                  T.C. Summary Opinion 2009-182



                      UNITED STATES TAX COURT



             LORI A. SINGLETON-CLARKE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 27975-07S.             Filed December 2, 2009.



     Lori A. Singleton-Clarke, pro se.

     Brian S. Jones, for respondent.



     GOLDBERG, Special Trial Judge:    This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.   Pursuant to section

7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent

for any other case.   Unless otherwise indicated, subsequent

section references are to the Internal Revenue Code in effect for
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the year in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure.

      Respondent determined a Federal income tax deficiency of

$2,126 for 2005.   After concessions, the sole remaining issue for

decision is whether petitioner is entitled to deduct $14,787 in

education expenses she paid in 2005 in connection with pursuing a

master of business administration degree with a specialization in

health care management (MBA/HCM).

                            Background

      Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    Petitioner resided in

Maryland when she filed her petition.

I.   Petitioner’s Job History

      Petitioner earned a bachelor of science degree in nursing

(BSN) from New York University in 1984.    Petitioner became a

registered nurse (RN) and for the next 24 years worked in various

capacities for a number of hospitals, medical centers, and long-

term care facilities.

      From 1984 to 1993 she worked initially as an acute bedside

clinical nurse and later as a team leader supervising nurses

providing acute bedside care.   From 1993 to 2004 she held various

nursing management positions of increasing responsibility,

eventually serving as a director of nursing for a 150-bed
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subacute long-term care facility, responsible for “24/7”

management of 110 nurses plus technicians.    From 2004 to 2008

petitioner worked sequentially at three different hospitals.

Though her titles were different, her tasks, activities, and

responsibilities were nearly identical, concentrating in a

nonsupervisory capacity as a quality control coordinator.

     Overall in her 24 years of work, petitioner has earned six

significant awards, including three citations of merit from the

Governor of Maryland.    The three jobs from 2004 to 2008 were a

step down in pay and in status and a purposeful decrease in

responsibilities because petitioner wanted more time to focus on

some personal matters.    However, because the three jobs and their

associated hiring requirements are central considerations in this

case, they are detailed below.

     A.    Civista Medical Center

     From 2004 to 2007 petitioner worked for Civista Medical

Center (Civista), a 108-bed acute care community-based hospital

in Maryland.    Her job title was quality improvement coordinator

and her responsibilities were to coordinate the quality

improvement and risk management activities for the hospital.      In

this role, petitioner developed and analyzed quality and risk

management reports, and she investigated complaints from and

implemented improvements for patients, visitors, nurses, and

doctors.    She reported to the director of quality management.    To
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qualify for the job, the minimum education and experience

requirements were “a Bachelor of Science degree in Nursing or

equivalent education and experience.     One year experience in

Quality Assurance, Risk Management, or Nursing Management

preferred.”     The position also required candidates to be

“currently licensed as a RN in the State of Maryland.”

       Civista underwent a change in leadership, causing petitioner

to switch to a new employer, Children’s National Medical Center

(Children’s) in Washington, D.C., with a new title, but

continuing essentially the same duties she performed at Civista.

       B.   Children’s National Medical Center

       From 2007 to 2008 petitioner worked for Children’s.    Her job

title was center outcomes coordinator.     Her responsibilities were

similar to the ones she had at Civista, developing a systemic

approach to measuring and improving outcomes for patients,

physicians, and employees.     The job requirements stated:

“Bachelor’s in Nursing or health related field required; Master’s

in Public Health preferred.     Two years quality improvement

experience in a hospital setting and three years clinical

experience preferred.”

       Petitioner’s 2-hour commute to Children’s proved to be

onerous.     She made a lateral switch to St. Mary’s Hospital (St.

Mary’s) to shorten the commute, resulting in another decrease in

pay.
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      C.   St. Mary’s Hospital

      Petitioner began working at St. Mary’s on September 8, 2008.

Her title is performance management coordinator, and again

similar to her responsibilities at Civista and Children’s, her

duties focus on coordinating, planning, and implementing the

Hospital’s performance improvement activities.      She reports to

the director of quality control, who in turn reports to the vice

president for quality.

      The job qualifications of a performance management

coordinator at St. Mary’s are, in pertinent part:

          Registered Nurse Licensure required. B.S. Health
      Care Administration required--Masters preferred.
      Registration in the State of Maryland (MAHQ) and
      National (NAHQ) Associations. Previous experience in
      clinical health care including direct experience in
      Performance Improvement. Experience with Risk
      Management and/or utilization review desired.

