The Section 162 ordinary-and-necessary business expense deduction pays off for Yishi Zuo, 5716-19S, filed 7/26/21, even though Yishi was sometimes entrepreneuring and sometimes not, as he pursued his MIT MBA.

Yishi got his BBA from UC Berkeley, and went at entrepreneuring with a vim after he left a two-year hitch at Goldman Sachs. Internet start-ups flowed from his inventive mind, and while they mostly cratered, Yishi forged gamely on.

STJ Peter Panuthos: “We have held that a taxpayer may deduct the cost of an MBA degree as an unreimbursed employee expense if his studies improve on a preexisting skill such as management skills. A taxpayer is in the same trade or business if he is still in the same general field and still using the same skills; for example, moving from one position to another that also uses management, administrative, and planning skills.” Transcript, at p. 8. (Citations omitted; see also my blogpost “Presently Engaged While Unemployed,” 8/2/16).

After deciding that there is no certification, qualification, or licensure for “entrepreneur,” with the obligatory dictionary chaw over the word, STJ Panuthos greenlights Yoshi. He was honing skills, not entering a new trade or business.

“We are satisfied that petitioner was qualified in the trade or business of being an entrepreneur before enrolling in the MBA program at MIT on the basis of the time and money he had previously spent founding, organizing, and assuming the financial risks of his two entrepreneurial ventures….

“Further, petitioner had likely developed significant business acumen that was useful in pursuing these ventures while obtaining an undergraduate degree in business administration and working as an investment analyst… Petitioner continued to develop his entrepreneurial skillset when he helped found and served as the CEO of DB….” Transcript, at pp. 9-10. (Name omitted).

Finally, although Yishi’s entrepreneuring while at MIT was a wee bit sporadic,he testifies that he continued his entrepreneurial ventures both during his temporary unemployment over the summer, and concurrently with his MBA education. STJ Panuthos says that’s OK.

“A taxpayer may be engaged in a trade or business, although not working, if he 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. The taxpayer must clearly intend to seek employment in the same trade or business.” Transcript, at p. 10.

Yishi fills the bill.