Santos v. Commissioner, T.C. Memo. 2016-100 (May 17, 2016):
Santos earned a bachelor’s degree in accounting [from Indiana University (Bloomington)]. In 1990, he began working as a tax-return preparer. In 1995, he became an “enrolled agent”, a person authorized to represent taxpayers before the IRS. In 1996, Santos earned a master’s degree in taxation [from San Francisco State University]. He began offering other services to his clients, including accounting and financial planning.
At some point Santos enrolled in law school [John F. Kennedy University College of Law]. He was attending law school in 2010. During that year, he paid tuition and fees of $20,275. He graduated from law school in 2011. In July 2011, he took the California bar examination. ... In December 2014, he was admitted to the State Bar of California and admitted to practice before the U.S. Tax Court.
In 2015, Santos started a law firm, Santos and Santos Law Offices, with his father. The firm performs multiple services including legal representation, tax planning, accounting, and financial planning. ...
Whether Santos is entitled to a deduction of $20,275 for his law school tuition and fees remains at issue. ...
Section 1.162-5(b)(1), Income Tax Regs., provides that two types of educational expenses are not deductible. One type is expenses for education that is part of a program of study which will lead to qualifying the taxpayer for a new trade or business. ... The regulation gives the following example of the expenses of this type: “A, a self-employed individual practicing a profession other than law, for example, engineering, accounting, etc., attends law school at night and after completing his law school studies receives a bachelor of laws degree. The expenditures made by A in attending law school are nondeductible because this course of study qualifies him for a new trade or business.” Id. subdiv. (ii), Example (1). Courts have held that a law degree qualifies a law student for a new trade or business (the business of being an attorney) and that thus the cost of a law degree is a nondeductible educational expense as set forth in the regulation. ... Therefore Santos’s law school tuition and fees are not deductible.
Santos challenges the validity of the regulation in question. ... Shortly after the Treasury promulgated the regulation, the Tax Court held that the regulation was valid, and the Court of Appeals for the Ninth Circuit affirmed. Weiszmann v. Commissioner, 52 T.C. 1106, 1111-1112 (1969), aff’d, 443 F.2d 29 (9th Cir. 1971). ... Because binding precedent holds that the regulation is valid, we decline to reconsider the validity of section 1.162-5, Income Tax Regs.