II.   The MBA/HCM

      Petitioner began taking courses at the University of Phoenix

in March 2005, graduating in April 2008 with an MBA/HCM.      She

chose the University of Phoenix because the institution allowed

students to complete the program via online courses, which was a

major priority for petitioner.

      Petitioner enrolled in the program to become more effective

in her then-present duties.      She realized that nursing had

evolved greatly in the 24 years since she earned her bachelor’s

degree, and she felt disadvantaged working with highly educated
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doctors.    Petitioner believed that although an MBA was not

required for her job, the degree would give her greater

credibility and the courses would make her more effective in her

present and future role as a quality control coordinator.

       The University of Phoenix MBA/HCM provides students “with

the business management skills needed to manage successfully in

today’s health care delivery systems.”         The program features

courses in “health care organizations, health care finance,

quality and database management, health care infrastructure, and

health care strategic management.”         Petitioner did well in her

course work, graduating with a 3.57 grade point average.

       Petitioner paid the entire cost of the program.       None of her

employers had a reimbursement policy for the MBA/HCM program.

III.    The Notice of Deficiency

       Petitioner timely filed her 2005 Federal income tax return

using the services of a paid preparer.         Respondent examined the

return and in a notice of deficiency determined a deficiency in

Federal income tax of $2,126.      Respondent disallowed $1,580 of

petitioner’s $1,620 in noncash and cash charitable contributions,

which petitioner conceded.    Respondent also disallowed all of

petitioner’s miscellaneous itemized deductions, consisting of

$180 in tax return preparation fees and $14,787 in unreimbursed

employee business expenses for education expenses.         Respondent
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later conceded the tax return preparation fees, leaving the

education expenses as the sole point of contention.

                               Discussion

I.    Burden of Proof

       In general, the Court presumes that the Commissioner’s

determination set forth in a notice of deficiency is correct, and

the taxpayer bears the burden of showing that the determination

is in error.    Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111,

115 (1933).    Under section 7491(a) the burden may shift to the

Commissioner regarding factual matters if the taxpayer produces

credible evidence and meets the other requirements of the

section.    Petitioner did not argue that she satisfied the

elements for a burden shift, but even if she did, the

consideration of a burden is moot here because no factual issues

are in dispute.    In other words, section 7491(a) is inapplicable

because we decide this case entirely by application of the law to

undisputed facts.

II.    Deductions in General

       Deductions are a matter of legislative grace, and taxpayers

must satisfy the statutory requirements for claiming the

deductions.    INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84

(1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440

(1934).    Taxpayers may deduct ordinary and necessary expenses

that they pay in connection with operating a trade or business.
                                 - 8 -

Sec. 162(a); Boyd v. Commissioner, 122 T.C. 305, 313 (2004).

Generally, the performance of services as an employee constitutes

a trade or business.     Primuth v. Commissioner, 54 T.C. 374, 377

(1970).    To be ordinary the expense must be of a common or

frequent occurrence in the type of business involved.       Deputy v.

du Pont, 308 U.S. 488, 495 (1940).       To be necessary an expense

must be appropriate and helpful to the taxpayer’s business.

Welch v. Helvering, supra at 113.     The expenditure must be

“directly connected with or pertaining to the taxpayer’s trade or

business”.    Sec. 1.162-1(a), Income Tax Regs.

     For such expenses to be deductible, the taxpayer must not

have the right to obtain reimbursement from his employer.       See

Orvis v. Commissioner, 788 F.2d 1406, 1408 (9th Cir. 1986), affg.

T.C. Memo. 1984-533.     Section 262(a) disallows deductions for

personal, living, or family expenses.

     Section 1.162-5, Income Tax Regs., Expenses for Education

(the regulation), interpreting section 162, Trade or Business

Expenses, governs whether a taxpayer may deduct education

expenses.     The validity of this longstanding regulation is not in

dispute.     The regulation provides that a taxpayer may deduct

education expenses as ordinary and necessary business expenses

     if the education--

         (1) Maintains or improves skills required by the
     individual in his employment or other trade or
     business, or
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         (2) Meets the express requirements of the
     individual’s employer, or the requirements of
     applicable law or regulations, imposed as a condition
     to the retention by the individual of an established
     employment relationship, status, or rate of
     compensation.

