilege of carrying on or doing business for any part of the year for which the tax is imposed. (228 Fed. 296-Blalock, Collector of Internal Revenue v. Georgia Ry. & Electric Co., 1916. Reversed on another point in 246 Fed. 387, 1917.) Corporations organized under the laws of Minnesota, not for charitable or eleemosynary purposes, but for the pecuniary advantage of their shareholders, held "organized for profit" within the meaning of the corporation tax law of August 5, 1909. (Von Baumbach v. Sargent Land Co., 242 U. S. 503, 1917.) A terminal railway company, organized for the purpose of performing terminal service for four railroad companies which were its stockholders, having been legally organized as a corporation capable of earning and paying dividends, is subject to corporation excise tax act, August 5, 1909, though the companies owning its stock organized the terminal company merely to provide a convenient joint agency for the performance of certain of their duties as carriers without any idea of deriving a profit. (Houston Belt & Terminal Ry. Co. v. United States, 250 Fed. 1, 1918.) (C. C. A. affirming decision of the district court.) Where a railroad corporation leased its property and franchises for the whole term of its charter, the fact that the lessee paid the rent, not to the lessor entity, but rather to its stockholders and bond holders, could not prevent the rent so paid being subject to taxation under corporation tax act 1909, section 38, if the act was otherwise applicable. (Anderson v. Morris & E. R. Co., 216 Fed. 83, -1914.) The Houston Belt & Terminal Co. was the terminal agent for four Texas railway companies, called tenant lines. The fact that the lessees paid an income in the form of rental to the Central Trust Co. does not exempt the said lessor from taxation as such rent was properly treated as having been paid to the terminal company and by it paid to the Central Trust Co. Judgment of district court affirmed. (Houston Belt & Terminal Co. v. U. S., 250 Fed. 1, 1918.) The above act must be construed as imposing an excise tax upon the right to do business in corporate form; so, if the persons choose the corporate form of business, the corporate income may be estimated upon the assumption that the form is to be regarded as the reality. (United States v. Oregon-Washington R. & Nav. Co., 251 Fed. 211., U. S. C. C. A. N. Y., 1919.) Massachusetts trusts. It was the intention of Congress to embrace within the corporation tax provisions of the tariff act of August 5, 1909 * * * only such corporations and joint-stock associations as are organized under some statute, or derive from that source some quality or benefit not existing at common law. A trust formed in a State, where statutory joint stock companies are unknown, for the purpose of purchasing, improving, holding and selling land, and which does not have perpetual succession but ends with lives in being and 20 years thereafter, is not within the provisions of the corporation tax law. (Elliot v. Freeman, 220 U. S. 178, Mar. 13, 1911.) Mining companies. The act applies to mining companies. It is not unconstitutional as imposing a direct tax not apportioned according to population, though with reference to mining companies the net income of the corporation is determined by ascertaining the value of ore extracted after deducting the cost of extraction and treatment and the cost of administering the corporation, with a reasonable reservation for contingencies since such method of determination does not make the tax on the corpus of the estate. (Stratton's Independence v. Howbert, 207 Fed. 419, 1912; 231 U. S. 399, 1913.) New York joint-stock associations. Under the New York Joint-Stock Association Law (Consol. Laws, c. 29), authorizing joint-stock companies to sue and be sued in the name of the president or treasurer, and providing that suits against a joint-stock company shall be prosecuted in the first instance against the president or treasurer, and under Constitution of New York, article 8, section 3, providing that the term "corporation" shall be construed to include all associations and joint-stock companies. having any of the powers or privileges of corporations not possessed by individuals or partnerships, and that all corporations shall have the right to sue, and shall be subject to be sued, in all cases as natural persons, an unincorporated joint-stock company, operating an express business, its shares being transferable, and its property being vested in trust for the association in five directors, enjoyed such privileges under the statutes of New York as to be taxable as a joint-stock association existing under the laws of the State, under corporation tax law, August 5, 1909, c. 6, section 38, providing that every corporation, joint-stock company, or association organized for profit and having a capital stock represented by shares, now or hereafter organized under the laws of any State, shall be subject to a special excise tax, since under the statutes of the State the association was endowed with capacities and attributes not possessed by a partnership at common law; it being practically a "corporation" by New York law, despite the absence of the important corporate attribute of limited liability. (Roberts v. Anderson, 226 Fed. 8, 1915.) (See, also, cases under act of 1913.) CROSS REFERENCES DOING BUSINESS." For set of facts held to constitute "doing business" in case of Additional franchises procured by lessor, see cases 17, 19. Eminent domain exercised or purchase of property by lessor, see cases 13, 15, 21. Distribution of rent by lessor, see cases 1, 2, 3a, 4, 5, 9, 17, 18, 23, 26, 27, 28, 29. Insurance companies, see case 3. Leased corporations, see cases 1, 2, 3a, 5, 6, 7, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 33, 34, 35. Mining companies, see cases 1, 2, 12, 33. Power of attorney, see case 16. Railway companies, see cases 3a, 10, 11, 13, 14, 15, 18, 25, 26, 29, 32, 34, 35. Sale of stocks or bonds or issuance of bonds by lessor, see cases 6, 15, 24, 27, 28, 34. "Doing business." 1. A corporation, the sole purpose whereof is to hold title to a single parcel of real estate subject to a long lease and, for convenience of the stockholders, to receive and distribute the rentals arising from such lease and proceeds of disposition of the land, and which has disqualified itself from doing any other business, is not a corporation "doing business" within the meaning of the corporation tax provisions of the act of August 5, 1909, c. 6, 36 Stat. 11, 112, and is not subject to the tax. (Zonne v. Minneapolis Syndicate, 220 U. S., 187, 1911.) 