In Uncategorized on 12/18/2017 at 16:35

Steve Pemberton, 2017 T. C. Sum. Op. 91, filed 12/18/17, is definitely “a man of St. John’s”, that is, St. John’s College, Oxford University. But I cannot include the remainder of the famous limerick in a blogpost meant for family reading.

Steve was taking college courses in a local community college back in the USA whilst still in high school, and though he transferred to a four-year never received a degree therefrom.

Instead, Steve hopped the Pond and ran up a bunch of charges on his St. John’s “battel statement” in pursuit of his UK BA in jurisprudence which he wants to deduct as educational expenses for his tutoring employment and self-employment occupations.

Ex-CSTJ Panuthos explains the “battel statement.” “It appears that ‘battel statements’ is a term used by St. John’s for billing statements.” 2017 T. C. Sum. Op. 91, at p. 7. Footnote 8.

Steve missed the cut for a UK work visa to pursue his legal career, but he saved every scrap of paper to prove his jurisprudential batteling. And man, I remember law school on this side of the Atlantic: “battle” doesn’t begin to describe it.

Steve came back to the USA and tutored, both freelance and as an employee. “Petitioner provided tutoring services for students preparing for the following examinations: (1) SAT exam; (2) ACT exam; (3) graduate record examination (GRE); (4) graduate management admission test (GMAT); (5) law school admission test (LSAT); and (6) advanced placement (AP) exams in the subjects of history and economics.” 2017 T. C. Sum. Op. 91, at pp. 4-5.

Steve never told his employers that he had the UK BA.

Now while educational expenses incurred to sharpen one’s skills are deductible, they must be incurred because appropriate or helpful, and reasonable in amount. Steve claimed that abstract reasoning was necessary for the exams for which he was tutoring.

“Petitioner has neither asserted nor established that obtaining a jurisprudence degree in England is of common or frequent occurrence within either the test preparation tutoring industry or the test proctoring industry, and thus has not established that the expense is reasonable.

“Further, to the extent that petitioner’s jurisprudence degree may have been helpful for his work as a tutor, he has not met the burden of proving that the education expenses were reasonable in relation to their purpose.  Petitioner earned approximately $48,000 in income as a tutor in [year at issue] and seeks to deduct $31,812 in education expenses.  Petitioner asserts that critical reasoning skills relate to the LSAT and GMAT exams, but it is unclear how much of his time was spent tutoring students for those two exams compared to the other five exams.”  2017 T. C. Sum. Op. 91, at pp. 11-12. (Citations and footnotes omitted).

If Steve needed courses in abstract reasoning, he could have taken them at an onshore institution, like the community college or the four-year.

Steve strikes out on his claim for the American Opportunity tax credit, because he never got a post-secondary degree. He transferred from the community college to the four-year, but never got his degree, so his Yank at Oxford gambit craters.

But even IRS concedes he might get the Lifetime Learning Credit.

“The Lifetime Learning Credit is less restrictive, providing credit not only for
courses that are part of a postsecondary course of study but also for courses taken
to acquire or improve an eligible student’s job skills. Sec. 25A(c)(2)(B). The
Lifetime Learning Credit provides a credit equal to 20% of a taxpayer’s first
$10,000 in eligible tuition and related expenses for each tax year after 2002. Id.
para. (1). The statute defines ‘qualified tuition and related expenses’ to include
tuition and fees at an eligible educational institution that the taxpayer, the
taxpayer’s spouse, or the taxpayer’s dependent attends, as well as course materials. Id. subsecs. (f)(1), (i)(3). Unlike the American Opportunity Credit, the Lifetime Learning Credit is not limited as ‘to the number of taxable years that a taxpayer
may claim * * * [it] with respect to any student.’ Sec. 1.25A-4(b), Income Tax

“Petitioner’s courses at St. John’s were part of a postsecondary course of
study. We find that petitioner paid the following qualified tuition and related
expenses to St. John’s in 2013: (1) the “College Fee …” of £6,465 and (2) the “University Fee …” of £13,860.15 Therefore, we conclude that petitioner is entitled to a Lifetime Learning Credit equal to 20% of the first $10,000 in eligible tuition and related expenses he paid in 2013. See sec. 25A(c), (f)(1), (i)(3); sec. 1.25A-4(b), Income Tax Regs.” 2017 T. C. Memo. 91. at pp. 17-18. (Footnote omitted, but it says neither Steve nor IRS provided exchange rate for the year at issue  for GBP-to-USD, so Rule 155.).

Steve had great records, and those battel statements must have wowed ex-CSTJ Panuthos. Steve, notwithstanding his UK law degree, wasn’t a tax expert. So Steve ducks both the negligence and the five-and-ten chops.

It helps if you’re a man of St. John’s.

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