Shortly after closing, the trust was informed by W. T. Grant Co. (Grant) that it did not intend to renew its lease which expired on February 28, 1974. This put the trust in a quandry. It had purchased the shopping center on the assumption that Grant would renew its lease. Without Grant, the shopping center had lost a major store that attracted many customers. Grant's decision to leave the shopping center made the wisdom of the trustees' investment questionable.

The trustees believed that the seller had not been candid with them. Negotiations were, therefore, opened for a reduction of the sales price to reflect the lower value of the shopping center without Grant. These negotiations led to a reduction in the sales price. The agreement on this point was reflected in a letter dated January 2, 1975, from the seller to the trust:

Mindful of the difficulties that you are confronted with, and facing in view of the vacancy of W. T. Grant from the premises, etc., this is to confirm our agreement that there will be allowed to you a reduction 1980 U.S. Tax Ct. LEXIS 76">*83 of $ 58,000 provided the mortgage is satisfied during the year 1975.

The purchase-money mortgage referred to in the letter was paid in full in December of 1975 for $ 135,000.

74 T.C. 1086">*1091 OPINION

First we consider respondent's claim that the transfers made by the corporation should be includable as "acquisition indebtedness" in the computation of the shopping center's "average acquisition indebtedness" for purposes of section 514. In computing unrelated business taxable income for any taxable year, section 514 includes in gross income, with respect to each debt-financed property, an amount which is the same percent (but not in excess of 100 percent) of the total gross income derived during the taxable year from the debt-financed property as:

(A) the average acquisition indebtedness (as defined in subsection (c)(7)) for the taxable year with respect to the property is of (B) the average amount (determined under regulations prescribed by the Secretary or his delegate) of the adjusted basis of such property during the period it is held by the organization during such taxable year.

Clearly, and as petitioner concedes on brief, the purchase-money mortgage it obtained on the shopping center is "acquisition 1980 U.S. Tax Ct. LEXIS 76">*84 indebtedness" for section 514 purposes. See sec. 514(c)(1)(A). The precise question before us is whether the transfers from the corporation to petitioner to purchase the shopping center should be considered in the computation of the section 514(a)(1) fraction (which is also used in determining allowable deductions, sec. 514(a)(2) and (3)) in determining the percent of income from the shopping center to be taken into account for the section 511 tax. ^{31980 U.S. Tax Ct. LEXIS 76">*85 1980 U.S. Tax Ct. LEXIS 76">*86 1980 U.S. Tax Ct. LEXIS 76">*87}

74 T.C. 1086">*1092 Respondent contends that the corporate transfers herein constituted a loan includable in the acquisition indebtedness incurred by the trust in acquiring the shopping center for purposes of section 511. Petitioner argues that, far from being a loan, the amount it received from the corporation was received as an advance contribution from the corporation to the profit-sharing plan of which the trust was a part.

The question of whether the transfer before us is a loan or an advance is one of fact. From all the evidence, we must determine whether 1980 U.S. Tax Ct. LEXIS 76">*88 the parties to the transacton, the corporation and the profit-sharing plan's trust, both of which were governed by the same individuals, intended the approximately $ 193,000 transfer to be repayable as a loan. There is no direct evidence of these organizations' intentions in the record. Therefore, our decision must be based upon circumstantial evidence.

From all the evidence, we conclude that the transfer was a 74 T.C. 1086">*1093 loan. The transaction was reflected as a loan on all the relevant returns and forms filed by both the trust and the corporation during the taxable years before us. The transfer was shown as an amount due to the corporation on the certified public accountant's trust working papers. On the other hand, there is no evidence contemporaneous with the actual transfer which would indicate that the transfer was a contribution. Petitioner points to the fact that it charged off and deducted $ 27,787.50 of the 1973 transfer as a contribution to the plan for that year. This fact is not inconsistent with the existence of a loan. The corporation could have easily directed that year's loan repayment from the trust back to the trust as a contribution. Petitioner points to a $ 10,000-$ 1980 U.S. Tax Ct. LEXIS 76">*89 20,000 advance contribution made by the corporation to the trust in 1969. From this single instance of prefunding, petitioner argues that it had a past history of prefunding payments. One payment does not a history make. Respondent subpoenaed all of petitioner's papers dealing with the 1973 transfer. No corporate resolution or, indeed, any other paper, was produced which would show the nature of the transfer was other than that which it and the corporation told respondent it was when they filed the returns and forms for the years before us, i.e., a loan.

