Opinion
May 20, 1941 —
June 12, 1941.
APPEAL from a judgment of the circuit court for Milwaukee county: DANIEL W. SULLIVAN, Circuit Judge. Affirmed.
Leo J. Federer of Milwaukee, for the appellant.
For the respondent there was a brief by the Attorney General and Harold H. Persons, assistant attorney general, and oral argument by Mr. Persons.
The First Wisconsin Trust Company, as trustee of the Fairview Mausoleum Maintenance Endowment Fund, appeals from a judgment of the circuit court affirming an assessment of taxes by the Wisconsin Tax Commission on income received by the trustee during the years 1918 to 1936, inclusive. Notice of appeal from the assessment was dated December 5, 1940.
The income sought to be taxed came in the form of interest on the trust fund and proceeds from the sale of securities in such fund.
The Fairview Mausoleum Company, a stock corporation, owns and operates a mausoleum in Milwaukee county for the interment of human remains in surface-burial vaults or crypts. To provide for perpetual care and maintenance of the mausoleum a trust was set up November 1, 1916, with the First Trust Company as trustee. The First Wisconsin Trust Company is successor trustee.
By the terms of the trust, upon the sale of any crypt the company was to pay the trustee $75 as part of a fund to be known as the Maintenance Endowment Fund, until such fund reached $65,000 when the obligation of the company to pay the $75 to the trustee was to cease. Until the amount of $65,000 was reached, however, the trust indenture provided that the earnings of the fund shall be added to the principal of the fund.
On November 1, 1916, the trust fund was started with $2,729.33, and it attained the $65,000 figure in 1933. No income tax return was filed until 1937 when demand therefor was made. The income sought to be taxed accrued in the years 1918 to 1936, inclusive, was not distributed, and totaled $20,278. The tax, including interest but excluding delinquent penalties, amounted to $440.31. On May 3, 1937, the Trust Company was notified of the tax and a hearing before the income tax board of review was requested on May 22, 1937. That board confirmed the tax as did the Tax Commission and the circuit court upon appeal.
Appellant's position is that the income sought to be taxed is exempt under the provisions of sec. 71.05(1) (d), Stats., which exempts from taxation "income of . . . all religious, scientific, educational, benevolent or other corporations or associations of individuals not organized or conducted for pecuniary profit." Another of appellant's contentions is that those who purchase crypts somehow become members of an association not organized or conducted for pecuniary profit.
A narrow question is presented on this appeal. It is whether the gains from the sale of securities and interest from investments which have been accumulated by the trustee of a fund set apart for the perpetual care of a mausoleum are taxable to the trustee under sec. 71.05(1) (d), Stats. The terms of that statute, as set out in the statement of facts, treat with different classes of corporations and associations: (1) Religious, scientific, educational and benevolent corporations and associations; and (2) those corporations or associations not organized or conducted for pecuniary profit.
First, appellant claims that the care and maintenance of crypts in a mausoleum is religious in purpose, and that therefore the facts of this case come within the exemption statute. In answer it may be said that it is not the purpose for which the fund is brought into, existence which determines exemption rights, but rather the purpose, character, and organization of the corporation itself. It is the kind of corporation which determines a status under the exemption statute and not the particular sort of trust fund set up by such a corporation.
Second, appellant makes the claim that crypt owners become an association of individuals upon the purchase of crypts in the mausoleum. The trust instrument creates a fund which is an assurance to the purchasers of crypts that the crypts will be maintained according to a standard. The money going into that fund is derived from sources so associated with the profit and commercial venture of the creator of the trust as to give it the substance and character of income of a commercial enterprise. We are treating with the income flowing from contributions from the sale of crypts and not with the contributions themselves. The earnings of the trust fund benefit the creator for they diminish the creator's obligation of setting aside the $75 from the sales price of each crypt. The fund is in reality set aside for a particular purpose by a stock corporation organized for profit. The interest of the purchasers of crypts is protected, but they are not formed into any association.
The taxpayer must bring itself within the express terms of the exemption statute. Because it has not done so, we conclude that this income is taxable. M. E. Church Baraca Club v. Madison, 167 Wis. 207, 211, 167 N.W. 258; Milwaukee E. R. L. Co. v. Tax Comm. 207 Wis. 523, 536, 242 N.W. 312; Armory Realty Co. v. Olsen, 210 Wis. 281, 291, 246 N.W. 513.
The statutory exemptions do not prevent the taxation of income merely because it is devoted to some purpose generally associated with proper and wholesome sentiments. Anything outside of the $75 contributions which tended to augment the trust fund during the time it was accumulating to the amount of $65,000 obviously increased the amount of money received by the Fairview Mausoleum Company. That is true because of the fact that when $65,000 was accumulated the duty of the company to pay the trustee $75 on the sale of each crypt ceased. In direct proportion to the income and profits accruing to the maintenance fund, the payments owed by the company to the fund were reduced.
Sec. 71.095(4), Stats., governs the income in the hands of the trustee. That statute provides that "all nondistributable, or contingently distributable income not distributed" shall be taxed against the trustee. State ex rel. Wis. Trust Co. v. Widule, 164 Wis. 56, 159 N.W. 630; First Wis. Trust Co. v. Department of Taxation, 237 Wis. 135, 294 N.W. 868. This income under the provisions of the trust instrument is taxable against the trustee.
Cases cited by appellant under the federal income tax law are inapplicable to the case before us. This is a tax on the income which is not exempt under our statutes. The cases cited deal with the deduction under the federal income tax law of that portion of sales prices of lots or crypts which is set aside for perpetual care.
We hold that no violation of the state or federal constitutions has occurred and that the tax was properly assessed.
By the Court. — Judgment affirmed.