Court Opinion

ID: 4482413
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:28.410979+00
Date Added: 2024-06-11T14:54:01.723599
License: Public Domain

Queaiy, J. dissenting: In this case, the petitioner claimed a deduction for legal and related services in connection with “estate planning,” namely, the recommendations of bis attorney and the preparation of documents relating to the disposition of his assets either inter vivos by gift or upon his death by will. The opinion of the majority is based on the supposed concession by the respondent that charges for legal services in connection with “estate planning” are deductible under section 212 (3)1 to the extent that such charges are allocable to tax advice. With this I cannot agree. Such services constitute a personal expenditure which the Congress never intended should be allowed as a deduction for tax purposes. Since no proof was offered with respect to that portion of the fee attributable to other services, incident to the estate planning, which might be deductible under section 212, I find no basis for the application of the so-called “Cohan rule” (Cohan v. Commission, 39 F. 2d 540 (C.A. 2, 1930)). Section 212(3) was enacted as a part of the Eevenue Act of 1954 with a specific purpose in mind, namely, to extend to the determination of a gift tax liability the same treatment that had been accorded to income and estate taxes.2 In the case of the income tax, the deduction is allowed to the taxpayer. In the case of the estate tax, the deduction is allowed to the estate or to the beneficiary liable for the tax. In the case of a gift tax, the deduction is allowed to the person who likewise is liable for the gift tax. On the other hand, in the case of “estate planning,” there is no impending tax liability and, insofar as the taxpayer incurring the expense is concerned, there never will be. Prior to his death, there is no one liable for any tax. The determination of the liability with respect to estate taxes rests primarily with the executor or administrator and expenses incident thereto are deductible as a part of the cost of administration. The respondent disallowed the full amount claimed by the petitioner. At the trial, the petitioner sought to prove that some amount was deductible as an expense relating to the “determination” of a tax within the meaning of section 212(3). Since no part of the expense could conceivably qualify on the basis claimed, decision should be entered for the respondent. Withey, Hoyt, and Irwin, //., agree with this dissent.   See. 212 provides: SEC. 212. EXPENSES FOR PRODUCTION OE INCOME. In the case of an individual, there shall he allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year— (1) for the production or collection of Income; (2) for the management, conservation, or maintenance of property held for the production of income; or (3) in connection with the determination, collection, or refund of any tar.    H. Rept. No. 1337, to accompany H.R. 8300, 83d Cong., 2d Sess., pp. 29, A59 (1954).