Vanderbilt Law Review

First Page



The need to engage the services of a lawyer may arise in a variety of situations, and the possibility of deducting the fees for a lawyer's services from the client's personal taxable income will ultimately depend on which one of several competing policies of the tax law is properly applicable under the particular circumstances. Taxpayers and their attorneys should be aware of the deductibility of expenses incurred for legal services rendered in connection with the planning of the taxpayer's estate. Such estate planning services include the drafting of a will, the arrangement of inter vivos and testamentary gifts, the creation of inter vivos and testamentary trusts, and tax advice in connection with estate planning. This paper will examine the extent of permissible deductions from personal income tax liability for these state planning fees...

It would seem safe to state as a general principle that the deduction of most estate planning service expenses should be allowed under either section 212(2), section 212(3), or a combination of both sections. The expenses are deductible under section 212(2) as expenses for the management, conservation, or maintenance of property held for the production of income if the planning services directly relate to property which produces income taxable to the taxpayer-client. Alternatively, the expenses are deductible under section 212(3) if they are solely for tax counsel directly related to the taxpayer-client's tax liability. Expenses which are not deductible under section 212(3) because there is no tax liability involved or because the tax consequences are too uncertain should be deductible under section 212(2) if the services were rendered in connection with property which produces income to the taxpayer. Nevertheless, some expenses, such as fees for the drafting of a will, may be disallowed as nondeductible personal expenses because they are not genuinely related to the management of income-producing property.