In Uncategorized on 08/02/2016 at 17:24

The section 162 ordinary-and-necessaries for those seeking education unreimbursed employee business expenses require the seeker to be presently engaged in a trade or business while seeking education to be more and better presently engaged.

But what happens when the seeker loses the job, while still being educated?

Judge Nega has an answer for that, and gives us a useful look at how to evaluate the facts, in Alex Kopaigora and Elizabeth S. Kopaigora, 2016 T. C. Sum. Op. 35, filed 8/2/16.

Alex was a manager for Marriott, running the show at their hostellerie at LAX. While so running, he was taking an executive MBA at BYU. Alex documented all his expenses, and IRS has no problem with the documentation. IRS claims that Alex lost his job with Marriott (which Judge Nega says was unjustified, but Alex nonetheless was out of a job). And IRS also claims that the executive MBA fitted him for a different job, even though Alex got a new job doing what he was doing at his old job.

Judge Nega: “A taxpayer may be engaged in a trade or business, although unemployed, if the taxpayer was previously involved in and actively sought to continue in that trade or business while pursuing a defined degree program related to his or her line of work. Furner v. Commissioner, 393 F.2d 292, 294 (7th Cir. 1968) (teacher continued to carry on her trade or business while simultaneously pursuing a graduate degree program and actively seeking employment in her line of work); rev’g 47 T.C. 165 (1966); see also Picknally v. Commissioner, T.C. Memo. 1977-321; Sherman v. Commissioner, T.C. Memo. 1977-301.” 2016 T. C. Sum. Op. 35, at p. 6.

As for the executive MBA fitting Alex for a new line of work, Judge Nega rejects that.

“When evaluating whether education expenses qualify the taxpayer for a new trade or business, the Court uses a ‘commonsense approach’ comparing ‘the types of tasks and activities which the taxpayer was qualified to perform before the acquisition of a particular title or degree, and those which he is qualified to perform afterwards.’” 2016 T. C. Sum. Op. 35, at p. 6. (Citations omitted, but get them for your next memo of law).

The aim is to maintain or improve skills, and you can deduct travel, meals and lodging expenses if you go on the road to education.

Judge Nega went over Alex’s courseload. “The courses petitioner chose to fulfill his degree requirements did not qualify him for a new trade or business because he was not qualified to perform new tasks or activities with the conferral of his degree. Instead, petitioner chose courses in a line of study that he was familiar with–management and finance. Even though petitioner took a few courses that were outside this scope, we do not believe that these courses by themselves could have prepared him to enter a new trade or business.” 2016 T. C. Sum. Op. 35, at p. 9.

And while unemployed, Alex kept on studying and looking for work. His new job was in the same line as the old, and IRS didn’t show that the executive MBA was required for the new job.

IRS waits until it’s brief time before claiming that Alex deducted some expenses in the wrong year, and while that might ordinarily be off the table as an ambush, Alex admitted he got it wrong, after Judge Nega reopened the record to let him show he hadn’t.



  1. […] Coverage Lew Taishoff has a piece entitled “Presently Engaged While Unemployed”.  It also appears that Mr. Kopaigora was bitten by the blogging bug at some point, but he seems to […]


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