MBA Expenses May Be Tax Deductible

In (Kopaigora, TC Summ. Op. 2016-35), the Tax Court found that tuition and other expenses incurred at an executive MBA program may be tax deductible.

Critical in this case is the fact that the student did not enter a "new' profession as a result of his MBA.

We believe that the facts support petitioners’ argument. When petitioner
enrolled in the EMBA degree program, he was a well-established finance and
accounting business manager at Marriott LAX. He managed the hotel’s financial
operations and auditing departments, he was responsible for large groups of
employees from various backgrounds and specializations, and he made sure the
hotel’s business practices were in compliance with GAAP. When his employment
was abruptly terminated, he continued to take courses at BYU that improved his
managerial and leadership skills--skills that were appropriate and helpful to his
position as a business manager. The courses petitioner chose to fulfill his degree
requirements did not qualify him for a new trade or business because he was not
qualified to perform new tasks or activities with the conferral of his degree.
Instead, petitioner chose courses in a line of study that he was familiar
with--management and finance. Even though petitioner took a few courses that
were outside this scope, we do not believe that these courses by themselves could
have prepared him to enter a new trade or business.

Finally, petitioner’s unemployment did not prevent him from continuing his
trade or business as a finance and accounting business manager for purposes of
section 162. After petitioner’s employment at Marriott LAX was terminated he
actively sought employment within the corporate finance and accounting field for
the remainder of his time at BYU, and his active job search paid off. Soon after he
graduated from the EMBA degree program, petitioner was hired by another
company to perform duties that were substantially similar to the duties of his
former job. Although petitioner was hired after he graduated, nothing in the
record suggests that the degree was a prerequisite for the job. See sec. 1.162-
5(b)(2), Income Tax Regs. We hold that petitioner’s EMBA degree tuition
education expenses are deductible as unreimbursed employee expenses under
section 162.

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