Funny, I was taught to regard it as a profession. But I’m old-fashioned that way.

Anyway, Emmanuel A. Santos, 2016 T. C. Memo. 100, filed 5/17/16, finds out from Judge Morrison that his law school tuition and fees aren’t deductible, because being a lawyer is a new trade or business.

EA was an EA, having started as an accountant, passed the SEE and then got a MST. Deciding to go for the full boat, he entered law school and ran up a $20K tuition and fees bill. His write-off thereof falls foul of Reg. Section 1.162-5(b)(3)(ii) Example 1:

“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.”

Well, EA went to law school, so what do you learn? When a Tax Reg is against you, play the Chevron-Mayo gambit, Altera variation.

Judge Morrison isn’t buying.

EA argues Treasury didn’t listen to the public comments when they published the Reg.

The Reg was published in 1967, and EA hasn’t got anything to show that Treasury didn’t listen to the comments. Besides, EA didn’t raise the commentary issue until his post-trial brief.

“As a result, neither the trial record nor the court papers in this case contain any information regarding the public’s comments to the regulation in question.  Without knowing what the public comments were, it seems difficult, if not impossible, for the Court to evaluate the adequacy of the Treasury Department’s response to the public comments when it promulgated section 1.162-5, Income Tax Regs.” 2016 T. C. Memo. 100, at p. 9.

Moreover, the Reg was sustained in Tax Court forty-five years ago, and Ninth Circuit just said it approved Tax Court’s decision, without going into the public comments. And EA is in CA, so he’s Golsenized.

As for Mayo and Altera, true, they came later, and also true, “(W)e recognize that the tests for determining whether a regulation is valid today are different….  And we recognize that precedent may lose its force when the underlying law upon which the precedent was based has changed. However, we see no such change that would justify deviating from…precedent.” 2016 T. C. Memo. 100, at p. 7. (Citations omitted.)

The Reg comported with the statute then and now. And Altera dealt with IRS wild-carding in a new test independent of statute, regulation or precedent. See my blogpost “Sixteen Lawyers – Part Deux,” 7/27/15.

I’ll give EA a Taishoff “good try, third class.”