Brief Fact Summary. Taxpayer was a teacher of twenty-seven years in Virginia. Her teaching certificate was set to expire unless she took college credit or an examination over a set of books. She chose to take college credits and deducted the expenses as business expenses.
Synopsis of Rule of Law. Ordinary and necessary expenses paid or incurred in carrying on a trade or business during a tax year are deductible.
Taxpayer taught school in Virginia for twenty-seven years. In 1945 she was head of the Department of English and a teacher of English and journalism. Taxpayer held the Collegiate Professional Certificate which was the highest certificate issued to public school teachers in Virginia. Her certificate was set to expire and she had to either take college credits or pass an examination on five books for renewal. She chose to obtain the college credits During the tax year at issue she attended summer school at Columbia University in New York. She deducted $239.50 in expenses from her net income for the year 1945. The Tax Court found that expenses were not allowed because they were personal.
Issue. Were the expenses ordinary and necessary in carrying on her trade or business?
Held. Circuit Judge Dobie issued the opinion for the United States Fourth Circuit Court of Appeals reversing the Tax Court and holding that the expenses are deductible.
Discussion. Points of Law - for Law School Success
Thus, to be deductible as a business expense Section 162(a) the item must be-(a) paid or incurred within the taxable year; (b) incurred in carrying on a trade or business'; and (c) both ordinary and necessary. View Full Point of Law
The Court of Appeals found that Taxpayer had complied with the letter and the spirit of the law. She did not incur the expenses for personal reasons but to enable her to have her certificate renewed to continue teaching.