Court Opinion

ID: 4482005
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:15.091762+00
Date Added: 2024-06-11T13:27:32.622234
License: Public Domain

Queay, Judge: The respondent determined a deficiency in income tax due from the petitioner in the amount of $572.80 for the taxable year 1968. All adjustments of income giving rise to the deficiency have been agreed to by the parties except for the disallowance by the respondent of the deduction of $1,500 paid by Leonard F. Cremona to a job-counseling organization in 1968. FINDINGS OF FACT Some of the facts have been stipulated. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference. Leonard F. Cremona and Marie Cremona are husband and wife whose legal residence at the time of filing the petition herein was Saddle Brook, N.J. They filed a joint Federal income tax return for the calendar year 1968 with the district director of internal revenue at Philadelphia, Pa. Marie Cremona is a party to this action solely by virtue of having filed a joint return; consequently, Leonard F. Cremona will hereinafter be referred to as petitioner. On or about January 26, 1968, petitioner entered into a contract with Harvard Executive Research Center, Inc. (hereinafter referred to as HERC), a so-called employment-counseling organization for job counseling and referral services. At that time, and up until the hearing in this case, petitioner was employed by Isotopes, Inc., as an “administrator.” In seeking new employment, he desired a position similar to the type which he held as an employee of Isotopes, Inc. Pursuant to the contract, HERC provided petitioner with counseling services and developed prospective job openings. While the counseling work was completed in 1968, the prospective job opportunities which developed therefrom arose in subsequent years. In no case was actual employment offered to petitioner as a result of the services of HERC. The petitioner attributes the lack of tangible results' to economic conditions and still claims to be hopeful that an offer will develop as a result of HERC’s prior efforts. OPINION Petitioner contends that the fee of $1,500 paid HERC in 1968 is deductible either as a trade or business expense under section 162(a)1 or an expense incurred in the production of income under section 212. In support thereof, petitioner cites David J. Primuth, 54 T.C. 374 (1970); Guy R. Motto, 54 T.C. 558 (1970); and Kenneth R. Kenfield, 54 T.C. 1197 (1970). The respondent seeks to distinguish the cases relied upon by the petitioner on the ground that the services for which the petitioner incurred an expenditure of $1,500 failed to produce any results. In this respect, as respondent points out, in the cited cases the taxpayer either obtained a new job as a result of the expenditure in question or was offered a job. Where neither a job nor an opportunity of employment results from the expenditure, the respondent would deny the deduction, citing Eugene A. Carter, 51 T.C. 932 (1969). At the outset, we believe that the Garter case is distinguishable in that the taxpayer in that case was in the military service. He sought the assistance of a job-counseling organization in order to obtain employment upon his release from the service. We do not regard that decision as applicable to a case where the taxpayer is in the trade or business represented by his existing employment and merely seeks to obtain a better job in that trade or business. As this Court clearly indicated in Kenneth R. Kenfield, supra, that question remains to be decided. In Rev. Bul. 60-223, 1960-1 C.B. 57, the respondent flatly stated that fees paid to employment agencies for securing employment were properly deductible.2 From time to time, the respondent has unsuccessfully sought to impose conditions upon the deductibility of such fees before this Court. Thus in Drnid J. Primuth, supra, respondent argued that the ruling only covered a situation where the fee was contingent upon the securing of a job and not the situation where the fee was payable in any event. The Court rejected that position, concluding that, because the petitioner in that case was virtually guaranteed new employment by the employment agency, the distinction between contingent fees and fees payable in all events was “a distinction without a difference.” David J. Primuth, supra at 380. We held that the expenditures by the taxpayer in securing new employment were incurred while carrying on a trade or business and were therefore deductible under section 162. We reaffirmed our position in Guy R. Motto, supra.-Finally, in Kenneth R. Kenfield, supra, the respondent argued that the fees paid to the employment agency were not deductible because the petitioner had not accepted the job offer which had been elicited through the agency. Again, in rejecting the respondent’s position, this Court concluded that the amount was deductible because not only did the agency assist the taxpayer in procuring the offer of a new job but a promotion obtained from bis existing employer was a direct consequence thereof. We are unable to distinguish in principle the right of petitioner to deduct the cost of seeking a new job in this case from the similar costs incurred by the taxpayers in Primuth, Motto, and Kenfield. In the instant case, the petitioner was engaged in the trade or business of being an “administrator,” an occupation which developed along with the expansion of defense contracting. Having concluded in Primuth, Motto, and Kenfield that a corporate executive or an engineer could be in a trade or business, logic compels us to extend the same rule to an “administrator.” The petitioner in good faith engaged the services of HERC in order to improve his job opportunities in that trade or business. In our opinion, the expenditure was no less an expense of the trade or business merely because, through economic conditions or otherwise, the petitioner did not succeed in obtaining a better job. Reviewed by the Court. Decision will he entered under Bule 50. Gofue, J., concurs in the result.  All statutory references are to the Internal Revenue Code of 1954, unless otherwise indicated.    Rev. Rul. 71—308, 1971-2 C.B. 167, adds the requirement that a new job must be secured as a result of the expenditure.