## Facts

- Coughlin was an attorney in private practice and a member of a Binghamton, New York law firm that handled substantial federal tax work.
- He had long practiced law and had been admitted to practice before the Treasury Department in 1944.
- His partners relied on him to remain current on federal tax law changes and relevant court decisions, and he accepted that responsibility as part of his practice.
- In 1946 he attended the Fifth Annual Institute on Federal Taxation in New York City, a program aimed at practitioners already versed in federal taxation and not intended for beginners.
- He spent $305 for tuition, travel, board, and lodging to attend; the amount’s reasonableness was not disputed.
- He deducted the $305 as an “ordinary and necessary” business expense under § 23(a)(1)(A) of the Internal Revenue Code of 1939.
- The Commissioner disallowed the deduction, and the Tax Court sustained the disallowance on the ground that the expenses were educational and personal; Coughlin appealed.

## Issues

1. Whether an attorney’s expenses for attending a specialized taxation institute are deductible as “ordinary and necessary” expenses of carrying on a trade or business under § 23(a)(1)(A) of the 1939 Code.
2. Whether the expenses were instead nondeductible personal or educational expenditures because they involved instruction and professional development.

## Decision

- The Second Circuit reversed the Tax Court.
- The court held the $305 was deductible as ordinary and necessary expenses incurred in carrying on Coughlin’s law practice.
- The court treated the expenditures as directly connected with, and proximately resulting from, Coughlin’s existing professional work in federal taxation.

## Legal Principles

- Business expenses are deductible when they are ordinary and necessary and bear a direct connection to carrying on the taxpayer’s existing trade or business.
- Expenditures for professional instruction may be deductible when undertaken to maintain or improve skills required in the taxpayer’s current practice, rather than to qualify for a new trade or profession.
- The fact that an expense has educational or personal attributes does not control if the dominant character and function of the expenditure is professional and tied to ongoing business duties.
- Treasury regulations recognizing deductions for professional dues and subscriptions support treating comparable professional updating expenditures (such as specialized practitioner institutes) as ordinary and necessary when incurred to remain current in a professional field.

## Conclusion

Because Coughlin attended a practitioner-focused tax institute to stay current in a field he already practiced and for which his firm relied on him, his tuition and related travel and living costs were ordinary and necessary business expenses deductible under § 23(a)(1)(A) of the 1939 Code.


Coughlin v. Commissioner, 203 F.2d 307 (2d Cir. 1953)