Sec. 1.162-5(a)(1) and (2), Income Tax Regs.

     Conversely, the regulation provides that if the education

qualifies the individual for a new trade or business, then the

education expenses are not deductible because the education is a

personal expense or constitutes an accumulation of personal

capital.   Sec. 1.162-5(b)(3), Income Tax Regs.

     Whether the education qualifies the taxpayer for a new trade

or business is an objective inquiry analyzing the tasks and

activities the taxpayer was able to perform before the education

in comparison to those the taxpayer was qualified to perform

afterward.     Glenn v. Commissioner, 62 T.C. 270, 275 (1974);

Weiszmann v. Commissioner, 52 T.C. 1106, 1110 (1969), affd. per

curiam 443 F.2d 29 (9th Cir. 1971).      In other words, the relevant

standard is whether the education objectively qualifies the

taxpayer for a new trade or business.      Robinson v. Commissioner,

78 T.C. 550, 554-556 (1982); Glenn v. Commissioner, supra.

Accordingly, the taxpayer’s subjective intent in undertaking the

education is not relevant, and likewise it is not material

whether the taxpayer does in fact become employed in a new trade

or business.     Burnstein v. Commissioner, 66 T.C. 492, 495 (1976);

Bodley v. Commissioner, 56 T.C. 1357, 1360 (1971).
                                - 10 -

III.   Application of the Law to Petitioner’s Factual Situation

       A.   Petitioner’s New Job at St. Mary’s

       Respondent contends that without receiving the MBA/HCM in

April 2008 petitioner would not have obtained her final job, the

one she started in September 2008 at St. Mary’s, because the St.

Mary’s job description, in addition to requiring an RN license,

which petitioner already possessed, required at least a bachelor

of science in health care administration, which petitioner had

not previously earned.

       Though the titles of the jobs varied, petitioner’s three

jobs since 2004 were nearly identical, requiring serving as a

quality control coordinator at acute care hospitals and medical

centers.     We believe that St. Mary’s would have gladly hired

petitioner as a performance management coordinator even without

the MBA/HCM.     All three quality control positions required an RN

license or a bachelor’s in nursing, with clinical or risk

management experience; credentials which petitioner possessed.

The first two employers, Civista and Children’s, had hired

petitioner without the MBA/HCM.     Further, petitioner was a

multiple award winner, having received recognition three times

from the Governor of Maryland and from three other prominent

organizations.     Moreover, petitioner had worked her way up to

serving as a director of nursing responsible for 110 nurses plus

additional technicians, clearly indicating high competence.       All
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three quality control positions, while important, were a step

down in status and pay from her former duties.   For all of these

reasons, we find that the MBA/HCM may have been a helpful

addition to her qualifications, but was not an essential

prerequisite for petitioner to secure the position at St. Mary’s.

     B.   Whether an MBA Qualifies Taxpayers for Any New Trade
          or Business

     The final remaining inquiry then is whether as an objective

matter the MBA/HCM qualifies petitioner for any new trade or

business, not just the particular job at St. Mary’s that she

acquired.   Respondent contends that the MBA/HCM does qualify

petitioner for a new trade or business, because in respondent’s

words, under the regulation “the tasks and activities she was

qualified for before she obtained the degree are different than

those which she is qualified to perform afterwards”.   We

disagree.

     An MBA degree is different from a degree that serves as

foundational qualification to attain a professional license.     For

instance, this Court had denied deductions for law school

expenses, because a law degree qualifies a taxpayer for the new

trade or business of being a lawyer.   See, e.g., Bodley v.

Commissioner, supra; Weiler v. Commissioner, 54 T.C. 398, 401-402

(1970).

     An MBA is a more general course of study that does not lead

to a professional license or certification.   Allemeier v.
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Commissioner, T.C. Memo. 2005-207.      This Court has had differing

outcomes when deciding whether a taxpayer may deduct education

expenses related to pursing an MBA, depending on the facts and

circumstances of each case.    The decisive factor generally is

whether the taxpayer was already established in their trade or

business.

