14 T.C. 598">*603 12. In case the disposition of the Trust Estate shall not have been completely provided for under the provisions of the next preceding paragraph before the thirty-first day of December, 1951, then on said date the Committee shall file with the Trustee written instruments setting forth the names of the Beneficiaries whose shares shall not have been segregated as provided for under the provisions of such paragraph and instructing the Trustee to segregate and dispose of such shares, such instructions to be limited in the same manner in all respects as provided in such paragraph as to the instructions provided to be filed under such paragraph.

* * * *

14. The Trustee shall have power and authority with the written approval of the Committee, to make any division or distribution of the Trust Estate required under the provisions of this instrument, in cash or in kind, or partly in cash and partly in kind, according to the discretion of the Trustee and the Committee, any division or distribution in kind to be at such valuations as the Trustee may establish therefor1950 U.S. Tax Ct. LEXIS 226">*238 with the written approval of the Committee. Any determination made as herein provided shall be final and conclusive upon all persons whomsoever.

From time to time, pursuant to the provisions of the trust indenture, shares of the persons included in the list of 890 beneficiaries have been paid by the trustee. Prior to 1944 the shares of 5 beneficiaries and during 1944 the shares of 6 beneficiaries were distributed. In each case payment was made in cash transmitted to the person named in the trust indenture as a beneficiary or in case of his death was made to his estate or his widow, pursuant to instructions of the committee in the trust indenture.

The number of beneficiaries remaining under the trust indenture was 885 on January 1, 1944, and 879 on December 31, 1944.

In response to inquiry by the trustee, respondent on May 25, 1945, ruled that the trust indenture does not meet the requirements of Internal Revenue Code section 165 (a). His ruling and stated reasons therefor were as follows:

In re: The Lincoln Electric Company Employees' Profit-Sharing Trust dated December 31, 1941

Gentlemen:

Reference is made to your letter dated March 24, 1944, submitting a copy of the above-designated1950 U.S. Tax Ct. LEXIS 226">*239 trust indenture, together with related data, and requesting rulings as to whether the trust is tax exempt for 1941, under the provisions of the Revenue Act then in effect, and for 1942 and 1943, under the law in effect during those years, and if the trust is tax exempt, as to whether distributions to participants or beneficiaries are subject to withholding tax or are to be regarded as capital gains if paid within one taxable year, or as annuities, if paid in installments.

The plan, as evidenced by the data submitted, has been considered and this office is of the opinion that the plan does not meet the requirements of section 165 (a) of the Internal Revenue Code, for 1941, for the reasons designated (a) and (b), set forth below; that it does not meet the requirements of the Internal Revenue Code, as amended, for 1942, for the reasons designated (a), 14 T.C. 598">*604 (b) and (c); and that it does not meet such requirements for 1943 for all of the following reasons:

(a) The plan is not a permanent program, within the purview of section 29.165-1 of Regulations 111 (section 19.165-1 of Regulations 103, as amended by T. D. 4973, 1940-1 C. B. 65), in that1950 U.S. Tax Ct. LEXIS 226">*240 it provides for a single contribution with ultimate segregation and disposition at the end of a ten-year period.

(b) The plan is not a definite program in that it fails to provide for a definite formula for determining the profits of the employer to be shared. See I. T. 3661, 1944-I. R. B. No. 10, page 13 (section 19.165-1 of Regulations 103, as amended by T. D. 4973, with respect to a "definite program").

(c) The plan is not for the exclusive benefit of employees or their beneficiaries in that beneficiaries of the participants are restricted to the spouse, children, and executor or administrator of the participant (Article 11 (a) and (b)). Section 29.165-1 of Regulations 111 provides in part, "The term 'beneficiaries' of an employee within the meaning of section 165 includes the estate of the employee, dependents of the employee, persons who are the natural objects of the employee's bounty, and any persons designated by the employee to share the benefit of the plan after the death of the employee." (Underscoring supplied).

(d) The segregation of the trust assets and the disposition thereof in the sole discretion of the Advisory Committee1950 U.S. Tax Ct. LEXIS 226">*241 make possible discrimination in favor of employees within the enumerations with respect to which discrimination is prohibited. (Article 10 of the trust indenture.)

