Bouchard v. Commissioner

MEMORANDUM FINDINGS OF FACT AND OPINION

DAWSON, Judge: This case was assigned to and heard by Special Trial Judge Murray H. Falk pursuant to the provisions of section 7456(c) of the Internal Revenue Code¹ and General Order No. 5 of this Court. ² The Court agrees with and adopts Special Trial Judge Falk's report which is set forth below.

*168 OPINION OF THE SPECIAL TRIAL JUDGE

FALK, Special Trial Judge: Respondent determined a deficiency of $1,054.32 in petitioner's 1973 federal income tax. Prior to trial, the parties settled several issues raised by the pleadings. The sole question presented for our decision is whether petitioners are entitled to deduct, under section 162(a), certain education expenses.

FINDINGS OF FACT

Some of the facts have been stipulated, and those facts are so found.

Petitioners filed their joint 1973 federal income tax return with the Internal Revenue Service Center at Andover, Massachusetts. At the time the petition herein was filed, they resided in Acton, Massachusetts.

Petitioner Kenneth G. Bouchard ³ graduated from Tufts University in 1967 with a bachelor of science degree in mathematics and physics. He received a master's degree in engineering and applied science from Yale University in 1968. Beginning in the fall of 1972, petitioner was a full member of the faculty at Bentley College in Waltham, Massachusetts (hereinafter referred to as Bentley), and taught mathematics. In order to obtain tenure at Bentley, petitioner was required to have a doctoral degree. In the fall*169 of 1973, he enrolled in a full-time program at Boston College School of Law which would lead to a Juris Doctor degree. He testified that he undertook this program to meet Bentley's requirement for tenure and to go from teaching mathematics at Bentley to teaching law at Bentley. Respondent appears to accept this statement of petitioner's intent.

Bentley is a four-year institution with a program of studies oriented to the business field. It offers courses in business law, and some of those courses are taught by lawyers. Petitioner remained on the faculty at Bentley full time for the three years during which he pursued his law studies, also full time. In June 1976, he graduated from law school. He passed the New Hampshire bar examination and secured a position in a Manchester, New Hampshire, law firm, which he currently holds. Petitioner was accepted in the L.L.M. program at Harvard University School of Law, but did not enroll there because he wanted practical legal experience.

*170 On his 1973 federal income tax return, petitioner deducted his expenses of attending law school in the amount of $2,844 that year. Respondent disallowed the deduction on the grounds that the expenditures were made for education which was part of a program of study being pursued by petitioner which would lead to qualifying him in a new trade or business.

OPINION

Section 162(a) allows as a deduction "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business." Section 1.162-5(a), Income Tax Regs., permits a deduction for expenses incurred for education which either "(1) maintains or improves skills required by the individual in his employment or other trade or business, or (2) meets the express requirements of the individual's employer * * * imposed as a condition to the retention by the individual of an established employment relationship, status, or rate of compensation." Whether education is undertaken to maintain or improve the taxpayer's skills or to meet his or her employer's requirements, the expenses are not deductible, however, if they are incurred for education which is part of a program of study being pursued*171 by the taxpayer which will lead to qualifying him or her in a new trade or business. Sec. 1.162-5(b)(1) and (3), Income Tax Regs.⁴

*172 Petitioner does not deny that the expenses in issue here were incurred for education which was part of a program of study being pursued by him which, objectively, would lead to qualifying him in a new trade or business in the sense that at its conclusion he would be eligible to become a member of the bar. ⁵ Nor does he challenge the validity of the applicable regulations. ⁶ Indeed, he bases his entire argument upon the language which relates specifically to teaching and related duties in section 1.162-5(b)(3), Income Tax Regs. He contends that inasmuch as he incurred the expenses in order to go from teaching mathematics at Bentley to teaching law at Bentley, his change of duties should not be considered to constitute a new trade or business. We do not agree.

*173 One failing of petitioner's argument is that it neglects to take into account that section 1.162-5(b)(3), Income Tax Regs., neither begins nor ends with the words "all teaching and related duties shall be considered to involve the same general type of work." They are preceded by a statement of principle -- that expenses for education which is part of a program of study being pursued by an individual which will lead to qualifying him or her in a new trade or business are not deductible -- and they are followed by examples by which the Secretary of the Treasury supplies some of the dimensions, color, feel, and smell of the living thought which the regulations are intended to convey. The examples are worded precisely and they are particularly informative. Example (a) is, "Elementary to secondary school classroom teacher." It is not kindergarten teacher to college professor, for example. Example (b) is, "Classroom teacher in one subject (such as mathematics) to classroom teacher in another subject (such as science)." [Emphasis supplied.] It is not classroom teacher in one subject (such as home economics) to classroom teacher in another subject (such as neurosurgery*174 ). Petitioner's argument that in order to find in his favor we need only substitute the word "law" for "science" within the second parentheses of example (b) begs the question. More to the point, we believe, is that petitioner is able to practice law, a profession new to him and for which during the year in question he was engaged in becoming qualified and incurring the expenses here in question in order to do so. We do not believe that in attempting to make clear his position relative to teachers under the regulations the Secretary renounced the general principle as it applies to them. ⁷

*175 Petitioner's argument contains another and more basic flaw. He argues, in effect, for application of a subjective test with respect to the deductibility of his law school expenses. He wants their deductibility to turn on his intent; that is, on how he intended to utilize his law education. Under section 1.162-5, Income Tax Regs., as it existed prior to May 1, 1967, a taxpayer's motives for securing an education leading to qualification in a new trade or business were relevant. A taxpayer could deduct such expenses, even if they qualified him or her in a new trade or business, if the taxpayer's primary purpose was to add to his or her equipment in carrying on a preexisting vocation, Greenberg v. Commissioner,367 F.2d 663, 666 (1st Cir. 1966), or to meet requirements imposed as a condition to the retention of his or her salary, status, or employment. See, e.g., Welsh v. United States,329 F.2d 145 (6th Cir. 1964). Petitioner requests that just such a rule be applied in his case and, indeed, many of the cases which he cites in support of his position arose under those old regulations. However, it is precisely that subjective standard which the*176 present regulations were designed to eliminate -- and the cases arising under the old regulations are valueless as precedent here. Weiler v. Commissioner,54 T.C. 398, 402 (1970); Dinsmore v. Commissioner,T.C. Memo. 1977-248; Gates v. Commissioner,T.C. Memo. 1977-236. Looked at objectively, the expenses in issue were incurred by petitioner for education which was part of a program of study being pursued by him which would lead to his becoming a lawyer. The trade or business of lawyer is clearly a new trade or business to him.

For the foregoing reasons, we sustain respondent's determination on this issue. See Bodley v. Commissioner,56 T.C. 1357 (1971); Wright v. Commissioner,T.C. Memo. 1973-8.

* * *

In accordance with the foregoing, and to reflect the agreement of the parties as to the other issues,

Decision will be entered under Rule 155.