## Facts

- Trustees created an express trust (Western Avenue Golf Club) in 1921 to hold and develop Los Angeles real estate and operate related facilities.
- The trust instrument authorized trustees to buy, sell, lease, encumber, develop, and operate property; build and run golf courses and clubhouses; receive income; make loans and investments; and manage the enterprise as if absolute owners.
- Beneficial ownership was divided into preferred and common shares, recorded in share ledgers, and interests were transferable.
- Shareholder meetings could be called, but shareholder votes were advisory only; management was centralized in the trustees.
- The trust had a fixed 25-year term and continued despite death or changes among trustees or beneficiaries.
- Beneficiaries were insulated from personal liability; persons dealing with trustees were limited to recourse against trust property.
- The trustees sold beneficial interests and conducted real estate development and sales, including platting and selling lots.

## Issues

1. Whether the trust, organized to conduct an ongoing business with transferable beneficial interests and centralized trustee management, was an “association” taxable as a corporation under the Revenue Acts of 1924 and 1926.
2. Whether Treasury regulations defining “association” for income tax purposes were within the Treasury Department’s authority and could be revised after enactment.

## Decision

- The Supreme Court affirmed the judgment upholding the Commissioner’s classification of the trust as an “association” taxable as a corporation.
- Congress may tax as a corporation an unincorporated business trust that transacts business in a corporate manner.
- Treasury was authorized to define “association” by regulation and to refine that definition for administration and consistency with judicial decisions.
- Reenactment of the statutory language (“corporation” includes “associations”) without material change was treated as approval of the Treasury’s regulatory construction.

## Legal Principles

- For federal tax purposes, “association” includes unincorporated business trusts that operate with key corporate attributes, even without formal incorporation.
- Whether beneficiaries exercise stockholder-like control is not decisive; beneficiary control and formal corporate procedures are not required.
- Corporate resemblance is shown by features such as centralized management (trustees acting like directors/officers), continuity of the enterprise despite changes in participants, transferability of beneficial interests, and limited liability.
- The test is functional: classification turns on the character and mode of conducting the enterprise, not state-law labels or statutory corporate privileges.
- Treasury regulations construing “association,” consistent with prior Supreme Court interpretation, are a valid exercise of delegated administrative authority.

## Conclusion

The trust’s business purpose, centralized trustee management, continuity, transferable shares, and limited liability made it an “association” for federal income tax purposes, so it was properly taxed as a corporation under the Revenue Acts.


Morrissey v. Commissioner, 296 U.S. 344 (1935)