Toner v. Comm'r of Internal Revenue , Docket No. 555-76.

• Decision Date: 12 February 1979
• Docket Number: Docket No. 555-76.
• Citation: 71 T.C. 772
• Parties: LINDA M. LIBERI TONER, PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

71 T.C. 772

LINDA M. LIBERI TONER, PETITIONER

v.COMMISSIONER of INTERNAL REVENUE, RESPONDENT

Docket No. 555-76.

United States Tax Court

Filed February 12, 1979.

P was a teacher in a Catholic elementary school in 1973. The minimum education required by her employer was a high school diploma, but teachers without a bachelor's degree were also required to earn 6 hours of college credits each year. Teachers in the public schools were generally required to have a bachelor's degree in order to begin teaching. P always planned to go to college and become a teacher. In 1973, she took courses with 15 hours of credit, received her bachelor's degree, and deducted the expenses for such courses. Held, P's educational expenses are not deductible because the education enabled her to satisfy the minimum educational requirement generally applicable in the teaching profession, another trade or business for her. Mary Ann Hagan and Margaret M. Boyce, for the

Marc A. Feller, for the respondent.

SIMPSON, Judge:

The Commissioner determined a deficiency of $177.41 in the petitioner's Federal income tax for 1973. The sole issue to be decided is whether the petitioner, a teacher in a Catholic elementary school, may deduct as a business expense the cost of college courses leading to a bachelor's degree.

FINDINGS OF FACT

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

The petitioner, Linda M. Liberi Toner, maintained her legal residence in Broomall, Pa., at the time her petition was filed in this case. She filed her individual Federal income tax return for 1973 with the Internal Revenue Service, Philadelphia, Pa.

During the year 1973, Mrs. Toner was employed as a lay teacher at St. Clement's Catholic Elementary School (St. Clement's), a school operated under the auspices of the Philadelphia archdiocese. The archdiocese advised and assisted in the operation of St. Clement's and the other Catholic schools in the archdiocese. St. Clement's employed both lay teachers and teachers who were members of a religious order. Lay teachers at St. Clement's were selected either by the pastor or the principal of the school.

In 1970, Mrs. Toner filed an application with the archdiocese for a teaching position in one of the Catholic elementary schools. She was interviewed by an official of the archdiocese and the principal of St. Clement's, and she was employed to teach at St. Clement's beginning in 1971. School officials considered the following factors in selecting teachers to teach at a Catholic elementary school: evidence of the applicant's ability to work in a religious atmosphere and of her moral character and ability to uphold the moral values and religious purpose of the school, a recommendation from her parish pastor, and references from other qualified persons. The applicant also had to possess a high school diploma and present a high school transcript indicating her intellectual capacities. These criteria were recommended by the Archdiocesan office and were followed at St. Clement's.

Mrs. Toner had graduated from high school and had completed 2 full years of college when she began teaching at St. Clement's in 1971. The usual educational background of a beginning lay teacher at St. Clement's was a high school education, and none of the other lay teachers at St. Clement's had a college degree when Mrs. Toner began teaching there. The number of Catholic elementary school teachers who had bachelor's degrees when they began teaching varied from parish to parish, but no parish in the Philadelphia archdiocese required a bachelor's degree of its beginning elementary teachers. On the other hand, virtually all the teachers in the Catholic high schools in the archdiocese were required to have a college degree when they were hired. The State of Pennsylvania imposed no educational requirements for teachers hired by the Philadelphia archdiocese. However, the State generally did require that a nonvocational teacher in a public school or in a nonreligious private school possess a bachelor's degree. Salaries for teachers in the Catholic elementary schools in the Philadelphia area were significantly lower than those in the public schools.

