## Facts

- Mary O. Furner worked as a junior high school teacher, teaching social studies (primarily history) for multiple school years before 1960.
- Believing she needed greater subject-matter depth, she enrolled as a full-time graduate student in history at Northwestern University for the 1960–61 school year and earned an M.A. in August 1961.
- Because her school system did not usually grant leaves of absence, she resigned in June 1960; during graduate study she performed no teaching duties.
- In April 1961, while still a student, she signed a contract to teach social studies (including history courses) beginning September 1961 at a junior high school in Illinois.
- She deducted her graduate-education expenses as ordinary and necessary business expenses under I.R.C. § 162; the Commissioner disallowed the deductions.
- The Tax Court upheld the disallowance, finding (1) she was not “carrying on” the trade or business of teaching during her full-time studies and (2) she undertook the education primarily to obtain a new position or substantial advancement; on appeal, the Commissioner treated the second finding as irrelevant under amended Treasury regulations.

## Issues

1. Whether a teacher who leaves a teaching job to pursue full-time graduate study directly related to her teaching field is “carrying on” the trade or business of teaching during the study period for purposes of deducting education expenses under I.R.C. § 162(a).

## Decision

- The Seventh Circuit reversed the Tax Court.
- The court held Furner remained in the trade or business of teaching during her full-time graduate study.
- The court allowed the graduate-education expenses as deductible business expenses under I.R.C. § 162(a).

## Legal Principles

- A temporary break in employment does not, by itself, end a taxpayer’s “trade or business” for I.R.C. § 162 purposes when the taxpayer maintains continuity in the same general line of work.
- Education expenses may be deductible when the education is directly related to the taxpayer’s current trade or business and is a normal incident of continuing that work.
- Formal “leave of absence” status is not controlling; the inquiry is functional and focuses on continuity of the taxpayer’s work and whether the education relates to the same general type of work before and after the study period.
- Under the amended Treasury regulations applied on appeal, teaching and related duties are treated as the same general type of work, and the main disallowance concern is education that qualifies the taxpayer for a new trade or business.

## Conclusion

The court held that a teacher who pursued full-time, field-related graduate study between teaching positions remained in the trade or business of teaching, so the related education expenses were deductible under I.R.C. § 162 despite a resignation and a year without classroom duties.


Furner v. Commissioner, 393 F.2d 292 (7th Cir. 1968)