Trust No. 5522 & Trust No. 5644, Bellehurst Syndicate v. Commissioner of Internal Revenue

Petitioner taxpayer is a trust which, on March 4, 1923, purchased a large tract of land in the city of Glendale, Los Angeles county, Cal. The declaration of trust provided for the creation and management of a subdivision project and the sale of lots in this tract. It was taxed on its income as an association resembling a corporation.

Its petition here seeks review of the decision of the Board of Tax Appeals, claiming error in sustaining the Commissioner of Internal Revenue in holding that taxpayer’s payments to five individuals or their firms in the years 1928 and 1929 were not in payment for services rendered by such individuals from March 4, 1923, to 1930, in the development of the subdivision and in its management in the successful disposition of the subdivided lots.

The trust instrument provided that the beneficiaries should pay in $100,000 to the trustee, for which they received one beneficial interest for each $500 invested. $50,-000 of these contributions to the investment were to be paid by the trustee to the trustor, seller of the property to the trust, as a first installment of the purchase price, and $50,000 to be used in the starting of the development. The trust…