## Facts

- Joel A. Sharon and Ann L. Sharon (husband and wife) filed joint returns for 1969 and 1970.
- During 1969–1970, Joel Sharon worked as an attorney for the IRS Office of Regional Counsel in San Francisco, California.
- The Sharons lived in a three-bedroom apartment in San Mateo, California. Sharon set aside one room for use as an “office,” furnished with a desk, lamps, a chair, and a typewriter; the closet held files, clothing, and books.
- The room was used for multiple purposes: (1) employment-related work, (2) investment and income-producing activities, (3) reading professional materials, and (4) personal correspondence; it was also occasionally opened for guest use during gatherings.
- Sharon kept no records allocating the room’s use among these purposes. His employer provided office space and gave him keys for after-hours access; Sharon worked at home mainly because it was more convenient than staying late at the office.
- Sharon incurred expenditures connected to entering and practicing law, including: amounts spent to obtain a college degree ($11,125) and a law degree ($6,910); bar review course costs (including $175.20 for New York and $230 for California); licensing and admission-related fees (including $25 for the New York bar exam, $571 for the California bar exam, $11 for admission to two federal courts in California, and $313.35 for admission to practice before the U.S. Supreme Court).
- On their returns, the Sharons claimed deductions for (i) one-sixth of apartment rent and related costs as home-office expenses under §§ 162 or 212, (ii) education and licensing costs as deductible business/income-producing expenses under §§ 162 or 212 or as amortizable costs under § 167, (iii) depreciation for residential rental property, and (iv) their Tax Court filing costs.
- The Commissioner determined deficiencies of $235.56 (1969) and $653.70 (1970). The Tax Court consolidated the cases and, after concessions, decided the remaining issues; the Ninth Circuit affirmed per curiam.

## Issues

1. Whether one-sixth of apartment rent and related costs was deductible as home-office expenses under § 162(a) or § 212, or disallowed as personal expenses under § 262.
2. Whether costs to obtain a college degree, a law degree, and New York bar-review courses were deductible or amortizable, or instead nondeductible personal/qualifying expenses.
3. Whether Sharon could deduct or amortize the California bar review course cost and the California bar examination and related admission fees, including admission to two federal courts in California.
4. Whether the cost of admission to practice before the U.S. Supreme Court was currently deductible under § 162(a) or had to be capitalized and amortized under § 167(a)(1).
5. What basis and remaining useful life applied to depreciation deductions for the Sharons’ residential rental property.
6. Whether the Tax Court had authority to award petitioners their Tax Court filing costs.

## Decision

- The Tax Court denied deductions for one-sixth of apartment rent and related costs as home-office expenses under § 162(a) or § 212, treating them as personal and nondeductible under § 262; it stated that Stephen A. Bodzin, 60 T.C. 820 (1973), would no longer be followed.
- The Tax Court held the costs of Sharon’s college education, law school education, and bar review courses (New York and California) were nondeductible personal expenses under § 262.
- The Tax Court held licensing and admission fees paid to obtain the right to practice law were capital expenditures amortizable under § 167(a)(1) over Sharon’s life expectancy, including:
  - the $25 New York bar examination/licensing fee,
  - California bar examination and related admission fees (including the $11 for admission to two federal courts in California), and
  - the $313.35 cost of admission to practice before the U.S. Supreme Court (not currently deductible under § 162(a)).
- The Tax Court determined the allowable depreciation for the Sharons’ residential rental property by fixing basis and remaining useful life.
- The Tax Court denied an award of the $20 filing costs for the two petitions, finding no authority to award such costs.
- The Ninth Circuit affirmed per curiam, agreeing that the home-office expenses were personal and nondeductible under § 262, that the degree and bar review course costs were not amortizable, and that the Tax Court lacked authority to award costs.

## Legal Principles

- A home-office deduction under § 162(a) or § 212 may be denied where the space is not used exclusively for business, the taxpayer keeps no reliable allocation records, adequate employer office facilities are available (including after-hours access), and the home arrangement is maintained mainly for the taxpayer’s convenience; such costs are treated as personal and nondeductible under § 262.
- Education expenses that meet minimum requirements or qualify a taxpayer to enter a new trade or business (including college, law school, and bar review courses taken to become a lawyer) are personal expenses under § 262, not deductible under § 162 or § 212 and not amortizable under § 167.
- Fees paid to licensing authorities or courts to obtain the legal right to practice (bar examination/licensing fees and court admission fees) are capital expenditures for an intangible right; where amortization is allowed, the period may be measured by the taxpayer’s life expectancy under § 167(a)(1).
- The cost of admission to practice before an additional court, including the U.S. Supreme Court, is not a current ordinary and necessary business expense when it is treated as acquiring a separate right to practice; it is capitalized and amortized over life expectancy.
- The Tax Court may not award petitioners their filing costs in a deficiency case absent statutory authority.

## Conclusion

Sharon held that an IRS attorney could not deduct a share of apartment rent and related costs for a mixed-use home office maintained for convenience when his employer provided adequate office space, and that college, law school, and bar review course expenses incurred to qualify to practice law were personal and nondeductible. The court distinguished those education costs from fees paid to obtain the legal right to practice (bar-related licensing and court admission fees, including admission to the U.S. Supreme Court), which it treated as capital expenditures amortizable over the attorney’s life expectancy, while also resolving depreciation of rental property and denying recovery of Tax Court filing costs for lack of authority.


Sharon v. Comm’r, 66 T.C. 515 (1976), aff’d per curiam, 591 F.2d 1273 (9th Cir. 1978).