Richard Michael Managan - Page 6




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               Educational costs incurred to maintain or improve skills               
          required by the individual’s trade or business are deductible as            
          ordinary and necessary business expenses, unless they are                   
          incurred to meet minimum educational requirements for a                     
          taxpayer’s trade or business or qualify the individual in a new             
          trade or business.  Sec. 1.162-5(a) and (b), Income Tax Regs.               
               Prior to taking her 1995 and 1996 courses at UCF, Mrs.                 
          Managan performed environmental audits for MRG.  The chemistry              
          degree, however, qualified her for a new trade or business.                 
          Indeed, she used the degree to obtain employment in a laboratory,           
          in 1997.                                                                    
               We need not address the burden of proof relating to this               
          issue because the documentary evidence and Mrs. Managan’s                   
          testimony established that Mrs. Managan’s UCF classes qualified             
          her for a new trade or business.  Accordingly, petitioner is not            
          entitled to deduct Mrs. Managan’s 1995 and 1996 educational                 
          expenses.                                                                   
          III.  The Boat                                                              
               Respondent determined that petitioner is required to                   
          capitalize legal fees paid to obtain a lobster fishing license              
          from Honduras and expenses (i.e., cost of utilities and moving              
          the partially completed vessel) relating to building the Dinky              
          Dau.  Petitioner contends that these are deductible business                
          expenses.                                                                   






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