Education Expense Research Lauren Smith From: Tax Research Paper

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Education Expense Research

Lauren Smith

From: Tax Accountant, CPA

Education Expenses claimed as Business Expenses

Facts

You incurred $15,000 in education expenses during the tax year in the course of earning an MBA from a local university. You want to deduct these expenses on your personal tax return as an employee business expense because your employer does not have an education expense reimbursement program.

The issue is (1) whether the education expenses qualify as education expenses and (2) whether they qualify to be deducted as a business expense on your tax return for this year.

Rule

The MBA is not a prerequisite if the petitioner was hired with the skills of clinical or risk management experience; credentials the petitioner already possessed. The MBA may have improved petitioner's skills set, but objectively, petitioner was performing the tasks and activities of the trade or business before commencing the MBA. Singleton-Clarke v. Commissioner, T.

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C. Summ. Op. 2009-182 (2009). Publication 970 explains what conditions education expenses qualify as business expense.

Analysis

Court rulings have widely differed from case to case concerning the deductibility of education expenses as business employee expenses, particularly where the MBA is concerned. Daniel R. Allemier v. Comm'r (TC Memo 2005-207) allowed. Galligan (TC Memo 2002-150) denied. McEuen (TC Memo 2004-107) denied. Sherman (TC Memo 1977-301) allowed. Schneider (TC Memo 1983-753) denied. Glenn v. Comm'r (Dec 32, 613) 62 T.C. 270.275 (1974) denied. The primary emphasis in these court rulings has been whether the education is required by the employer and whether the education qualified the petitioner for a new trade or business. The case of Allemier v. Comm'r (TC Memo 2005-207) was allowed based on the facts that Allemier was employed in the same business, employer, before, during, and after obtaining the MBA, the MBA was.....

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