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, 190, c. 6,
36 Stat. 11, 112, and is not subject to the tax.
Page 220 U. S. 188
The facts, which involve the construction of the Corporation Tax
Law, are stated in the opinion.
Page 220 U. S. 189
MR. JUSTICE DAY delivered the opinion of the Court.
This case involves the validity of the Corporation Tax Law just
passed upon in No. 407,
Flint v. Stone Tracy Co., ante, p.
220 U. S. 107.
The case presents a peculiarity of corporate organization and
purpose not involved in the cases just decided. The Minneapolis
Syndicate, as the allegations of the bill,
Page 220 U. S. 190
admitted by the demurrer, show, was originally organized for and
engaged in the business of letting stores and offices in a building
owned by it, and collecting and receiving rents therefor. On the
twenty-seventh of December, 1906, the corporation demised and let
all of the tracts, lots, and parcels of land belonging to it, being
the westerly half of Block 87 in the City of Minneapolis, to
Richard M. Bradley, Arthur Lyman, and Russell Tyson, as trustees,
for the term of 130 years from January 1, 1907, at an annual rental
of $61,000, to be paid by said lessees to said corporation. At that
time, the corporation caused its articles of incorporation, which
had theretofore been those of a corporation organized for profit,
to be so amended as to read:
"The sole purpose of the corporation shall be to hold the title
to the westerly one-half of Block 87 of the Town of Minneapolis,
now vested in the corporation, subject to a lease thereof for a
term of 130 years from January 1, 1907, and, for the convenience of
its stockholders, to receive, and to distribute among them, from
time to time, the rentals that accrue under said lease, and the
proceeds of any disposition of said land."
As we have construed the Corporation Tax Law (
Flint v. Stone
Tracy Co. ante, p.
220 U. S. 107), it
provides for an excise upon the carrying on or doing of business in
a corporate capacity. We have held in the preceding cases that
corporations organized for profit under the laws of the state,
authorized to manage and rent real estate, and being so engaged,
are doing business within the meaning of the law, and are therefore
liable to the tax imposed.
The corporation involved in the present case, as originally
organized and owning and renting an office building, was doing
business with the meaning of the statute as we have construed it.
Upon the record now presented, we are of opinion that the
Minneapolis Syndicate, after the demise of the property and
reorganization of the corporation,
Page 220 U. S. 191
was not engaged in doing business within the meaning of the act.
It had wholly parted with control and management of the property;
its sole authority was to hold the title subject to the lease for
130 years, to receive and distribute the rentals which might accrue
under the terms of the lease, or the proceeds of any sale of the
land, if it should be sold. The corporation had practically gone
out of business in connection with the property, and had
disqualified itself by the terms of reorganization from any
activity in respect to it. We are of opinion that the corporation
was not doing business in such wise as to make it subject to the
tax imposed by the act of 1909. Holding this view, we think the
court below erred in sustaining the demurrer to the bill. The
decree of the court below is therefore reversed, and the cause
remanded to the Circuit Court of the United States for the District
of Minnesota, with directions to overrule the demurrer, and for
further proceedings consistent with this opinion.
Reversed.