(e) The distribution of the trust funds on such terms and conditions, and at the time set by the Advisory Committee makes possible discrimination in favor of employees who are officers, shareholders, persons whose principal duties consist in supervising the work of other employees or who are highly compensated (Article 11 and 12.)

Since the profit-sharing plan of The Lincoln Electric Company does not meet the requirements of section 165 (a) of the Internal Revenue Code, for 1941 and of such section, as amended by section 162 (a) of the Revenue Act of 1942, for 1942 and 1943, the trust which is a part thereof is not entitled to exemption under that section. Since the trust is not exempt, answers to your third question are not pertinent.

OPINION.

The principal question for decision herein is whether the Lincoln Electric Company Employees' Profit-Sharing Trust was an exempt trust within the meaning of section 165 (a) of the Internal Revenue Code. ¹Section 165 (a) requires that the trust, in order to be exempt, must be1950 U.S. Tax Ct. LEXIS 226">*242 for the purpose of "forming part of a stock bonus, pension, or profit-sharing plan."

1950 U.S. Tax Ct. LEXIS 226">*243 14 T.C. 598">*605 Petitioner contends that the trust complies with the requirements of section 165 (a). It argues that it was the intent of Congress to include as a "plan" within the meaning of section 165 (a) every type of arrangement under which receipt by the employee of the sum paid is deferred. Respondent, on the other hand, contends, for the reasons stated in his letter to petitioner of May 25, 1945, that the trust was not exempt, as it was not part of a true "profit-sharing plan" within the meaning of the statute.

It will be noted that the statute in question deals with "A trust forming part of a stock bonus, pension, or profit-sharing plan." It is clear that the employees' trust here involved is not part of any stock bonus plan, nor is it a part of any pension plan. Petitioner does not so contend, but it does contend that the purpose of the trust was to carry out a profit-sharing plan of the Lincoln Electric Co. with the greater part of its employees, which constituted considerably more than 70 per cent thereof, and that therefore it is exempt under section 165 (a). We agree with petitioner that the evidence shows that the purpose of the creation of the trust was to provide for1950 U.S. Tax Ct. LEXIS 226">*244 the ultimate disposition without discrimination of $ 1,000,000 of its 1941 profits to 890 of its employees, or, in case of their death, to certain beneficiaries of these employees. The question is whether such plan is one which comes within the exemption provisions of section 165 (a).

In Lincoln Electric Co., 6 T.C. 37, one of the issues which we had before us was whether in the year 1941 the company was entitled to deduct the sum of $ 1,000,000 paid to the Cleveland Trust Co., as trustee, under a trust for the benefit of certain employees, either as additional compensation for services actually rendered or as ordinary and necessary business expenses. The $ 1,000,000 there involved made up the corpus of the trust which we now have before us. We held in Lincoln Electric Co., supra, that the $ 1,000,000 was not deductible by 14 T.C. 598">*606 the taxpayer as an ordinary and necessary business expense under the provisions of section 23 (a) (1) (A). The taxpayer in that case made no claim that the $ 1,000,000 contributed to the trust was deductible under the provisions of section 23 (p) of the code dealing with pension trusts. 1950 U.S. Tax Ct. LEXIS 226">*245 The year there involved was the year 1941, which was prior to the amendments included in the 1942 Act which are here applicable. The Sixth Circuit reversed our decision in the Lincoln Electric Co. case, supra, and held that the $ 1,000,000 in question was an ordinary and necessary business expense. See Lincoln Electric Co. v. Commissioner, 162 Fed. (2d) 379. But the Lincoln Electric Company Employees' Profit-Sharing Trust, the petitioner in the instant case, was not before us in Lincoln Electric Co., and neither in our decision nor in the decision of the Sixth Circuit was its exempt status as a taxpayer under section 165 (a) ruled upon. Therefore, we do not consider our own decision or the decision of the Sixth Circuit in the Lincoln Electric Co. case as having any controlling effect upon the issue which we have here to decide.

