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Thursday, August 19, 2004

Tax Court Denies Deduction for M.B.A. Expenses

Thursday, August 19, 2004

Interesting Wall Street Journal article on recent Tax Court cases that have made it difficult for M.B.A. students to deduct their costs as education expenses under § 162:

• In McEuen v. Commissioner, T.C. Summary Opinion 2004-107 (8/3/04), the court held that the M.B.A. degree (from Northwestern) qualified the taxpayer for a new trade or business and was a requirement of the job she took after graduation.
• In Zhang v. Commssioner, T.C. Summary Opinion 2003-58 (5/20/03), the court held that the M.B.A. degree (from MIT) merely improved the taxpayer's general understanding and competency rather than specific skills needed in his trade or business.
Robert Willens of Lehman Brothers is quoted in the story as saying that these cases virtually foreclose a deduction for M.B.A. expenses:
"That's the scary part of the [McEuen] decision. An M.B.A. is always going to qualify you to do something beyond what you're doing.... Quite frankly, it's pretty much over. It's going to be virtually impossible to take a deduction for education expenses."

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Comments

How about LL.M.'s? Is going from a business lawyer to a tax specialist a new trade or business?

Posted by: Jack Bogdanski | Aug 19, 2004 7:19:14 PM

I wonder whether the payment of MBA fees for an employee by their employer give rise to taxable income in the employee's hands, & to a deduction on the employer's hands?

In the UK, both "cherries" are sometimes available (ss 312 & 250 ITEPA 2003, Silva v Charnock [2002] STC (SCD) 426).

Posted by: Tom Holbrook | Aug 20, 2004 5:59:36 AM

I wonder whether the payment of MBA fees for an employee by their employer give rise to taxable income in the employee's hands, & to a deduction on the employer's hands?

In the UK, both "cherries" are sometimes available (ss 312 & 250 ITEPA 2003, Silva v Charnock [2002] STC (SCD) 426).

Posted by: Tom Holbrook | Aug 20, 2004 6:00:13 AM