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Education Expense Research Lauren Smith From: Tax Research Paper

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...

Singleton-Clarke v. Commissioner, T.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 not a job requirement for the initial position or for subsequent promotions, the…

Sources used in this document:
Singleton-Clarke v. Commissioner, T.C. Summ. Op. 2009-182 (2009) is a very similar case to yours. She is an RN with over 20 years of experience who worked in various capacities, including quality control coordinator. Her case was denied as above. Even though the MBA did not qualify the petitioner for a new skill or trade and did improve the skill set, the education expenses being deducted as business expenses were still denied because the same tasks and activities were being performed before and after the MBA. So, when the IRS denied the deduction, the tax court upheld the IRS decision.

Conclusion

Your case is very similar to the Singleton-Clarke v. Commissioner, T.C. Summ. Op. 2009-182 (2009), causing an extreme chance of denial. The tasks and activities that were being performed before obtaining the MBA are the same tasks and activities that are being performed after the MBA. The MBA has not been a job requirement because there were positions served with the same tasks and activities before and after the MBA. If the education expenses are deducted as business employee expenses, the will more than likely be denied, causing a requirement to amend the tax return.
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