Propositions to be proven to take a deduction under IRC section 162(a):
-Must be expenditures for education (including research undertaken as part of an educational program)
-the education must:
- maintain or improve skills required by taxpayer in their employment or other trade or business OR
-meet the express requirements of the taxpayers employer, or the requirements of applicable law or regulations, imposed as a condition to the retention by the taxpayer of an established employment relationship, status, or rate of compensation
-the education must not be: -education for Minimum education requirements, or -education for qualification for a new trade or business

I. Citation: Rev. Rul. 74-78, 1974-1 C.B. 44 II. Facts: The taxpayer, a dentist engaged in general dental practice, returned to dental school for postgraduate study in orthodontics. He attended dental school on a full-time basis continuing his dental practice on a part-time basis. Upon completion of his postgraduate training he became an orthodontist and limited his practice to orthodontic patients. III. Issues: 1. Whether the postgraduate study in orthodontics by a practicing dentist is considered education to maintain or improve the taxpayer in his trade of dentistry?
2. Whether orthodontics is considered to be in the same “trade or business” as dentistry? IV. Reasoning: Reasoning follows logic in section 1.162-5(3)(ii), Example (4), where the taxpayer in the example is in the trade or business of psychiatry. In the example, the taxpayer is allowed a deduction for expenses incurred in engaging in education of psychoanalysis and this education is considered to maintain or improve skills required by them in their field of psychiatry. V. Holding: By applying the logic used in the example, the expenditures by taxpayer in the current case for postgraduate studies in orthodontics were in connection with improving his skills as a dentist. Accordingly, such expenditures are deductible as ordinary and necessary expenditures under section 162 of the Code. VI. Substantive principle of law: a. Narrowly stated: If a taxpayer who is currently engaged in dentistry incurs expenditures for postgraduate studies in orthodontics, such expenditures are considered to maintain or improve skills required by him in dentistry and does not qualify him for a new trade or business. b. Abstractly stated: Taxpayers who incur expenses for education that does not qualify them for a new trade or business are considered to maintain or improve skills required by their current trade or business.

I. Citation: Rev. Rul. 72-450, 1972-2 C.B. 89. II. Facts: A taxpayer who is currently an US marine corps artillery officer takes a leave to attend law school and to be admitted to a BAR. His function during summer vacations will be substantially the same as a military lawyer of his rank and experience. After finishing law school and completing the bar, the taxpayer will return to full-time active duty as both a legal officer and artillery officer. III. Issues:
1. Whether the expenses made in connection with law school are considered to ‘maintain or improve his skills’ or ‘qualify him for a new trade or business?’
2. Whether the expenses made in connection with preparing and taking the bar examination are considered to ‘maintain or improve his skills’ or ‘qualify him for a new trade or business?’
3. Whether the educational expenditures are considered deductible under section 162 as ordinary and necessary expenses or considered nondeductible under section 262 as personal, living, or family expenses?

IV. Reasoning: [1] To explain their position, the IRS listed two examples specifically relating to law school expenses directly from section 1.162-5(b)(3)(ii). The first example says simply that if a self-employed individual practicing a profession other than law incurs expenses in connection with law school to obtain a law degree, that expense is nondeductible because it qualifies him for a new trade or business.
The second example repeats the same logic and holding, but in the case of an individual in employment status rather than self employed.
[2] To address the expenses in connection with the bar examination the IRS cited Rev. Rul. 69-292, C.B. 1969-1, 84 in which it is help that expenses incurred by a taxpayer in taking prep course work to take a state exam leading to a certificate are considered nondeductible personal; expenditures. V. Holding: The expenses for law school and admittance to a bar will qualify the taxpayer for a new trade or business and are nondeductible under section 262. VI. Substantive principle of law:
Narrowly stated: A taxpayer who is a us marine artillery officer, who takes a leave and incurs expenses in connection with law school and admittance to a state bar, and then returns to duty as a legal officer and an artillery officer; those expenses will qualify him for a new trade or business and are nondeductible under section 262.
Abstractly stated: A taxpayer who works within their profession who incurs expenses relating to a degree outside of their profession, shall be considered incurring expenses that qualify him for a new trade or business and such expenses are nondeductible.