Thus, we hold that the transfer was a loan. Because this indebtedness was incurred to acquire the shopping center, and as the shopping center was clearly acquired to produce income, and as this indebtedness is not inherent in the performance or exercise of the function which is the basis of the trust's exemption, we conclude that the loan was an "acquisition indebtedness" within the meaning of section 514(c). See sec. 514(c)(4). ⁴ Because the shopping center was acquired with acquisition indebtedness and was held for the purpose of producing income, which use was not substantially related to the trust's exempt function aside 1980 U.S. Tax Ct. LEXIS 76">*90 from its need for income, we conclude, further, that the shopping center was "debt-financed 74 T.C. 1086">*1094 property" within the meaning of section 514(b)(1). Sec. 514(b)(1)(A)(i). ^{51980 U.S. Tax Ct. LEXIS 76">*91} This being the case, the appropriate section 514(a)(1) percentage of the gross income derived by the trust from the shopping center is taxable as "unrelated business taxable income."

Petitioner argues that we should reduce the trust's "average acquisition indebtedness" on the purchase of the shopping center by the $ 58,000 reduction of the purchase price negotiated by the parties in 1975. There is no doubt that in 1975, 2 years after the shopping center was purchased, the trust negotiated a reduction of the purchase price. In exchange for this agreed reduction, however, the seller demanded and received a quid pro quo, i.e., 1980 U.S. Tax Ct. LEXIS 76">*92 the agreement by the trust that it would pay off the purchase-money mortgage it had taken out on the property in the year of reduction, 1975. In this way, petitioner agreed to pay off the mortgage, reduced to $ 135,000, all in 1 year, rather than over 25 years at 7.25 percent. Clearly, this reduction in the amount due under the mortgage 2 years after the property was acquired cannot alter the amount that in 1973 was the property's "acquisition indebtedness" within the meaning of section 514(c). The "average acquisition indebtedness" with respect to debt-financed property is the average amount of the outstanding principal indebtedness during that portion of the taxable year the property is held by the organization, determined as of the first day of each calendar month. Sec. 1.514(a)-1(a)(3), Income Tax Regs. Were this not so, then no property's "acquisition indebtedness" could ever be fixed. Under petitioner's theory, any mortgage payments, prepayments, or negotiated reductions of any sort in any following taxable year would reduce the 74 T.C. 1086">*1095 property's "acquisition indebtedness." We cannot accept such an interpretation.

Finally, we come to petitioner's claim that, if taxable, the trust 1980 U.S. Tax Ct. LEXIS 76">*93 is taxable at corporate rates. Section 511(b)(1) imposes on the unrelated business taxable income of every trust described in section 511(b)(2) a tax computed as provided in section 1(d)(now sec. 1(e)). Section 511(b)(2) applies the (b)(1) tax to any trust, with exception not here applicable, exempt from tax, and which, were it not for such exemption, would be subject to the rules described in subchapter J.

Apparently, petitioner's argument on this front centers around its reading of the trust regulations. Thus petitioner argues on brief that: "The Regulations under Subchapter J provide that Part 1 (trust rates) is not applicable to any organization which is to be classified for tax purposes as a trust under the classification rules of section 301.7701-2, -3, and -4 of this Chapter." While we were not provided with a citation, the sentence petitioner has attempted to paraphrase may be contained in section 1.641(a)(O)(a), Income Tax Regs. However, that sentence reads somewhat differently. There is an additional negative: "Part 1 has no application to any organization which is not to be classified for tax purposes as a trust under the classification rule of sections 301.7701-2, 301.7701-3 1980 U.S. Tax Ct. LEXIS 76">*94 and 301.7701-4 of this chapter." Thus, the trust-section regulations apply to trusts and do not apply to organizations which are not trusts.

