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Sunday, December 29, 2013

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

MBAHart v. Commissioner, T.C. Memo. 2013- 289 (Dec. 23, 2013):

Petitioner husband graduated from college in 2007. In January 2009 he enrolled in an M.B.A. program with a concentration in finance at Rollins College. ... On Schedule A, Itemized Deductions, for their 2009 joint tax return, petitioners reported an itemized deduction of $18,600 on line 21, unreimbursed employee expenses. ... Respondent disallowed this deduction as an unreimbursed employee business expense. ...

Petitioner husband contends that he was in the business of selling pharmaceuticals and that the M.B.A. classes he took enabled him to obtain employment in 2009. Respondent contends that petitioner husband was not established in a trade or business in 2009 and that his employers did not require him to enroll in an M.B.A. program. ...

Implicit in both section 162 and the regulations is that the taxpayer must be established in a trade or business before any expenses are deductible. ... Respondent contends petitioner husband was not established in a trade or business before entering the M.B.A. program. Petitioner husband contends that he was in a trade or business because he focused on the selling of cancer pharmaceuticals, which is a specialized field. After reviewing the record in this case, and despite an effective pro se representation, we find that petitioner husband was not established in a trade or business before enrolling in the M.B.A. program, and therefore, his expenses are not deductible.

Petitioner husband graduated from college only two years before starting his M.B.A. program. ... Carrying on a trade or business has been defined as entailing considerable continuous and regular activity. ... Petitioner husband's employment in the cancer pharmaceutical sales field was not continuous, and there is no evidence in the record that petitioner was carrying on a trade or business before he enrolled in the M.B.A. program. Because we conclude that petitioner husband was not carrying on a trade or business, we need not consider whether petitioner husband's M.B.A. qualified him for a new trade or business.

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