Court Opinion

ID: 4483920
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:16:23.118104+00
Date Added: 2024-06-11T07:58:23.220369
License: Public Domain

Goffe, J., dissenting: I respectfully dissent. The majority has interpreted section 1.162-5(b)(2), Income Tax Regs., in such a manner that, in effect, it is applying section 1.162-5(b)(3), Income Tax Regs., upon which the Commissioner never relied. For convenience, the subsections of section 1.162-5 of the regulations will sometimes hereafter be referred to as (b)(2) and (b)(3). Section 1.162-5, Income Tax Regs., permits a taxpayer to deduct expenses for education within limited perimeters. Subsections (b)(2) and (b)(3) specify expenditures for educational expenses which are not deductible. Subsection (b)(2) denies deductions for educational expenses required of the taxpayer “in order to meet the minimum educational requirements for qualification in his employment or other trade or business.” (Emphasis added.) It is undisputed that petitioner, prior to the year before the Court, met the minimum educational requirements for the position she occupied as an elementary teacher in the Catholic schools; i.e., a high school diploma. The language of (b)(2) which establishes criteria for ascertaining the minimum educational requirements of the employee’s existing position does not apply here because the minimum educational requirements of petitioner’s present position are not in dispute. The factors which (b)(2) takes into consideration include the requirements of the employer upon which the parties agree. The majority relies upon another factor, “the standards of the profession * * * involved,” yet cites no authority as to why that factor should prevail over the “requirements of the employer” factor. The majority proceeds to hold that teaching in the public schools is another trade or business and earning her college degree enabled petitioner to meet the requirements of the other trade or business; i.e., teaching in the public schools. In addition to misconstruing and misapplying (b)(2), the majority confuses (b)(2) with (b)(3), the latter of which is entitled, “Qualification for new trade or business.” As Judges Drennen and Sterrett point out in their concurring opinions, the erroneous interpretation of (b)(2) by the majority makes (b)(3) redundant. The majority is unable to cite any authority for its interpretation that (b)(2) should be applied to any employment position other than the one in which the taxpayer is presently engaged. Burnstein v. Commissioner, 66 T.C. 492 (1976), cited by the majority, was based strictly on (b)(3), not (b)(2). Teaching is not a trade or business when the teacher is employed by either the parochial or public school system. Such a teacher is undeniably an employee. He or she earns a salary and is not self-employed. “Other trade or business” used in (b)(2) obviously refers to the present occupation of the employee if he or she is not an employee. The majority attempts to factually distinguish four cases upon which petitioner relies. The Court of Appeals in Marlor v. Commissioner, 251 F.2d 615 (2d Cir. 1958), reversed our opinion reported at 27 T.C. 624 in a per curiam opinion based upon Judge Raum’s dissenting opinion. That dissenting opinion was based upon the proposition that, although the taxpayer’s work toward his doctorate qualified him for appointment to a permanent teaching position, it had the immediate objective of enabling him to hold his present position by demonstrating progress toward earning a doctorate. In the instant case petitioner, as part of her yearly contract, had to agree to earn 6 college hours of credit each year, a requirement not necessary if she held a college degree. She merely telescoped the 6-hour requirement into 1 year by earning the remaining 15 hours of credit to earn her college degree. In Devereaux v. Commissioner, 292 F.2d 637 (3d Cir. 1961), we were reversed by the Court of Appeals to which the instant case is appealable. Although the regulations at that time based allowability of the deduction upon primary purpose, the Court of Appeals pointed out that the Tax Court interpreted the regulations liberally and the regulations under the 1954 Code are much more liberal than those under the Internal Revenue Code of 1939. It can hardly be said that the majority in the instant case is engaged in a liberal interpretation of the regulations. Moreover, the Court of Appeals cited with approval the decision of the Court of Appeals for the Second Circuit and the dissenting opinion of Judge Raum in Marlor v. Commissioner, supra. The Court of Appeals for the Ninth Circuit also followed the decision of the Court of Appeals for the Second Circuit and the dissenting opinion of Judge Raum in Marlor