Petitioner goes on to argue that: "The Regulations under section 301.7701-4 provide that the fact that any organization is technically cast in the trust form, by conveying property to trustees for the benefit of persons designated as beneficiaries, it will not change the real character of the organization if, by applying the principles set forth in section 301.7701-2 and -3, the organization more nearly resembles an association or partnership than a trust." The foregoing, obviously, merely states, or perhaps, begs the question here at issue. We find that the facts, here, do not justify taking the petitioner as a corporation. In so holding we are doing it a favor.

On the record before us, we find that the trust is operated for an exempt purpose and not as an organization with the objective of operating a business and dividing the gains therefrom. See sec. 301.7701-2(a)(1), Proced. & Admin. Regs. Consequently, it is 74 T.C. 1086">*1096 entitled to its exempt status. Thus, the trust is taxable as a trust, at trust rates, to the extent required by section 511 et seq., 1980 U.S. Tax Ct. LEXIS 76">*95 and this opinion.

The final dispute relates to respondent's claim for the section 6651(a) addition to tax for failure to file. ^{61980 U.S. Tax Ct. LEXIS 76">*96} The section 6651(a) addition applies in the case of any failure to file any return required under authority of subchapter A of chapter 61, other than part III thereof. Respondent bases his section 6651(a) claim upon petitioner's failure to file timely Form 990-T for the years before us. The requirement that Form 990-T be filed relates to every trust "described in section 501(c)(3) or (17), or section 401(a), which is otherwise exempt from tax under section 501(a), and which is subject to the tax imposed on unrelated business taxable income by section 511(b)(1)." Sec. 1.6012-3(a)(5), Income Tax Regs.

If, therefore, petitioner's failure to file the Forms 990-T required of it was not due to "reasonable cause," the section 6651(a) addition is due. Petitioner argues that it is not liable for the addition to tax because it relied upon the expert advice of its certified public accountant. Respondent argues that the addition is due because "at least Mr. Riback, one of the trustees, was aware of the problem involving debt finance income and chose not to file Forms 990-T."

Petitioner has the burden of proving that reasonable cause for the failure to file timely, exists. Ferrando v. United States, 245 F.2d 582">245 F.2d 582, 245 F.2d 582">589 (9th Cir. 1957); Latham Park Manor, Inc. v. Commissioner, 69 T.C. 199">69 T.C. 199, 69 T.C. 199">219 (1977), affd. in an unpublished opinion (4th Cir., Jan. 28, 1980). The general rule is that taxpayer's duty to file a return when due is a personal, nondelegable duty. Reliance upon an accountant to file is, thus, no excuse for late filing. 1980 U.S. Tax Ct. LEXIS 76">*97 See Logan Lumber Co. v. Commissioner, 365 F.2d 846">365 F.2d 846, 365 F.2d 846">854 (5th Cir. 1966), affg. on this issue a Memorandum Opinion of this Court. 245 F.2d 582">Ferrando v. United States, supra at 74 T.C. 1086">*1097 589. Reasonable cause for failure to file a timely return can be shown, however, by proof that the taxpayer acted in good-faith reliance upon the advice of an accountant to whom all the relevant facts were revealed ( Paula Construction Co. v. Commissioner, 58 T.C. 1055">58 T.C. 1055, 58 T.C. 1055">1061 (1972), affd. per curiam 474 F.2d 1345">474 F.2d 1345 (5th Cir. 1973)), and that petitioner relied upon the accountant's advice with respect to a question of tax law. West Coast Ice Co. v. Commissioner, 49 T.C. 345">49 T.C. 345, 49 T.C. 345">351 (1968).

Petitioner's accountant testified. We found him to be generally knowledgeable in the tax law. He was apprised of all the facts. While we are satisfied with our conclusion that petitioner is liable for the tax on unrelated business taxable income, we are not prepared to say that the accountant's opinion to the contrary was a product of negligence or willful disregard of the law. Further, while the advice was erroneous on this point, we do not think it was so clearly wrong as to permit on inference that petitioner, in relying upon that 1980 U.S. Tax Ct. LEXIS 76">*98 advice, was negligent or that it willfully disregarded the law. See Coldwater Seafood Corp. v. Commissioner, 69 T.C. 966">69 T.C. 966, 69 T.C. 966">974 (1978).

Decision will be entered for the respondent.