## Facts

- Dr. Arnold Namrow was a licensed physician practicing psychiatry who sought additional training in psychoanalysis.
- Psychiatrists could technically attempt psychoanalysis without formal institute training, but doing so risked significant professional disadvantages, including lack of recognition by professional psychoanalytic organizations and reduced referrals for psychoanalytic patients.
- Namrow enrolled in a multi-year psychoanalytic training program at the Washington Psychoanalytic Institute.
- The program required, among other components, Namrow’s own personal analysis and supervised work with patients under “supervising analysts.”
- Namrow paid fees for his personal analysis and for the supervising analysts’ services as part of the training.
- On his federal income tax return, Namrow deducted these payments as business-related education expenses.
- The Commissioner of Internal Revenue disallowed the deductions, concluding the expenditures were incurred to obtain a special skill and professional standing beyond the ordinary skills of psychiatrists and therefore were not deductible as ordinary and necessary business expenses.
- Namrow petitioned the United States Tax Court for a redetermination; the Tax Court upheld the Commissioner’s determination.
- Namrow appealed to the United States Court of Appeals for the Fourth Circuit.

## Issues

1. Whether a practicing psychiatrist may deduct the costs of personal analysis and supervising analysts incurred in a psychoanalytic training program as ordinary and necessary business (education) expenses, or whether the costs are nondeductible because they qualify the taxpayer for a new and different professional specialty.

## Decision

- The Fourth Circuit affirmed the Tax Court.
- The court held there was sufficient evidence to support the Tax Court’s finding that the psychoanalytic training expenses were incurred to qualify Namrow to practice in a distinct specialty, not merely to maintain or improve skills used in his existing psychiatric practice.
- Because the expenditures were aimed at obtaining additional professional qualification and status in psychoanalysis, the deductions were properly disallowed.

## Legal Principles

- Education-related expenditures may be deductible as ordinary and necessary business expenses when they are undertaken primarily to maintain or improve skills required in the taxpayer’s current trade or business.
- Education-related expenditures are not deductible when they are incurred to meet requirements for, or to qualify the taxpayer for, a new trade, business, or materially different type of professional work.
- When reviewing a Tax Court decision that turns on how the expenditure is characterized (skill maintenance versus qualification for a new specialty), an appellate court will not disturb the Tax Court’s determination if it is supported by sufficient evidence in the record.
- Costs incurred to obtain recognized professional standing in a specialized field can be treated as non-ordinary expenditures directed toward acquiring a new professional capacity rather than current practice expenses.

## Conclusion

The Fourth Circuit upheld the Tax Court’s denial of Dr. Namrow’s claimed deductions for fees paid for personal analysis and supervising analysts during psychoanalytic institute training, concluding the record supported the finding that the program was undertaken to qualify him for the distinct specialty of psychoanalysis rather than to maintain or improve skills in his existing psychiatric practice.


Namrow v. Commissioner, 288 F.2d 648 (1960)