advice on merely how to rearrange title to income-producing property relates to neither the management nor the conservation of such property within the meaning of section 212. See Schultz v. Commissioner, 50 T.C. 688, 699-700 (1968), affd. per curiam 420 F.2d 490 (3d Cir. 1970); Bagley v. Commissioner, * * * [Bagley v. Commissioner, 8 T.C. 130, 135 (1947).] * * * * * * *
advice on merely how to rearrange title to income-producing property relates to neither the management nor the conservation of such property within the meaning of section 212. See Schultz v. Commissioner, 50 T.C. 688, 699-700 (1968), affd. per curiam 420 F.2d 490 (3d Cir. 1970); Bagley v. Commissioner, * * * [ Bagley v. Commissioner, 8 T.C. 130, 135 (1947).] *ss We have held that amounts paid for advice with respect to planning one's personal and family affairs, such as establishing trusts for family members or making gifts, are nondeductible personal expenditures within the meaning of section 262. Mathews v. Commissioner, 61 T.C. 12, 27 (1973), revd. on another issue 520 F.2d 323 (5th Cir. 1975); Cobb v. Commissioner, 10 T.C. 380, 383 (1948), affd. 173 F.2d 711 (6th Cir. 1949); Bagley v. Commissioner, supra. * * *
The petitioner has the burden of proof in establishing what portion of the fee was allocable to tax advice. Arthur D. McDonald, 52 T.C. 82, 89 (1969); George L. Schultz, 50 T.C. 688, 699-700 (1968), affirmed per curiam 420 F.2d 490 (C.A. 3, 1970). In attempting to meet such burden, the petitioners rely on the testimony of the attorney in charge of their account.
Taxpayers have the right to decrease or avoid their taxes by means that the law permits, Gregory v. Helvering, 293 U.S. 465, 469 (1935); on the other hand, where as is the case herein, there is such a marked pattern of tax benefits, we may view such pattern as ‘a yellow caution signal on our road to decision.‘ See Schultz v. Commissioner, 50 T.C. 688, 694 (1968), affd. per curiam 420 F.2d 490 (3d Cir. 1970). Petitioners cite cases in which courts have refused to recharacterize formal gifts of corporate stock to charitable foundations immediately before the redemption of the shares (Behrend v. United States, an unreported case (4th Cir. 1972, 73-1 USTC par. 9123, 31 AFTR 2d 73-406); Palmer v. Commissioner, 62 T.C. 684 (1974), affd. on another issue 523 F.2d 1308 (8th Cir. 1975)), and cases upholding installment sale treatment for sales to a purchaser related to the seller occurring immediately before resale by the purchaser (Weaver v. Commissioner, 71 T.C.443 (1978), affd. 647 F.2d 690 (6th Cir. 1981); Roberts v. Commissioner, 71 T.C. 311 (1978), affd. 643 F.2d 654 (9th Cir.1981); Pityo v. Commissioner, 70 T.C. 225 (1978); Rushing v. Commissioner, 52 T.C. 888 (1969), affd. 441 F.2d 593 (5th Cir.1971)).
It is well established that expenses paid for advice and assistance which concerns merely rearranging title to property relates neither to the management nor conservation of such property under section 212(2). Schultz v. Commissioner, 50 T.C. 688, 699-700 (1968), affd. per curiam 420 F.2d 490 (3d Cir. 1970); Epp v. Commissioner, 78 T.C. 801 (1982); Luman v. Commissioner 79 T.C. 846 (1982). Nor is petitioner's testimony that he was motivated to purchase the tax package materials and create the “business trust organizations” by his desire to minimize probate expenses and isolate his assets from potential malpractice liability sufficient to sustain petitioners' burden of proving that the expenditure related to the maintenance or conservation of income producing property.
As a general rule, “advice on merely how to arrange title to income-producing property relates to neither the management nor the conservation of such property within the meaning of section 212.” Epp v. Commissioner, 78 T.C. 801, 805 (1982); cf. Schultz v. Commissioner, 50 T.C. 688, 699-700 (1968), affd. per curiam 420 F.2d 490 (3d Cir. 1970). Again, however, the primary purpose of the expenditure is not the controlling criterion for determining deductibility; instead, the Gilmore-Woodward “origin and character” test is to be applied.
Moreover, advice on merely how to rearrange title to income-producing property relates to neither the management nor the conservation of such property within the meaning of section 212. See Schultz v. Commissioner, 50 T.C. 688, 699-700 (1968), affd. per curiam 420 F.2d 490 (3d Cir. 1970); Bagley v. Commissioner, supra. See also Hicks v. Commissioner, T.C. Memo. 1982-200; Hoelzer v. Commissioner, T.C. Memo. 1982-6.
While the presence of a tax-avoidance purpose is not, in and of itself, perfidious if the transaction involved has substance, it is clearly an element which can be taken into account. See George L. Schultz, 50 T.C. 688, 694 (1968), affd. per curiam 420 F.2d 490 (3d Cir. 1970). Petitioners were not obligated to pay and in fact did not pay for the property.
While the presence of a tax-avoidance purpose is not, in and of itself, perfidious if the transaction involved has substance, it is clearly an element which can be taken into account. See George L. Schultz, 50 T.C. 688, 694 (1968), affd. per curiam 420 F.2d. 490 (3d Cir. 1970). Petitioners were not obligated to pay and in fact did no pay for the property.
But the petitioners were entitled to try to navigate such a course and the mere presence of a tax-avoidance purpose is not enough to require us to put a stamp of "failure" on their efforts. Cf. George L. Schultz, 50 T.C. 688, 694 (1968), affirmed per curiam 420 F.2d 490 (C.A. 3, 1970). Petitioners contend that, because the production quotas were never satisfied, they never had an option to acquire or the right to receive the Las Delicias stock and therefore neither section 1234 nor section 165(g) applies.