A taxpayer claiming exemption must bring himself within the precise terms of the statutory provision granting the exemption. New Colonial Ice Co. v. Helvering, 292 U.S. 435">292 U.S. 435; Deputy v. Du Pont, 308 U.S. 488">308 U.S. 488. The question before us is 1950 U.S. Tax Ct. LEXIS 226">*246 an interpretation of the expression "profit-sharing plan." Section 165 (a) does not define the meaning of "profit-sharing plan." However, Regulations 111, section 29.165-1, states, in part, as follows:

Sec. 29.165-1. Employees' Trusts. -- (a) In General. -- In order that a trust may be exempt under section 165 (a) it must be part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries. The trust must be formed and availed of solely to aid in the proper execution of a plan which is a definite written program and arrangement communicated to the employees, solely designed and applied to enable such employees or their beneficiaries to share in the capital or profits of such employer's trade or business or to provide for the livelihood of such employees or their beneficiaries after the retirement of such employees.

* * * A profit-sharing plan, on the one hand, is a plan established and maintained by an employer to provide for the participation in his profits, by his employees or their beneficiaries, based on a definite predetermined formula for determining the profits to be shared and a definite predetermined1950 U.S. Tax Ct. LEXIS 226">*247 formula for distributing the funds accumulated under the plan after a fixed number of years, the attainment of a stated age, or upon the prior occurrence of some event such as illness, disability, retirement, death or severance of employment. * * *

The term "plan" implies a permanent as distinguished from a temporary program. While the employer may reserve the right to change or terminate the plan, and to discontinue contributions thereunder, if the plan is abandoned for any cause other than business necessity within a few years after it has taken effect, this will be evidence that the plan from its inception was not a bona fide program for the exclusive benefit of employees in general. * * * The permanency of the plan will be indicated by all of the surrounding facts and circumstances, 14 T.C. 598">*607 including the likelihood of the employer's ability to continue contributions as provided under the plan. * * * [Emphasis supplied.]

This regulation constitutes a contemporaneous construction of the act by those charged with its administration and for that reason is entitled to consideration and will not be overruled unless inconsistent with the law and inappropriate to accomplish1950 U.S. Tax Ct. LEXIS 226">*248 the purpose of Congress. See Brewster v. Gage, 280 U.S. 327">280 U.S. 327; Fawcus Machine Co. v. United States, 282 U.S. 375">282 U.S. 375; Augustus v. Commissioner, 118 Fed. (2d) 38; certiorari denied, 313 U.S. 585">313 U.S. 585. In Augustus v. Commissioner, the court said:

* * * The first administrative interpretation of a provision as it appears in a new act often expresses the general understanding of the times or the actual understanding of those who played an important part when the statute was drafted.

So far as we can see, the above regulation is reasonable and a fair interpretation of the expression "profit-sharing plan."

Was the employees' profit-sharing trust herein a "profit-sharing plan" within the meaning of the statute and regulations? The record discloses that in December, 1941, the company established a trust for the benefit of 890 of its employees and paid $ 1,000,000 to the Cleveland Trust Co., as trustee. The creation of the profit-sharing plan and the payment of the $ 1,000,000 to the trustee were pursuant to a resolution of the company's board of directors duly1950 U.S. Tax Ct. LEXIS 226">*249 adopted December 18, 1941. The payment of the $ 1,000,000 was not made in accordance with any predetermined formula for the determination of profits to be shared. See I. T. 3661, 1944 C. B. 315. ² It was a lump sum payment, with no provision for recurrent contributions to the trust. We do not think that under the circumstances herein the trust formed part of a "profit-sharing plan" within the intent and purview of section 165 (a) as interpreted by the applicable Treasury regulations.

1950 U.S. Tax Ct. LEXIS 226">*250 14 T.C. 598">*608 In our findings of fact we set out a ruling by the Commissioner dated May 25, 1945, in which the Commissioner stated in some detail why the trust was not exempt from taxation under section 165 (a) of the code for the years 1941, 1942, and 1943. His reasons as to why he considered the trust was not exempt were stated in five separate paragraphs, which were numbered (a), (b), (c), (d), and (e). The Commissioner in his letter stated that the trust for the year 1943 does not meet the requirements of the Internal Revenue Code, as amended, for 1943, for the reasons designated in all of the paragraphs of his letter. If the Commissioner was correct as to 1943, he would also be correct as to the year 1944, the year which we have before us. No change in the law or regulations has been called to our attention as having taken place between 1943 and 1944. In sustaining respondent's determination that petitioner is not exempt under section 165 (a) for the year 1944, we are doing so on the strength of our belief that petitioner does not meet the requirements of that part of Treasury Regulations 111, section 29.165-1, quoted above, and our holding that such regulations are a valid 1950 U.S. Tax Ct. LEXIS 226">*251 interpretation of the law. These requirements are summarized in paragraphs (a) and (b) of the Commissioner's letter heretofore referred to. Petitioner strongly takes issue with the Commissioner in his interpretation of the statute as evidenced by the regulations above referred to and says in its brief:

