                        T.C. Memo. 2007-174



                      UNITED STATES TAX COURT



                RONALD Z. THOMPSON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 24178-05.                 Filed July 3, 2007.



     Anthony V. Diosdi, for petitioner.

     Kaelyn Romey, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     HAINES, Judge:   Respondent determined a deficiency in

petitioner’s 2002 Federal income tax of $3,663, as well as a

penalty under section 6662(a) of $733.1



     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended. Amounts are rounded to
nearest dollar.
                                - 2 -

     The issues for decision are:    (1) Whether petitioner is

entitled to deduct the expense of flight school as an educational

expense under section 162(a); and (2) whether petitioner is

liable for the accuracy-related penalty under section 6662(a).

                           FINDINGS OF FACT

     The parties’ stipulation of facts and the attached exhibits

are incorporated herein by this reference, and the facts

stipulated are so found.    At the time the petition was filed,

petitioner resided in Castro Valley, California.

     Petitioner graduated from San Jose State University with a

bachelor of science degree in aviation operations.    Petitioner is

currently employed as an aeronautical engineer2 with Planners

Collaborative, Inc. (Planners), a subcontractor which provided

engineering and technical management services to support the

National Aeronautics and Space Administration’s (NASA) Ames

Research Center.   Prior to his employment with Planners, from

August 2000 through October 2004, petitioner was employed as an

aeronautical engineer with Teculan Inc. (Teculan), a

subcontractor which also provided engineering and technical

management services to NASA.




     2
       The parties also referred to petitioner as a systems
engineer.
                                - 3 -

     Petitioner’s duties for Teculan required him to:    (1)

Identify, collect, organize, and document engineering

requirements and drawings; (2) maintain configuration control

processes to ensure traceability of baseline documentation; (3)

test and evaluate aircraft flight systems software, cockpit

ergonomics, and other related engineering modalities; and (4)

perform engineering studies and provide technical assistance,

including problem solving and formulation of tradeoffs and

recommendations.

     While working at Teculan, on October 1, 2001, petitioner

began attending a commercial pilot training program offered by

Sierra Academy of Aeronautics (Sierra Academy) to pursue a

commercial pilot’s certificate for both single-engine and

multiengine airplanes (commercial pilot certificates).    To

receive a commercial pilot certificate for either single-engine

or multiengine airplanes, petitioner was required to complete

three programs:    (1) personal pilot’s certification; (2) pilot

instrument rating; and (3) commercial pilot certificate.

Petitioner completed these three programs and received his

commercial pilot certificates on March 1, 2004.

     The parties stipulated that petitioner was not required to

attend flight school to meet the minimum education requirements

necessary to qualify as an aeronautical engineer by his former
                                 - 4 -

employers or by any law or regulation.      Petitioner was not

reimbursed for the expenses paid to attend Sierra Academy.

     In 2002, petitioner paid Sierra Academy $17,826 for tuition

and $929 for required books, equipment, and uniforms.      He

reported $18,755 as educational expenses on his Schedule A,

Itemized Deductions, for 2002.    Petitioner prepared his 2002

Federal income tax return using tax preparation software.

     On November 15, 2005, respondent mailed petitioner the

notice of deficiency with respect to 2002 which denied

petitioner’s deductions for educational expenses.      Petitioner

timely filed his petition on December 22, 2005.

                             OPINION

     Section 162(a) allows a deduction for all ordinary and

necessary expenses paid or incurred during the taxable year in

carrying on any trade or business.       Generally, expenditures made

by an individual for education are deductible under section

162(a) if the education maintains or improves skills required of

the individual in his employment or other trade or business or

meets the express requirements of the individual’s employer.

Sec. 1.162-5(a), Income Tax Regs.    However, even if the general

rule is satisfied, expenses for education are nondeductible if

the education is part of a program of study which will lead to

qualifying an individual for a new trade or business.      Sec.

1.162-5(b)(1), (3), Income Tax Regs.
                                - 5 -

     An individual who, through education, improves his skills in

an existing trade or business may also become qualified for a new

trade or business.   Educational expenses incurred to qualify for

a new trade or business are nondeductible even if the individual

does not engage in the new activity.    See sec. 1.162-5(b)(3)(ii)

Example (2), Income Tax Regs.   The mere capacity to engage in a

new trade or business is sufficient to disqualify the expenses

for the deduction.   Weiszmann v. Commissioner, 52 T.C. 1106, 1111

(1969) affd. per curiam 443 F.2d 29 (9th Cir. 1971); see sec.

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

     The Court agrees with petitioner’s contention that his

training improved his aeronautical engineering skills.    By taking

flight lessons petitioner likely improved his ability to evaluate

cockpit ergonomics and design and troubleshoot future flight

concepts.   The training also likely improved his skills in

testing and evaluating aircraft flight systems software.

However, the education undertaken by petitioner was a course of

study that led to his receipt of commercial pilot certificates.

As a result, this Court must decide whether petitioner became

qualified for new trade or business by attaining these

certificates.

     Even though petitioner did not intend to work as a

commercial pilot, the commercial pilot certificates qualified him

to be employed as a pilot-in-command of an aircraft for single
                                 - 6 -

and multiengine airplanes for compensation,3 qualified him to

serve as a second-in-command pilot for an airline,4 and enabled

petitioner to engage in a trade or business for which he was

previously unqualified.     Robinson v. Commissioner, 78 T.C. 550,

557 (1982); Bodley v. Commissioner, 56 T.C. 1357, 1361 (1971).

Therefore, this Court finds that petitioner’s commercial pilot

training was part of a program of study which qualified him for a

new trade or business, and the expenses paid in 2002 to attend

the program are nondeductible under section 162.    See sec. 1.162-

5(b)(3), Income Tax Regs.

     Respondent contends petitioner is liable for a section 6662

penalty because the underpayment of tax was attributable to

negligence.   Section 6662(a) imposes a 20-percent accuracy-

related penalty on the portion of any underpayment attributable

to negligence.   Sec. 6662(b).   The term “negligence” includes any

failure to make a reasonable attempt to comply with the

provisions of the internal revenue laws or to exercise ordinary

and reasonable care in the preparation of a tax return.    Sec.

6662(c); sec. 1.6662-3(b)(1), Income Tax Regs.




     3
       See Roussel v. Commissioner, T.C. Memo. 1979-125; 14
C.F.R. sec. 61.133(a) and (b) (2002).
     4
       See 14 C.F.R. sec. 61.55 (2002). Because petitioner did
not earn an airline transport pilot rating, he would not be
allowed to captain an airplane for an airline company.
                                 - 7 -

     On this entire record, the Court finds that petitioner made

a reasonable attempt to comply with the internal revenue laws

and exercised ordinary and reasonable care by obtaining software

to aid him in the preparation of his 2002 Federal income tax

return.    Therefore, the Court is satisfied that the section

6662(a) accuracy-related penalty for negligence should not be

imposed.

     The Court, in reaching its holding, has considered all

arguments made and concludes that any arguments not mentioned

above are moot, irrelevant, or without merit.

     To reflect the foregoing,


                                                Decision will be

                                          entered under Rule 155.
