Will M. McEuen III and Tracy L. McEuen - Page 3

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               Respondent determined a deficiency in petitioners' 1998                
          Federal income tax of $2,558.  The parties agree that respondent            
          correctly determined that petitioners have unreported income of             
          $7 from the refund of State income tax for the prior year.                  
               The issue remaining for decision is whether petitioners are            
          entitled to deduct on Schedule A, Itemized Deductions,                      
          educational expenses of $20,317.  Respondent did not challenge              
          petitioners' entitlement to additional itemized deductions of               
          $3,794.  Because the amount of unchallenged itemized deductions             
          is less than the standard deduction, respondent allowed the                 
          standard deduction in the deficiency determination.                         
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and the exhibits received in evidence              
          are incorporated herein by reference.  At the time the petition             
          was filed, petitioners resided in York, South Carolina.                     
                                     Background                                       
               Tracy L. McEuen (petitioner) earned a B.A. degree, with                
          distinction, in mathematics and economics, from Indiana                     
          University in 1992 and began working at Merrill Lynch (M-L) the             
          same year.  Petitioner was employed as a "financial analyst" at             
          M-L.  Financial analysts could remain at M-L for a maximum of 3             
          years, as did petitioner.  To become an "associate" at M-L, a               
          candidate was required to have an M.B.A. degree.  Petitioner left           
          M-L in 1995.                                                                






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