2. Where defendant corporation was organized to own the stock of a mining company, and had no assets except such stock, a small amount in bank, and office furniture, etc., and did nothing other than to receive dividends from the operating company and distribute them as such among its own stockholders, it was not "doing business" within the act and was not subject to the tax. (United States v. Nipissing Mines Co., 206 Fed. 431, 1913.) 3. An association organized under the laws of a State for the purpose of collecting assessments from its members and disbursing the same in payment of benefits on the death or injury of members and the expenses of the association, any surplus at the end of a year being paid into a reserve fund to be used in payment of losses in any succeeding year which may exceed the assessments for that year, is an "insurance company" and in exercising the functions for which it was organized is "doing business" within the meaning of those terms as used in Corporation Tax Act, August 5, 1909. * * * (Commercial Traveler's Life and Accident Association v. Rodway 235 Fed. 370, 1913.) 3-A. A railway corporation which has leased its railroad to another operating company but which maintains its corporate existence and collects and distributes to its stockholders the rental, from the lessee and also dividends from investments is not "doing business" within the meaning of this act and hence not required to make return or pay the tax. (Park Realty Co. case, 220 U. S. 107, disting., and Zonne v. Mpls. Syndicate, 220 U. S. 187, followed.) (McCoach v. Minehill & S. H. R. R. Co. 228 U. S. 295, 1913, Affg. 192 Fed. 670, 1912.) 4. Where a corporation, with general business powers, amended its articles so as to limit its activities to the mere ownership and rental of certain property occupied and used by its stockholders as a department store, and applied the entire rent, first to the payment of interest on mortgage liens, and then to the payment of dividends to stockholders, it was not "doing business," under Corporation Tax Act, August 5, 1909. (Abrast Realty Co. v. Maxwell, 206 Fed. 333, and Maxwell v. Abrast Realty Co., 218 Fed. 457, 1914.) 5. Where a street railway company, under authority of the State law, leased at a graded annual rental its system of street railways, which it owned, operated, and controlled, to another company for a long term, and thereafter engaged in no other business than to maintain and preserve its corporate existence, receiving the rent, and distributing the income among its stockholders, it was no longer "doing business" as a traction company, and was therefore not subject to franchise taxation, under act of August 5, 1909 which is only applicable to corporations doing business in a corporate capacity as authorized. (Wilkes-Barre & W. V. Traction Co. v. Davis, 214 Fed. 511, 1914.) * * * 6. Selling stocks or bonds by lessor, proceeds to be applied to making improvements, makes lessor liable. The lessor company engages in business, although it may not have in its immediate possession the equipment and appliances of a railroad business. (Lima Electric R. & Lt. Co. v. Bettman, Commissioner's Annual Report, 1914, p. 25.) (But see cases No. 15, 24, 34.) 7. Substituting one mortgage bond for another for the purpose of renewing, refunding, or extending time for the payment of preexist ing debt, does not render the lessor company liable as carrying on business in the capacity designated in its articles of incorporation. (Lima Elec. Ry. and Lt. Co. v. Bettman, S. D., Ohio, Annual Report of Commissioner of Int. Rev. 1914, p. 26.) 8. A corporation to be subject to the tax must be organized for the purpose of doing business, and, in addition, must be actually engaged in that business. The question is rather what the corporation is doing than what it could do. (Emery, Bird, Thayer Realty Co. v. United States, 198 Fed. 242, 1912, affirmed by Supreme Court in 237 U. S. 28, 1915.) 9. A realty corporation simply collecting and distributing rent from a specified parcel of land is not doing business within the meaning of corporation tax law of 1909. (Emery, Bird, Thayer Realty Co. v. United States, 198 Fed. 242, 1912, affirmed by Supreme Court, 237 U. S. 28, 1915; Zonne v. Minneapolis Syndicate, 220 U. S. 187, followed; Cedar St. Realty Co. v. Park Realty Co., 220 U. S. 107, distinguished.) 10. Within act August 5, 1909, section 38, the expression "engaged in business," "carrying on business," or "doing business" do not have different meanings, but separately or connectedly convey the idea of progression, continuity, or sustained activity, and "engaged in business" means occupied or employed in business; "carrying on business" does not mean the performance of a single disconnected business act, but means conducting, prosecuting, and continuing business by performing progressively all the acts normally incident thereto, while "doing business" conveys the idea of business being done, not from time to time, but all the time. (Lewellyn v. Pittsburgh B. & L. E. R. Co., 222 Fed. 177, 1915.) 11. The bare acts of the lessor company in acquiring property by purchase and condemnation proceedings at request of lessee do not constitute "carrying on or doing business" within the meaning of the statute. (Lewellyn v. Pittsburgh B. & L. E. R. Co., 222 Fed. 177, 1915.) 12. An iron company, which with the approval of its stockholders, leased to another company for 999 years all the property constituting its manufacturing plant, sites, mines, and roads, and coal and other lands, not to exceed 10,000 acres, and assigned to the lessee all its cash, contracts, and entire business, in consideration of a rental equal to 4 per cent on its outstanding stock, payable directly to its stockholders, together with an additional amount to cover the cost of maintaining its organization, after which it merely existed as landlord and lessor, and had no other income than the rent, was not "doing business" within the meaning of corporation tax act August 5, 1909, imposing an excise upon the doing or carrying on of business in a corporate capacity in a State. (Cambria Steel Co. v. McCoach, 225 Fed. 278, 1915.) |