I. Citation: Morton S. Taubman, 60, TC 814 (1973) II. Facts: The Taxpayer (the petitioner), who is a CPA and working as an accountant for a national accounting firm, claimed a deduction for the 1969 tax year for expenses made in connection with obtaining his bachelor of law degree from University of Baltimore. The taxpayer, in 1970, passed the Maryland bar exam and became a member of the Maryland Bar. The IRS (the respondent) claimed that the expenses are disallowed as a deduction relying on section 1.162-5 of the regulation. The petitioner argued that in 1966 when he entered law school, the applicable regulation provided for a “primary purpose test.” The regulation relating to the “primary purpose” test was amended to its current from in 1967 and in effect for tax years after jan. 1, 1968. The petitioner pointed out that there was no change to applicable statutory wording and that the IRS should not be allowed to change the test for deductibility via new regulation. III. Issues:1. Should the IRS be allowed to apply the new regulations under section 1.162-5 to the petitioner’s case?
2. Whether the expenses in connection with the law degree ‘qualify him for a new trade or business? IV. Reasoning: [1] The tax court rejected the petitioner’s argument that the IRS shall not be allowed to change the test for deductibility stating that the IRS has “a long and well-recognized ability to change regulations, despite a lack of change in statutory language, and then to apply such altered regulations, prospectively.
[2] When addressing whether the expenses qualified the taxpayer for a new trade or business, the tax court made reference to a prior case heard before them in jeffry l weiler, supra where the facts of the instant case were substantially similar. In the prior case the taxpayer, a CPA working for the IRS, was denied deduction for expenses relating to his pursuit for a law degree, which the court upheld. V. Holding: Under the prior decision, the court held that the expenses in relation with law school nevertheless qualify him as a lawyer, a trade or business separate and distinct form his current employment, and such expenses are nondeductible under section 1.162-5(b) (3) of the regs. VI. Substantive principle of law:
Narrowly stated: If a taxpayer, who is a working CPA, who incurs expenses in connection with obtaining a law degree, who then obtains said degree and admission to the Maryland bar, then all expenses in connection shall be nondeductible because they are expenses that nevertheless qualify him for a new trade or business as a lawyer.
Abstractly stated: To determine deductibility of educational expenditures, all taxpayers will use an “objective test” to determine whether the expenditures are in connection with qualifying the taxpayer for a “new trade or business.”

I. Citation: Johnson v. US., 332 F. Supp. 906, 27 AFTR 2d 71-1239, 71-1 USTC Paragraph 9347(E.D. La. 1971) II. Facts: A taxpayer who was previously employed as a law clerk, who is a CPA, entered into Graduate school of law, tax division in pursuit of an LLM in taxation. In his 1966 tax return he was denied deduction for expenses in connection with the LLM. III. Issues: 1. Whether certain expenses incurred in 1966 in connection with his masters of laws degree in taxation are deductible as educational and business expenses? IV. Reasoning: The court identified regulation 1.162-5 to be applied in the current situation stating it is clear in order for an educational expense to be deductible it must escape the prohibitions contained in (b) (2) AND (3) as well as fulfill the express requirements of (a) (1) and (2). The court held that the plaintiff was never actively engaged in the profession of law therefore the expenses could not fulfill express requirements of maintaining or improving his skills required by his employment and could not fulfill meeting express requirements of said employment. V. Holding: Deduction for educational expenses denied under reasoning that he incurred such expenses to meet requirements of his new intended specialty (tax law). VI. Substantive principle of Law:
Abstractly Stated: In order for an educational expense to be deductible under section 1.162-5 of the regulations it must escape the prohibitions contained in (b) (2) AND (3) as well as fulfill the express requirements of (a) (1) and (2)