Upon commencing employment at a Catholic elementary school in the Philadelphia archdiocese, a lay teacher was required to sign an agreement that she take a minimum of 6 college credits per year until such time as she obtained her college degree. Mrs. Toner signed such an agreement. The purpose of such agreement was to assure that a teacher would keep abreast of current practices in the teaching profession. The teacher was required to sign this agreement annually until such time as she obtained a college degree. However, aside from the requirement that she sign such agreement, a teacher was not required to obtain a degree. A teacher who already had her bachelor's degree or State certification did not have to sign such agreement. No other educational requirements were imposed on teachers at St. Clement's, although teachers there were advised to take some theology courses, in keeping with the religious nature of the school. A teacher with a bachelor's degree received a higher salary than a teacher with similar experience but without a degree.

The functions of a teacher at St. Clement's were to train her students in Christian principles and to teach formal classes in subjects such as religion, social studies, math, and English. The religious purpose of the education was also carried over to the teaching of secular subjects. Mrs. Toner's functions were the same as those of all other teachers at St. Clement's and included preparing the children for their liturgy at mass, teaching prayers, and preparing the students for confirmation and religious ceremonies. Her responsibility for religious instruction was the same as that of the teachers who belonged to the religious order. Mrs. Toner was accorded full faculty status equal to that of other faculty members at St. Clement's, and she served on faculty committees and had an equal voice in faculty affairs. She was also covered by the lay employees' retirement plan operated by the archdiocese of Philadelphia.

Since she was a child in grade school, Mrs. Toner expected to go to college; she was interested in the areas of medicine and teaching. After graduation from high school, she entered Villanova University as a full-time student in 1968. She began in the nursing school but soon transferred to the general humanities program. In September 1970, she enrolled in Villanova's night school and changed her major to education, with a specialty in English. She obtained her bachelor's degree in September 1973. Villanova had a State-approved program for teacher certification, and upon graduation, Mrs. Toner received a State teaching certificate issued by the Pennsylvania Board of Education. She has never applied for a teaching position in the public schools. She continued to teach at St. Clement's until December 1976, shortly before the birth of her first child.

In 1973, Mrs. Toner took 15 credits at Villanova consisting of the following courses: Education 263, The Problem Child; Education 298, Student Teaching; English 224, Major American Writers II; and Psychology 225, Psychology of Motivation. On her Federal income tax return for 1973, she deducted her expenses for tuition, student teaching, transportation, textbooks, and other related amounts for a total of $906.28. In his notice of deficiency, the Commissioner disallowed the entire amount on the grounds that the expenses were incurred to meet the minimum educational requirement for qualification in her employment and were not deductible.

OPINION

We must decide whether the petitioner is entitled to deduct the educational expenses paid by her in 1973. She maintains that when she began teaching at St. Clement's, she already satisfied the minimum educational requirement of her employer, that the educational courses taken by her in 1973 were to maintain and improve her skills as a teacher, and that she is entitled to deduct the expenses incurred for such education. The Commissioner concedes that the minimum educational requirement of St. Clement's, the petitioner's employer, was graduation from high school, that the petitioner had met such educational requirement when she was employed, and that the education pursued by her in 1973 did in fact maintain or improve her skills as a teacher. Nevertheless, the Commissioner contends that her educational expenses were personal and not deductible because her education was pursued to enable her to achieve her lifelong objective of completing a college education and because such education enabled her to satisfy the minimum educational requirement generally applicable to members of the teaching profession. We need not decide whether a teacher's education to obtain a bachelor's degree is always to be treated as meeting the minimum educational requirements of the profession, but we are satisfied that in this case, the expenses of the education are not deductible.

Section 162(a), I.R.C. 1954,¹ allows a deduction for all the ordinary and necessary expenses of carrying on a trade or business. On the other hand, section 262 expressly disallows a deduction for all personal expenses. Section 1.162-5, Income Tax Regs., sets forth criteria for distinguishing those educational expenses which are deductible as business expenses under section 162(a) from those educational expenses which are personal and not deductible. In part, such section provides:

Sec. 1.162-5 Expenses for education.

(a) General rule. Expenditures made by an individual for education (including research undertaken as part of his educational program) which are not expenditures of a type described in paragraph (b)(2) or (3) of this section are deductible as ordinary and necessary business expenses (even though the education may lead to a degree) if the education—

(1) Maintains or improves skills required by...