                       T.C. Memo. 2003-175



                     UNITED STATES TAX COURT



   GEORGE W. WARREN AND FLORENCE J. WINTERHELD, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8125-00.               Filed June 12, 2003.


     George W. Warren and Florence J. Winterheld, pro se.

     Cynthia Olson and James Gehres, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     VASQUEZ, Judge: Respondent determined a deficiency of $3,954

and an addition to tax of $745 under section 6651(a)(1) in

petitioners’ Federal income tax for 1994.1   After concessions,



     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code, and all Rule references are to the Tax
Court Rules of Practice and Procedure. Amounts are rounded to
the nearest dollar.
                                - 2 -

the issue for decision is whether petitioners are entitled to

deduct education expenses incurred in 1994.

                           FINDINGS OF FACT

     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.    At the time they filed

the petition, petitioners resided in Chinook, Montana.    At the

time of trial, George Warren (hereinafter, petitioner) was 62

years old.

     In 1986, petitioner decided to pursue a career in the

ministry of the United Methodist Church (UMC).    The rules for

each level of candidacy can be found in the UMC’s 1992 Book of

Discipline.2   There are various levels of candidacy.   The levels,

in ascending order, are:    (1) Certified candidate, (2) local

pastor, (3) associate member, (4) probationary member, and (5)

member in full connection.    Petitioner will be unable to become a

member in full connection because of the time commitment, as

petitioner will be forced to retire at the age of 70.




     2
         The 1992 Book of Discipline is applicable to the year in
issue.   These rules changed in 1996.
                              - 3 -

     From 1993 to 1996, petitioner was a part-time local pastor.3

The levels relevant to the year in issue are described as

follows:

          1. Certified Candidate: This level requires
     graduation from an accredited high school or receipt of
     a certificate of equivalency.

          2. Local Pastor: A local pastor may be a student
     or a part-time or full-time position.4 This level
     requires attendance at a 2-week licensing school or
     completion of one-third of the work necessary for a
     master of divinity degree.

          This position is appointed annually. Local
     pastors continue in the course of study for ordained
     ministry until they have completed the educational
     requirements for associate or probationary membership.5
     After completion of the educational requirements for an
     associate membership, however, an individual may choose
     to remain a local pastor. A local pastor may lead the
     sacraments (i.e., baptism, communion) at the appointed
     parish.

          3. Associate Member: To be considered for
     associate membership, a candidate must have reached the
     age of 35 and served 4 years as a full-time local
     pastor. This level also requires completion of the
     educational requirements for local pastors, completion
     of the 5-year course of study for ordained ministry,
     and completion of at least 60 semester hours toward a
     bachelor’s degree.




     3
        Since 1996, petitioner has been a full-time local pastor,
and, as of June 2002, was being considered for associate
membership.
     4
        Local pastors may be part time if, for example, a church
cannot afford a full-time local pastor.
     5
        Generally, a full-time local pastor must complete these
educational requirements within 8 years and a part-time pastor
within 10 years.
                                - 4 -

     In 1992, petitioner became a certified candidate.      Prior to

entering the candidacy for ministry, petitioner accumulated over

60 undergraduate semester hours from various schools, which met

the minimum undergraduate educational requirements to become an

associate member.

     Petitioner decided that he needed to improve his ministry

skills.    Such skills included interpersonal skills, relational

skills (e.g., working with situations in which parishioners could

be involved), sermon writing skills, leadership skills, and

management skills.    In 1994, petitioner decided to take courses

at the University of Great Falls.6      These courses were not

required for petitioner to continue as a local pastor.      In

December 1995, petitioner earned a bachelor’s degree in human

services.

     On their joint 1994 tax return, petitioners claimed a

deduction of $9,698 for “Continuing Education” on their Schedule

C, Profit or Loss From Business.     The amount claimed represented

tuition, books, and course-related fees incurred and paid by

petitioner for the courses taken at the University of Great

Falls.    In the notice of deficiency, respondent disallowed the

deduction, stating:


     6
        Examples of courses taken by petitioner include:
Introduction to Counseling, Internship in Ministry Practice,
Death and Dying as a Life Cycle, Modern Social Problems, The
Family, Community, Ethics in Human Services, Symphonic Choir,
Basic Writing, and Writing Strategies.
                               - 5 -

          Since you did not establish that the business
     expense shown on your tax return was paid or incurred
     during the taxable year and that the expense was
     ordinary and necessary to your business, we have
     disallowed the amount shown.

Respondent issued a supplemental report for the notice of

deficiency but continued to disallow this deduction in full.

                              OPINION

     Deductions are a matter of legislative grace, and

petitioners have the burden of showing that they are entitled to

any deduction claimed.7   Rule 142(a); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934).

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

necessary expenses incurred in carrying on a trade or business.

Although this section does not explicitly mention expenditures

for education, the regulations provide an objective test for

determining whether such expenditures are deductible.8   Diaz v.

