agent in the United States, and upon the filing thereof would be accepted by the corporation paying the dividend as evidence that the nominal stockholder was not liable for income tax on the dividend to be paid, and such paying corporation would be governed by the established facts in not withholding the tax on such dividends.25 In the absence of disclosure of actual ownership filed with the corporation paying the dividend or its withholding agent, such corporation or its withholding agent would be held liable on their stock records of ownership for the tax required to be withheld, and would withhold the normal tax and pay the same to the proper officer of the United States authorized to receive it in the manner and form provided for withholding and accounting for tax withheld.26 In such cases it was the duty of the paying corporation to make monthly return of such withholding.27 An annual return, which was a summary of such monthly returns, was filed on or before March first of each year for the preceding calendar year.28 The tax so paid and deducted from the dividend paid could only be released to a nominal stockholder not liable therefor upon a proper showing to the Commissioner of record and actual ownership and names. and post office addresses of debtor corporations and withholding agents and the amounts withheld.29 If, for any reason, there was included in the return of a non-resident foreign corporation of income from sources within the United States dividends upon which tax had been so withheld at the source, such non-resident foreign corporation might take credit against the amount of tax due for the amount of tax so withheld at the source, provided a statement was attached to the return setting forth the source and amount

25 Reg. 33 Rev., Art. 32.

26 Reg. 33 Rev., Arts. 32 and 201.

27 This return was made on Monthly Form 1012.

28 Reg. 33 Rev., Art. 201.

29 Reg. 33 Rev., Art. 32.

of the income upon which the tax had been so withheld.30 There was no duty on the part of a non-resident nominal stockholder to file any return or account for any tax on behalf of the actual owner. That duty was imposed only when the nominal stockholder was a resident of this country.31 A foreign partnership, although itself not subject to tax, filed a certificate of ownership, as indicated above, in order to release its individual members from the tax liability which would otherwise have attached by reason of apparent ownership upon the distributive shares of the partnership profits.

PROCEDURE IN CASE OF DUTCH ADMINISTRATION OFFICES. A special ruling has been made with respect to the socalled "Administration Offices" in Holland, which has application to many similar situations in foreign countries. It appears that the Dutch Administration offices are the registered owners of large blocks of American stocks, against which they have issued bearer certificates, with coupons attached. These coupons, upon presentation and surrender, entitle the bearer to dividends declared on the stock. The Administration Offices were held to be prima facie liable for the tax on dividends paid on the stock standing in their names, unless they disclosed the names of the actual owners by use of the proper certificates.32 By appointing an agent in the United States they could avoid having the tax withheld at the source. Such agent was required to make returns of income for the Dutch Administration Office represented by him and pay the corporation tax of 2% on all dividends received by it, except such amounts as were shown by certificates disclosing actual ownership to have been received for the account of nonresident alien individuals or partnerships. Such certificates were attached to and made the basis of the return when filed.33

30 Reg. 33 Rev., Art. 201.

31 See Note 15 of Text.

32 Form 1087.

33 T. D. 2386, T. D. 2669. This ruling was based on the theory that

CERTIFICATES ISSUED TO BEARER. When stock of an American corporation is floated in some European countries, where investors are accustomed to bearer stock certificates, a block of the stock is sometimes issued to a trust company in this country which in turn issues bearer certificates entitling the holder to certificates of stock for the number of shares designated, upon the surrender of bearer certificate, and to any dividends which may be declared on such shares while the bearer certificate is outstanding. The bearer certificates pass by delivery, the dividends being claimed through foreign banks by presentation and surrender of numbered coupons attached thereto. In such cases the trust company was, under the 1916 Law, in the position of a resident nominal stockholder.

Dutch Administration offices were "non-resident alien corporations," subject to tax on dividends and to having the tax withheld at the source. Since the present law does not tax corporations on dividends received by them it seems, only on some other theory can they be required to ascertain and disclose the names of the owners of their bearer certificates, under the present law.

CHAPTER 8

FIDUCIARIES

The Revenue Act of 1918 provides that every fiduciary (except receivers appointed by authority of law in possession of part only of the property of an individual) shall make, under oath, a return for the individual, trust or estate for which he acts, as outlined in this chapter. For the purpose of discussion in this book fiduciaries are divided into two classes, this chapter dealing with the subject in general and with the particular provisions applicable to domestic fiduciaries, that is, those which reside in this country or have an office or place of business here and consequently are within the jurisdiction of this Government. Foreign fiduciaries, which subject is treated in the following chapter, are defined for the purpose of this book as fiduciaries who neither reside in this country nor have an office or place of business here, that is, those who are not within the jurisdiction of this Government. A nonresident citizen acting as a fiduciary would, it seems, be entitled to be classed with the domestic fiduciaries, since the United States has some measure of jurisdiction over him as a citizen, and since the withholding provisions of the law do not apply to non-resident citizens.

Who Are Fiduciaries. The Revenue Act of 1918 defines the term "fiduciary" to mean a "guardian, trustee, executor, administrator, receiver, conservator, or any person acting in a fiduciary capacity for any person, trust or estate. In view of the definition of the word "person"

"2

1 Revenue Act of 1918, § 225. 2 Revenue Act of 1918, § 200.

3

used in the above definition, a corporation, partnership, joint-stock company or insurance company may be a fidueiary under the law. Some rulings and regulations issued under the 1916 and former laws in explanation of the term "fiduciary" are given below as indicative of the Treasury Department's attitude in interpretation of the broad term "any person acting in any fiduciary capacity for any person, trust or estate." Thus, it has been held that a fiduciary for income tax purposes is one who holds in trust an estate to which another has the beneficial title or in which another has a beneficial interest, or receives and controls the income of another, as in the case of receivers. It has also been ruled that the term "fiduciary" applies to all persons or corporations who occupy positions of peculiar confidence towards others, such as trustees, executors, or administrators, and that a fiduciary for income tax purposes is any person or corporation who holds in trust an estate to which another has a beneficial interest or receives and controls income of another as in the case of minors.

AGENTS. An agent, as such, is not a fiduciary for his principal even though he may have complete charge of the property of his principal. There may be a fiduciary relationship between an agent and a principal, but the word "agent" does not denote a fiduciary within the meaning of the law.7

POWER OF ATTORNEY. A person cannot, by power of attorney, appoint another to act as a fiduciary. A power of attorney can not create a fiduciary relationship. An agent having entire charge of property with authority to effect and execute leases with tenants entirely on his own responsibility and without consulting his principal, paying

3 In Revenue Act of 1918, § 1, the term "person" is defined to include "partnerships and corporations as well as individuals.'' The term "corporation" includes associations, joint-stock companies and insurance companies.

4 T. D. 2090.

5 Reg. 45, Art. 1521; Reg. 33 Rev., Art. 29.

6 T. D. 2135.

7 Reg. 33 Rev., Art. 29; T. D. 2090.