     For example, in the following two cases we held that the

taxpayers were not entitled to deduct their MBA expenses.      In

Link v. Commissioner, 90 T.C. 460, 463-464 (1988), affd. without

published opinion 869 F.2d 1491 (6th Cir. 1989), the taxpayer had

not established a trade or business.     After graduating with an

undergraduate degree in May 1981, he worked during the summer but

then promptly commenced his MBA coursework in September 1981.

Similarly, in Schneider v. Commissioner, T.C. Memo. 1983-753, the

taxpayer, after graduating from West Point, served honorably in

the Army for 5 years before resigning from active duty with the

rank of captain and immediately starting in Harvard’s MBA

program.    Although the taxpayer established outstanding

management experience in the Army, he had never worked in

business, and therefore we decided his “work as an Army officer

is a different trade or business from the consulting business for

which his course of study at Harvard prepared him.”      Id.

     In contrast, in Sherman v. Commissioner, T.C. Memo. 1977-

301, we held that another former Army officer was entitled to
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deduct the expense of his Harvard MBA.    The difference is that

the former officer in Sherman had worked for 2 years as a

civilian employee after resigning his Army commission and before

matriculating to Harvard.    Moreover, the duties of the taxpayer

in Sherman during his 2 years of civilian work included

formulating and monitoring management plans and reviewing and

evaluating policies involving purchasing, inventory control, and

personnel management.   These were the types of subject matters

taught in the MBA program.

     Two other cases also illustrate situations where an MBA did

not lead to a new trade or business.     In Allemeier v.

Commissioner, supra, before beginning an MBA program, the

taxpayer had already worked 3 years for a pediatric orthodontic

laboratory, during which time his responsibilities expanded to

include designing marketing strategies for additional products,

organizing informational seminars, and traveling extensively to

conventions to lead seminars.    This Court held that the

taxpayer’s trade or business did not significantly change because

the MBA merely improved preexisting skills for the same general

duties he was already performing before enrolling in the MBA

program.

     Likewise, in Blair v. Commissioner, T.C. Memo. 1980-488, the

taxpayer initially completed 1 year of undergraduate coursework.

She then spent the next 13 years concentrating on raising a
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family while also working for small companies, gaining the

equivalent of 5-1/2 years’ experience in mostly clerical and

secretarial duties.    She also acquired some familiarity with

bookkeeping, payroll, and personnel matters.     Over the next 3

years the taxpayer earned a bachelor of arts degree in English,

and then she was hired by a large international corporation,

where she worked for a little more than 1 year as a personnel

representative before commencing her MBA.     The corporation

promoted the taxpayer to personnel manager within 11 months after

starting the 2-year MBA program.     This Court held that “under any

realistic interpretation” petitioner’s new duties as a personnel

manager did not constitute a new trade or business because she

was already engaged in the same type of work, with the only major

difference being that as a personnel manager she made decisions

while as a personnel representative she made only

recommendations.   Id.    Neither the difference in duties nor the

new title was enough to constitute a new trade or business.

     Analyzing petitioner’s situation, her facts and

circumstances far more closely resemble the cases that allowed a

deduction for pursuing an MBA.     Petitioner is unlike the student

in Link v. Commissioner, supra, who went straight from his

undergraduate degree into an MBA program, and the officer in

Schneider v. Commissioner, supra, who went straight from the Army

into an MBA program.     Petitioner is considerably closer in
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circumstance to the taxpayers in Sherman v. Commissioner, supra,

Allemeier v. Commissioner, T.C. Memo. 2005-207, and Blair v.

Commissioner, supra, who had 2 years, 3 years, and 1 year,

respectively, of experience performing tasks and activities in

their chosen professions before beginning their MBA programs.

The facts in favor of petitioner are even stronger than those in

the three cases above where the taxpayers prevailed.   Petitioner

worked for 1 year as a quality control coordinator and had more

than 20 years of directly related work experience, gaining vast

clinical and managerial knowledge in acute and subacute health

care settings, before beginning the University of Phoenix MBA/HCM

program.

     In summary, the MBA/HCM may have improved petitioner’s

preexisting skill set, but objectively, she was already

performing the tasks and activities of her trade or business

before commencing the MBA.   For all of the above reasons, we find

that petitioner’s MBA/HCM did not qualify her for a new trade or

business, and we hold, therefore that petitioner may deduct her

education expenses for 2005.

     To reflect our disposition of the issues,


                                         Decision will be entered

                                    under Rule 155.
