of the lease agreement. Cases involving rights of such a creditor are not in point. Debts are obligations for the payment of money founded upon contract, express or implied. Taxes are imposts levied for the support of the Government. Taxes operate in invitum. Meriwether v. Garrett, 102 U. S. 472, 513. They are of a higher nature than debts. United States v. McHatton, 266 Fed. 602. Stockholders "do not occupy the position of strangers, who have taken for value, in good faith, and without notice of corporate obligations either fixed or potential." United States v. Updike, 8 Fed. (2d) 913; certiorari denied, 271 U. S. 661. Cf. Pierce v. United States, 255 U. S. 398. The two New York decisions discussed above had to do with the rights of stockholders under a lessee's guarantee and their remedies against the lessee. But the rights of stockholders to the property of their corporation are entirely different. Cf. American Telegraph & Cable Co. v. United States, 61 Ct. Cls. 326. A corporation can not directly or indirectly distribute its assets among its stockholders nor allow stockholders to withdraw its assets, except in the payment of dividends out of profits and after lawful obligations have been met. Bartlett v. Drew, supra. The right to contract is not absolute in all matters. Knoxville Iron Co. v. Harbison, 183 U. S. 13. The lease agreements were legal and effective for many purposes and no doubt gave the stockholders certain rights even as against the corporations. Cf. Scovill v. Thayer, 105 U. S. 143. But the rights of the stockholders to corporate property at all times were subject to a superior potential right on the part of the Government to impose taxes upon the corporation and collect those taxes from the income of the corporation. Cf. Louisville & Nashville R. R. Co. v. Motley, 219 U. S. 467; Knox v. Lee, 12 Wall. 457, 550, 551. When the Constitution was amended and income taxes imposed upon the corporations, the right of the Government to collect such taxes from corporate property took precedence over the right of the stockholder to continue to receive that property.

The varying definitions of insolvency, the diversity in reasoning which shades of difference in cases have elicited, and the controversy which has raged in regard to the "trust fund doctrine," indicate the improbability of any satisfactory all-inclusive general rule covering equitable liability. Yet, despite conflicting reasoning in opinions and texts, the decision of actual cases has not been so difficult. Therefore, in the final analysis, we must seek the decision of this case in its particular facts. These corporations have parted with their property and have gotten nothing in return which the Government can take for taxes. Instead, the consideration for the use of the properties under the agreement is to be paid directly to the stockholders, as if the corporations had been paid and had declared divi

dends. If the corporations had sold their properties at a taxable profit, the proceeds of the sales, paid by agreement to the stockholders, could be followed for the purpose of collecting the tax on the sale. Cf. United States v. McHatton, supra. So here, since no remedy is available at law to the Government, we think equity under the local law would follow the income from the properties into the hands of the stockholders and make it liable for the tax, because the stockholders have this property which ought to be applied to the payment of taxes of their corporation. Cf. Bartlett v. Drew, supra. We, therefore, hold that there is a liability in equity on the part of this stockholder to pay these taxes of the corporations from its retained share of the payments which have become due since the obligation to pay the taxes accrued. Cf. United States v. Updike, supra; United States v. Armstrong, 26 Fed. (2d) 227.

Reviewed by the Board.

Judgment will be entered for the respondent.

TIMES-PICAYUNE PUBLISHING COMPANY, PETITIONER, v. COMMIS-
SIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 48892, 49539. Promulgated December 9, 1932.
Expenditures made by petitioner in maintaining a chair in
journalism in Tulane University for the purpose of bettering its
service to the public as a news gatherer and dispenser, which were
reasonably expected to bring returns to it in dollars and cents, con-
stituted deductible items of expense under section 234 (a) of the
Revenue Act of 1926.

Esmond Phelps, Esq., for the petitioner.
John H. Pigg, Esq., for the respondent.

These proceedings are for the redetermination of deficiencies in income tax in the amount of $1,554.07 for the year 1927 in Docket No. 48892, and $1,225.51 for the year 1928 in Docket No. 49539.

There is only one contested issue involved and that issue is whether or not an expenditure of $6,000, made by petitioner in each of the two years herein involved for the purpose of maintaining a chair, or department of journalism, in Tulane University, is deductible as an ordinary and necessary expense item.

The facts are not controverted. The two cases were consolidated for hearing.

FINDINGS OF FACT.

The petitioner is a corporation, with its principal office and domicile in New Orleans, Louisiana. Its business is the publication of a

daily newspaper in New Orleans, known as the Times-Picayune. Its circulation is about 100,000 daily, and 139,000 Sunday. Its circulation is much larger than any other paper published in New Orleans. It is the oldest paper in New Orleans. As a news gatherer and dispenser, it serves the public in the City of New Orleans and its vicinity in a radius of about fifty miles.

Tulane University is a long established institution of learning, with a student enrollment of about three thousand. Prior to 1926 it had not maintained a chair of journalism and apparently no facilities for taking such a course were furnished students by any school in that city. The profit-producing factor of a newspaper is its advertisements. Its advertisements in volume and in rates of prices paid are very largely determined by the size of its circulation. The size of its circulation depends on the quality of service which it renders the public as a news gatherer and dispenser. That service depends upon the efficiency of the reporters.