When the statute speaks of a "plan," the Commissioner takes this to mean a "plan" confined to the making of recurrent and systematic payments into a trust for employees. And from this erroneous premise the Commissioner concludes that, since the present indenture provides for but a single contribution, it does not satisfy the statute.

But Congress did not so limit the statute.

A reading of section 165 (a), together with section 23 (p) with which it must be integrated, shows that the whole subject is a difficult one and much must be left to interpretative Treasury regulations. We, therefore, do not feel justified in disapproving that part of the regulations printed above. In saying this, however, we do not wish to be understood as approving the reasons given by the Commissioner in paragraphs (c), (d), and (e) of his letter. The Commissioner in his brief argues for the validity of1950 U.S. Tax Ct. LEXIS 226">*252 his objections stated in all three of these latter paragraphs. But we do not go so far. Having sustained the Commissioner under the part of Treasury regulations above referred to, it becomes unnecessary to rule upon the objections to the trust which the Commissioner stated in paragraphs (c), (d), and (e) of his letter and which he still presses in his brief.

The Commissioner in his brief, in addition to his reliance upon Treasury Regulations 111, section 29.165-1, relies upon Harold G. Perkins, 8 T.C. 1051, and South Texas Commercial National Bank 14 T.C. 598">*609 , 7 T.C. 764; affd., 162 Fed. (2d) 462. These cases, however, are so different in their facts from the instant case that we do not think they are helpful here and, therefore, we do not discuss them.

Petitioner contends, in the alternative, that if the trust does not qualify as an exempt trust under section 165 (a), then the trust indenture created not one, but a separate trust for each one of the 890 beneficiaries named. It was stipulated that if the trust indenture created a separate trust for each of the 890 employees named1950 U.S. Tax Ct. LEXIS 226">*253 as a beneficiary under the trust indenture, there would be no deficiency in tax. Respondent, contends, however, that it was the intent of the grantor to create a single trust and the income of all the property is taxable to one trust.

In determining whether the trust indenture created a single trust or multiple trusts, the controlling factor is the intention of the grantor, which must be determined from the entire trust instrument. Huntington National Bank v. Commissioner, 90 Fed. (2d) 876, affirming 32 B. T. A. 342; McGinley v. Commissioner, 80 Fed. (2d) 692; Lynchburg Trust & Savings Bank v. Commissioner, 68 Fed. (2d) 356; William L. Mellon Trusts, 11 T.C. 135; affd., 174 Fed. (2d) 828. We think that an examination of the trust instrument indicates an intention to create a single trust. Throughout the trust indenture the grantor consistently and many times uses the singular form in referring to the trust and the trust estate. In William L. Mellon Trusts, supra,1950 U.S. Tax Ct. LEXIS 226">*254 we pointed out that: "The employment of such language by the settlor is an important factor in determining his intention, and requires clear proof of intention to create more than one trust." Also the grantor has used the plural in referring to the beneficiaries who are to share the trust estate. For instance, paragraph No. 9 of the agreement provides that the trust estate shall be held for the benefit of the "Beneficiaries in the proportions indicated by the fractions set opposite their respective names."

In our opinion the trust instrument in its entirety and particularly the references to the trust in the singular and the references to the beneficiaries in the plural show a clear expression of intent of the grantor to establish a single trust. The language of the trust instrument indicates a conjunction of the interests of the 890 beneficiaries in a single trust estate, the fractional parts of which in accordance with the terms of the trust are to be later distributed among the beneficiaries, and such language negatives any intent to create separate trusts. We hold, therefore, that the trust is taxable as a single entity. Cf. William L. Mellon Trusts, supra;1950 U.S. Tax Ct. LEXIS 226">*255 James S. Reid Trust, 6 T.C. 438; Marian Neal, etc. Trust, 40 B. T. A. 1033.

Decision will be entered for the respondent.