v. Commissioner, supra. Michaelsen v. Commissioner, 313 F.2d 668, 671 (9th Cir. 1963). Lastly, the majority attempts to distinguish Laurano v. Commissioner, 69 T.C. 723 (1978), by pointing out that “the taxpayer was already a fully certified teacher, and she was seeking to deduct the expenses of some additional education.” The taxpayer there was a teacher certified to teach in Toronto, Canada, and during the taxable year before the Court was teaching in a parochial school in New Jersey. She took three courses at Kean College, none of which the diocese required her to take but one of which was required for certification in New Jersey; another directly related to the curriculum which she was teaching; and the third she hoped to use in the future in specialized teaching. The Commissioner relied upon (b)(2) of the regulations but we held for the taxpayer by emphasizing the following quoted language from (b)(2): “Once an individual has met the minimum educational requirements for qualification in his employment or other trade or business (as in effect when he enters the employment or trade or business), he shall be treated as continuing to meet those requirements even though they are changed.” (Sec. 1.162-5(b)(2), Income Tax Regs.) That language applies with equal force here. Petitioner fully met the educational requirements of her teaching post at St. Clement’s. The Commissioner there also relied upon (b)(3), arguing that because the taxpayer was seeking certification in New Jersey she was taking the courses to qualify for a new trade or business. We held that because the teaching duties in Canada and New Jersey involved the same general type of work, the taxpayer had previously met the educational requirements for qualification in her employment. I fail to see the distinction between qualifying to teach in a different school, whether it be in Canada or New Jersey, parochial or public, provided the duties involve the same general type of work. The majority does not hold nor does respondent argue that the duties were different in the Pennsylvania public schools than in the Pennsylvania parochial schools. The Commissioner acquiesced in that decision. 1978-38 I.R.B. 5. The effect of the majority opinion is to overrule Laurano which should not be done, especially in light of the Commissioner’s acquiescence. The majority relies upon Garwood v. Commissioner, 62 T.C. 699 (1974), and Diaz v. Commissioner, 70 T.C. 1067 (1978). Both of those cases are distinguishable because the taxpayers had not satisfied the minimum educational requirements of the teaching positions they held. In the instant case, petitioner met the educational requirements for the position she held. The concurring opinions of Judges Drennen, Sterrett, and Chabot rely upon the merits of respondent’s position under subsection (b)(3) of the regulations. The statutory notice of deficiency was not based upon (b)(3) nor did the respondent rely on (b)(3) at trial nor on brief. It is understandable why he did not rely on (b)(3) in view of his acquiescence in Laurano v. Commissioner, supra. It would be most unfair for us to decide the issue in favor of respondent on the application of (b)(3) because petitioner would be deprived of arguing the merits of (b)(3). The majority refuses to allow a portion of petitioner’s expenses because she has not claimed an allocation and the cases (not in point) do not permit an allocation. Nevertheless, in my view, petitioner would prevail under (b)(3) because teaching in the public schools would not be a trade or business different than employment by the parochial schools. Because (b)(3) was not raised by respondent and, therefore, not properly before the Court, a close analysis of (b)(3) is unwarranted. Suffice it to say, however, the text of (b)(3) and the examples are extremely generous to teachers. To paraphrase Gertrude Stein in Sacred Emily (1913), “teacher is a teacher is a teacher is a teacher.” I would, therefore, hold that petitioner is not precluded from deducting her educational expenses in 1973 by either subsection (b)(2) or (b)(3) of section 1.162-5, Income Tax Regs. Counsel for respondent conceded in his opening statement that the courses which petitioner took in 1973 maintained or improved her skills in her employment. Sec. 1.162-5(a)(l), Income Tax Regs. The cost of education in excess of that required by her employer, if the education maintains or improves her skills, constitutes an allowable deduction, sec. 1.162-5(c)(2), Income Tax Regs., and the expenses are deductible even though they lead to a degree, sec. 1.162-5(a), Income Tax Regs. I conclude that petitioner is entitled to deduct the education expenses she paid in 1973. Featherston, Fay, Irwin, Quealy, Hall, and Wiles, JJ., agree with this dissenting opinion.