Prior to 1926 petitioner had experienced trouble in procuring efficient reporters and felt the need of a school that would give such training. In 1926 petitioner's board of directors directed its vice president, A. P. Howard, to negotiate with Tulane University in an effort to establish and maintain such a school. He tried to get the University to maintain such a school at its own expense, but was not successful. Finally, he effected an agreement and entered into a contract between the University and petitioner, by the terms of which petitioner agreed to pay to the University $6,000 per annum for a period of ten years, beginning in 1926, and the University agreed to establish and maintain during that period such a school. That agreement was carried out and petitioner made the payments annually, and the University maintained the school.

In its tax returns for 1927 and 1928, petitioner treated the $6,000 payment as one of its ordinary and necessary expense items, and deducted such amount from its gross income. The Commissioner refused to allow the deduction, and charged the amount back into taxable income, which gave rise to most, though not all of, the deficiencies for those years. The University used the $6,000 in question solely for the maintenance of that chair of journalism, and the $6,000 per annum was the only income that department of the University received.

OPINION.

LOVE: The sole question here involved is whether or not the annual payment by petitioner of $6,000, in the manner and for the purposes disclosed in our findings of fact, is deductible from gross income as an ordinary and necessary expense item, under section 234 (a) of the

Revenue Act of 1926 (which is the same as section 23 (a) of the Revenue Act of 1928).

The evidence in the case clearly justifies the conclusion that petitioner was not actuated in making the payments herein described by philanthropic or charitable motives. It was a clear, cold-blooded business proposition on the part of the petitioner's board of directors. They expected to get returns of value in dollars and cents. In their judgment it was a sound business proposition, and subsequent history seems to have proven the wisdom of their action.

While it is true that, when the question here involved is to be decided each case must to a very large extent be viewed separately and decided on its own merits, and no effort be made to lay down a general rule, yet we believe it may be safely stated that when the board of directors, in the exercise of their sound, conservative judgment, decide that an expenditure of a sum of money will bring actual money returns to the corporation, though such returns may come to the corporation through indirect channels, we believe that such expenditures are within the purview and spirit of the statute and should be allowed as deductions. We believe such to be the clear import declared by the court in the case of Harris & Co. v. Lucas, 48 Fed. (2d) 187. In that case, the court, among other things, said:

It is evident that the words "ordinary " and 46 necessary" in the statute are not used conjunctively, and are not to be construed as requiring that an expense of a business to be deductible must be both ordinary and necessary, in a narrow, technical sense. On the contrary, it is clear that Congress intended the statute to be broadly construed to facilitate business generally, so that any necessary expense, not actually a capital investment, incurred in good faith in a particular business, is to be considered an ordinary expense of that business. This in effect is the construction given the statute by the Treasury Department and the courts.

While the Treasury Department has held as a general rule that only expenditures commonly recognized as operating expenses are deductible, the rule has been applied with great liberality, and practically any reasonable expenditure that has benefitted the business has been allowed to be deducted as an expense

Of course, each case depends for decision upon its own facts, and it would be impossible to formulate a uniform rule to govern all cases. Generally speaking, business men should be free to exercise their ingenuity in devising methods of increasing business. This rebounds to the benefit of the government by creating more taxable income. Considering the above stated examples, it would seem clear by analogy that petitioner was entitled to deduct the amounts paid to its former creditors. It was under no legal obligation to make the payments, and they were made entirely to promote the business by restoring its credit with the wholesalers from whom it purchased goods.

Practically to the same purport is the case of American Rolling Commissioner, 41 Fed. (2d) 314. Also Corning Glass

Mills v.

Works v. Lucas, 37 Fed. (2d) 798; Rodeo-Vallejo Ferry Co., 24 B. T. A. 936, 941; Old Mission Portland Cement Co., 25 B. T. A. 305.

Since the issuance of the deficiency notices here involved, the Commissioner has liberalized his policy with respect to such questions as here under consideration. See I. T. 2653, Internal Revenue Bulletin No. 44, dated October 31, 1932, p. 6.

The deficiencies should be redetermined and the payment made by petitioner to Tulane University for each of the years 1927 and 1928 allowed as an expense deduction from gross income.

Judgment will be entered under Rule 50.

EDWARD E. BRADLEY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 56168. Promulgated December 9, 1932.

Where the grantor of a trust retains the independent right to dispose of the income thereof and during the taxable years designates the recipients of his bounty, held, the income of the trust is taxable to him. Corliss v. Bowers, 281 U. S. 376, followed.

C. Hadlai Hull, Esq., for the petitioner.
C. C. Holmes, Esq., for the respondent.

The Commissioner determined deficiencies in the petitioner's income tax of $2,606.78 for 1927 and $1,891.91 for 1928.

The only question for our determination is whether the income of a trust established by the petitioner is taxable to him.

FINDINGS OF FACT.

The petitioner is a resident of Stonington, Connecticut.

On December 11, 1923, the petitioner transferred to the Washington Trust Company, of Westerly, Rhode Island, certain securities of the par value of $162,607.58, in accordance with a declaration of trust executed by the petitioner at that time, which, in so far as material hereto, is as follows:

Said Trustee shall, during my lifetime, pay from the net income, interest and profit accruing upon said fund, to such persons as I may designate, on the first days of January, April, July and October, in each year, such sums as I may request; and all net income, interest or profit accruing on such dates, not thus paid, shall be reinvested, and become a part of said fund.

I reserve and retain the power and right to increase the principal of said fund, at any time. It is understood that while living, I may advise and consult with the Trustee and its officers as to investments. Upon my decease, said