Commissioner, 70 T.C. 1067, 1072-1073 (1978).   Education expenses

are considered ordinary and necessary business expenses if the

education maintains or improves skills required by the taxpayer

in his employment or meets the express requirements of an


     7
         The parties do not argue that sec. 7491(a) is applicable.
     8
        The education expense regulation here relevant was
promulgated in 1967. It replaced a regulation that had been
promulgated in 1958. The 1958 regulation embodied a subjective
“primary purpose” test. The 1967 regulation replaced this with
an objective test, in particular, the qualification-for-a-new-
trade-or-business test embodied in sec. 1.162-5(b)(3), Income Tax
Regs. Taubman v. Commissioner, 60 T.C. 814, 817-819 (1973).
                                - 6 -

employer imposed as a condition for the taxpayer’s continued

employment, status, or rate of compensation.    Sec. 1.162-5(a),

Income Tax Regs.

     Education expenses, however, are not deductible if they are

“made by an individual for education which is part of a program

of study being pursued by him which will lead to qualifying him

in a new trade or business.”    Sec. 1.162-5(b)(3)(i), Income Tax

Regs.    This is so even if the courses meet the express

requirements of the employer.     Jungreis v. Commissioner, 55 T.C.

581, 591 (1970).    It is immaterial whether the individual

undertaking the education intends to or does in fact become

employed in a new trade or business.     Bodley v. Commissioner, 56

T.C. 1357, 1360 (1971).

     Whether the education qualifies a taxpayer for a new trade

or business depends upon the tasks and activities which he was

qualified to perform before the education and those which he is

qualified to perform afterwards.     Weiszmann v. Commissioner, 52

T.C. 1106, 1110 (1969), affd. per curiam 443 F.2d 29 (9th Cir.

1971).    We have repeatedly disallowed education expenses where

the education qualifies the taxpayer to perform significantly

different tasks and activities.     Browne v. Commissioner, 73 T.C.

723, 726 (1980); Glenn v. Commissioner, 62 T.C. 270, 275 (1974).

Further, the taxpayer’s subjective purpose in pursuing the

education is irrelevant, and the question of deductibility is not
                               - 7 -

satisfied by a showing that the taxpayer did not in fact carry on

or did not intend to carry on a new trade or business.   Burnstein

v. Commissioner, 66 T.C. 492, 495 (1976).

     Respondent argues that the courses taken by petitioner

qualify him for a new trade or business, and that the expenses of

a college education are almost always nondeductible personal

expenses.

     We conclude that the courses, which ultimately led to

petitioner’s bachelor’s degree, qualified petitioner in a new

trade or business.   The courses taken by petitioner provided him

with a background in a variety of social issues that could have

prepared him for employment with several public agencies and

private non-profit organizations outside of the ministry.

Whether or not petitioner remains in the ministry is irrelevant;

what is important under the regulations is that the degree “will
                               - 8 -

lead” petitioner to qualify for a new trade or business.9   Sec.

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

     It may be all but impossible for a taxpayer to establish

that a bachelor’s degree program does not qualify the taxpayer in

a new trade or business.10   See Malek v. Commissioner, T.C. Memo.

1985-428.   We stated in Carroll v. Commissioner, 51 T.C. 213, 216

(1968), affd. 418 F.2d 91 (7th Cir. 1969):

     Millions of people must secure a general college
     education before they commence their life’s employment,
     and it is generally accepted that obtaining such
     education is a personal responsibility in preparing for
     one’s career. * * * Though his perseverance is to be
     admired, we do not believe that he should receive tax
     deductions not available to those who complete their
     general college preparation before beginning their
     career. Furthermore, a general college education has
     more than economic utility. It broadens one’s
     understanding and increases his appreciation of his
     social and cultural environment.




     9
        In Glasgow v. Commissioner, T.C. Memo. 1972-77, affd. 486
F.2d 1045 (10th Cir. 1973), we allowed an ordained minister to
deduct the expenses involved in gaining an undergraduate degree.
The opinion notes that, as a general proposition, the costs of an
undergraduate college education are not deductible, but that an
exception was warranted under the circumstances involved in the
case. The case was decided under the 1958 regulations. See
supra note 8. These earlier regulations were subjective and
stressed the “primary purpose” for a taxpayer’s educational
expenditures. As a result, an educational expenditure which
qualified a taxpayer for a new trade or business would not be
disallowed as an ordinary and necessary business expense
deduction unless the education was undertaken primarily for the
purpose of obtaining a new position.
     10
        We note that the regulations deal specifically with
“teaching and related duties”. Sec. 1.162-5(b)(3)(i), Income Tax
Regs.
                                 - 9 -

     We have no doubt that the courses petitioner took greatly

improved his skills in being a pastor, and that petitioner

intends to continue with the UMC.    Unfortunately, we apply an

objective test in determining whether a course qualifies a

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

supra, and the courses taken by petitioner prepared him for

positions outside the ministry.    See Meredith v. Commissioner,

T.C. Memo. 1993-250.   We conclude that petitioner is not entitled

to a deduction for his educational expenses because the courses

qualified petitioner in a new trade or business.

     In reaching our holding herein, we have considered all

arguments made, and to the extent not mentioned above, we

conclude them to be moot, irrelevant, or without merit.

     To reflect the foregoing,

                                                Decision will be

                                          entered under Rule 155.
