Sharon v. Comm'r of Internal Revenue
| Decision Date | 21 June 1976 |
| Docket Number | Docket Nos. 6189-71,3597-72. |
| Citation | 66 T.C. 515 |
| Parties | JOEL A. SHARON AND ANN L. SHARON, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
1. P was an attorney employed by the IRS. During 1969 and 1970, he occasionally used one room in his apartment as a place for doing office work. Held, P is not entitled to deductions under sec. 162 or sec. 212, I.R.C. 1954, for one-sixth of the rental and other costs of the apartment. Stephen A. Bodzin, 60 T.C. 820 (1973), revd. 509 F.2d 679 (4th Cir. 1975), cert. denied423 U.S. 825 (1975), will no longer be followed.
2. To enable P to enter the legal profession, the following amounts were spent by or on his behalf: $11,125 to obtain a college degree; $6,910 to obtain a law school degree; $175.20 to take bar review courses; and $25 to take the New York State bar examination. Held, the costs of P's college education, law school education, and bar review courses are nondeductible personal expenses under sec. 262, I.R.C. 1954. Held, further, the $25 fee paid to the New York licensing authority is a capital expenditure amortizable over P's life expectancy.
3. P paid $230 to take a California bar review course, $571 to take the California bar examination, and $11 for the privilege of practicing before two Federal courts in California. Held, the cost of the California bar review course is a personal, nondeductible educational expenditure; held, further, other fees incurred in gaining license to practice law in California are amortizable over P's life expectancy.
4. During 1970, P spent $313.35 in obtaining a license to practice before the U.S. Supreme Court. Held, the cost of obtaining a license to practice before the Supreme Court of the United States was not a deductible business expense under sec. 162(a), I.R.C. 1954, but was a capital expenditure amortizable over P's life expectancy.
5. Remaining useful life and basis for depreciation determined with respect to rental property owned by P.
6. P paid the sum of $20 as the costs of filing the two petitions involved herein. Held, P is not entitled to an award of costs. Joel A. Sharon and Ann L. Sharon, pro se.
David L. Gibson and William E. Saul, for the respondent.
The Commissioner determined deficiencies in the petitioners' Federal income tax in the amounts of $235.56 for 1969 and $653.70 for 1970. Due to concessions, the following issues remain for decision: (1) Whether one-sixth of the petitioners' rental and other costs of the apartment is deductible under either section 162(a) or section 212 of the Internal Revenue Code of 1954 1 as the cost of maintaining an office in their home; (2) whether the petitioners are entitled to amortization deductions under section 167(a)(1) with respect to certain educational and other expenses incurred to enable the petitioner Joel A. Sharon to obtain a license to practice law in the State of New York; (3) whether the petitioners may deduct or amortize costs incurred by the petitioner Joel A. Sharon in taking the California bar examination and miscellaneous expenses incurred in obtaining admission to courts in that State; (4) whether the petitioners may deduct under section 162, or amortize pursuant to section 167, the cost of petitioner Joel A. Sharon's admission to the Supreme Court of the United States; (5) whether the petitioners are entitled to depreciation deductions with respect to residential rental property owned by them; and (6) whether the petitioners are entitled to an award of Tax Court costs
Some of the facts have been stipulated, and those facts are so found.
During the years 1969 and 1970, and at the time of filing the petitions herein, Joel A. Sharon and Ann L. Sharon, husband and wife, resided in San Mateo, Calif. They filed their joint Federal income tax returns for the years 1969 and 1970 with the Internal Revenue Service Center, Ogden, Utah. Mr. Sharon will sometimes be referred to as the petitioner.
The petitioner was employed as an attorney by the Office of Regional Counsel, Internal Revenue Service, San Francisco, Calif., from February 1967 to March 1972. During 1969 and 1970, the petitioner set aside one room in his apartment to be used as an office. The office was a large room separated from the living room by sliding doors. The room was furnished with a desk, desk lamp, desk chair, room lamp, and a typewriter. The room also had a storage closet housing numerous files, clothing, and library books. The petitioner used the office for the following purposes: (1) Performing work in connection with his employment; (2) performing work in connection with investments and property held for the production of income; (3) reading and reviewing various professional books, journals, and other publications; and (4) handling personal correspondence.
In connection with his employment, the petitioner used the office for reviewing files, preparing for conferences, drafting briefs, and preparing Tax Court cases for trial. During the 2 years in question, he handled 8 or 10 trials for his employer.
The petitioner's employer did not require him to maintain an office at home or to work beyond regular working hours. He was given a set of keys to the office provided by his employer. His office at home was not better suited for the performance of his employment duties than the office provided by his employer.
When he thought it necessary or desirable to work extra hours, the petitioner found it more convenient to take his work home. The trains and buses ran less frequently after 6 p. m. If he arrived in San Mateo late, he would have to walk three-quarters of a mile to reach home, whereas if he arrived earlier, his wife could meet him at the station and drive him home. Also, by not staying at his employer's after hours, he saved the expense of buying dinner at a downtown restaurant.
The petitioner also used the office at his home as a place to do reading that he felt was necessary to keep current in the legal profession. His reading matter included the American Bar Association Journal, the New York State Bar Journal, the California Bar Journal, the Journal of Taxation, CCH Tax Advance Sheets, and various newspapers and magazines of general interest. The subject matter of his reading included no-fault insurance, prepaid legal insurance, law school developments, legal ethics, and current developments in the tax law.
The office was also used in connection with the petitioner's investments. Books, records, and files pertaining to his investments were stored in the office. His activities in this regard included reading and answering correspondence, reviewing and preparing financial statements, and researching legal and financial data regarding possible investments.
The petitioner used the office for a maximum of approximately 15 to 20 hours per week. He kept no records regarding the use of the office, and the record does not disclose what portion of the time was spent in connection with his employment as opposed to the time spent in connection with his investments or other purposes. The office was not used by his children. Occasionally, his wife would assist him in the office, but she did not use it for any other reason. On infrequent occasions, when the petitioners entertained a large group, they would keep the sliding doors between the office and living room open and permit guests to use both rooms.
The following expenses were incurred in the use of the petitioner's apartment:
+------------------------+
¦ ¦1969 ¦1970 ¦
+----------+------+------¦
¦ ¦ ¦ ¦
+----------+------+------¦
¦Rent ¦$3,300¦$3,360¦
+----------+------+------¦
¦Utilities ¦180 ¦180 ¦
+----------+------+------¦
¦Insurance ¦50 ¦50 ¦
+----------+------+------¦
¦Total ¦3,530 ¦3,590 ¦
+------------------------+
The room used by the petitioners as an office represented one-sixth of their available apartment space. On their 1969 and 1970 joint Federal income tax returns, they claimed deductions for ‘Office in Home Expenses' in the amounts of $588.33 and $598.33 respectively.
The petitioner attended Brandeis University from September 1957 to June 1961 and received a bachelor of arts degree upon his graduation. During his years at Brandeis, the following expenses were paid by or on behalf of the petitioner in connection with his education:
After graduation from Brandeis University, the petitioner entered Columbia University School of Law, receiving a bachelor of laws degree in June 1964. While pursuing his law degree at Columbia University, the following expenses were paid by or on his behalf:
In order to be eligible to take the New York bar examination, the petitioner was required to graduate from a fully accredited 4-year undergraduate institution and give evidence of his successful completion of 3 years of study at an accredited law school. The petitioner expended a total of $210.20 in gaining admission to practice law in the State of New York. This amount included $175.20 for bar review courses and...
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