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Since you did not establish that the business
expense shown on your tax return was paid or incurred
during the taxable year and that the expense was
ordinary and necessary to your business, we have
disallowed the amount shown.
Respondent issued a supplemental report for the notice of
deficiency but continued to disallow this deduction in full.
OPINION
Deductions are a matter of legislative grace, and
petitioners have the burden of showing that they are entitled to
any deduction claimed.7 Rule 142(a); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934).
Section 162(a) allows a deduction for all ordinary and
necessary expenses incurred in carrying on a trade or business.
Although this section does not explicitly mention expenditures
for education, the regulations provide an objective test for
determining whether such expenditures are deductible.8 Diaz v.
Commissioner, 70 T.C. 1067, 1072-1073 (1978). Education expenses
are considered ordinary and necessary business expenses if the
education maintains or improves skills required by the taxpayer
in his employment or meets the express requirements of an
7 The parties do not argue that sec. 7491(a) is applicable.
8 The education expense regulation here relevant was
promulgated in 1967. It replaced a regulation that had been
promulgated in 1958. The 1958 regulation embodied a subjective
“primary purpose” test. The 1967 regulation replaced this with
an objective test, in particular, the qualification-for-a-new-
trade-or-business test embodied in sec. 1.162-5(b)(3), Income Tax
Regs. Taubman v. Commissioner, 60 T.C. 814, 817-819 (1973).
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Last modified: May 25, 2011