## Facts

- The taxpayer was employed as a minister.
- While continuing ministerial work, he enrolled in college-level courses, including communication, sermon writing, and management.
- He completed a bachelor’s degree program in human services.
- He claimed deductions for tuition and related education expenses as unreimbursed employee business expenses under I.R.C. § 162.
- The IRS disallowed the deductions and determined an income tax deficiency.
- The taxpayer petitioned the Tax Court, asserting the education improved skills used in his existing ministry.

## Issues

1. Whether the taxpayer’s tuition and related expenses for a bachelor’s degree in human services were deductible as ordinary and necessary business expenses under I.R.C. § 162 and Treas. Reg. § 1.162-5(a).
2. Whether the education was nondeductible because it qualified the taxpayer for a new trade or business under Treas. Reg. § 1.162-5(b)(3).

## Decision

- The Tax Court sustained the Commissioner’s disallowance of the claimed education-expense deductions.
- The court concluded the bachelor’s degree program qualified the taxpayer for a new trade or business, making the expenses nondeductible.
- The deficiency determination was upheld.

## Legal Principles

- Education expenses are deductible under I.R.C. § 162 only if they maintain or improve skills required in the taxpayer’s current trade or business, or are required by an employer or by law as a condition of continued employment or status. Treas. Reg. § 1.162-5(a).
- Education expenses are not deductible if the education qualifies the taxpayer for a new trade or business, even if the taxpayer does not change jobs or intends to remain in the same occupation. Treas. Reg. § 1.162-5(b)(3).
- The analysis is objective and focuses on the qualifications conferred by the course of study, including the degree program’s scope and the types of work for which it prepares the taxpayer.
- In a deficiency case, the taxpayer bears the burden to show entitlement to deductions and to show the expenses do not fall within the regulatory exclusions.

## Conclusion

The Tax Court held that a minister could not deduct tuition and related costs of a bachelor’s degree program in human services because the program, viewed as a whole, qualified him for work beyond ministry and therefore constituted education for a new trade or business under Treas. Reg. § 1.162-5(b)(3).


Warren v. Commissioner, T.C. Memo. 2003-175 (2003)