Rev. Rul. 69-300

Advice has been requested whether, under the circumstances described below, a bank that was appointed custodian of certain property by court order pending a final determination of its owner is required as a fiduciary to file Form 1041, U.S. Fiduciary Income Tax Return, and include in income the earnings of such property.

Documentary evidence of ownership of shares in a land trust was lost and the identity of the true owner could not be established. As part of the litigation surrounding the ownership of the property the local court directed that certificates representing ownership of the property and the accumulated earnings thereon be placed in the custody of the bank.

The bank was granted by the court certain discretionary powers of administration and management with regard to the property. It could vote at any stockholders' meeting; approve or oppose any reorganization or refinancing proposal; invest earnings in government obligations; retain counsel; exercise or sell conversion or subscription rights; hold the property in its own name or in a street name; and petition the court with respect to any other disposition concerning the property it considered to be in the best interest of the unknown owner.

Section 641(a) of the Internal Revenue Code of 1954 provides, in part, that taxes imposed on individuals are to apply also to income of property held in trust, including income accumulated in a trust for the benefit of unascertained persons.

Section 641(b) of the Code provides, in part, that such taxes are to be computed and paid by the fiduciary who is required by section 6012(b)(4) to file a return of such taxes.

Section 7701(a)(6) of the Code defines the term "fiduciary" to mean a guardian, trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for any person.

It has been established that the term "trust" as used in section 641 of the Code is not confined to technical trusts. That is, a relationship that is clothed with the characteristics of a trust comes within the purview of section 641 of the Code even though there is some technical reason why it would not be a trust for other purposes under local law. See Rev. Rul. 61-102, C.B. 1961-1, 245, and the cases discussed therein.

The mere appointment of a bank or an individual as a custodian does not of itself cause the bank or individual to be a receiver or any other type of fiduciary. However, where the bank or individual is vested with broad discretionary powers of administration and management, a fiduciary relationship exists within the meaning of section 7701(a)(6) of the Code.

In the instant case, the rights and duties of the bank with respect to the property and its unknown owner are such that the bank is a fiduciary of property held in trust, including income accumulated for unascertained persons. Accordingly, the bank must file Form 1041 and include in income the earnings on the property it holds pursuant to the court order.