Ronald Weiszmann (Weiszmann v. Commissioner, U.S. Tax Court) graduated from college as an engineer. Not wishing to be employed as an engineer, Mr. Weiszmann took a job with Marathon Oil Company as a patent trainee with the understanding that he would be required to attend law school on a full-time basis while working for Marathon part time during most of the school year and full time during vacation periods. His agreement with Marathon was that upon graduation he would no longer work as a patent trainee, but that he would be promoted to a patent attorney with Marathon or that he would seek employment outside of Marathon if Marathon had no job openings as a patent attorney. After graduating from law school, Mr. Weiszmann obtained employment with Chevron Research Company as a patent attorney.
As a graduate student, Weiszmann would not be eligible to claim the American Opportunity Tax Credit which is only available to undergraduate students. While graduate students can claim the Lifetime Learning Tax Credit, higher income graduate students may find that their income precludes them from claiming the credit. In such cases, these students may be eligible to claim the educational expenses as a deduction. Weiszmann deducted the cost of his law school tuition and fee payments as ordinary and necessary business expenses on his personal income tax return.
The IRS disallowed the deduction and the case went to Tax Court. The taxpayer, citing IRS regulations, argued that these costs were deductible because it was a requirement of his employer to maintain and improve his job skills and as a condition of his employment; he was required to earn a law degree. The IRS cited its regulations and case law and argued that the taxpayer’s education was not undertaken for the primary purpose of maintaining his temporary job as a patent trainee, but rather to attain a new position. The Court agreed with the IRS that the taxpayer’s pursuit of a law degree was not for the purpose of maintaining or improving his skills as a part-time patent trainee, but to obtain full-time employment as a patent attorney. Thus such educational expenses were considered personal expenses that were not tax deductible.
While Mr. Weiszmann may be a very good patent attorney, hopefully he learned that his law degree did not make him a tax attorney.
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