Memorandum Findings of Fact and Opinion
ATKINS, Judge: The respondent determined a deficiency in income tax for the taxable year 1962 in the amount of $133.73.
The issue presented is whether amounts expended by petitioner John C. Martin, Jr., a patent examiner employed by the United States Patent Office, for tuition, books, and supplies in attending night law school classes are deductible as ordinary and necessary business expenses under section 162(a) of the Internal Revenue Code of 1954.
Findings of Fact
Some of the facts have been stipulated and are incorporated herein by this reference.
The petitioners are husband and wife residing in Arlington, Virginia. They filed a joint Federal income tax return for the taxable year 1962 with the district director of internal revenue, Richmond, Virginia. John C. Martin, Jr., will hereinafter be referred to as the petitioner.
The petitioner served in the United States Army from July 1954 to June 1957, at which time he returned to the University of Delaware and continued his courses which led to his receiving, in June 1960, a bachelor's degree in chemistry.
Sometime during his last year of attendance at the University of Delaware the petitioner considered various careers within the field of chemistry. He was not interested in laboratory work on a full time basis. A document issued by the American Chemical Society described various occupations, one of which was that of patent examiner. At that time the petitioner developed an interest in the position of patent examiner. At the placement office of the university he saw a pamphlet issued by the Civil Service Commission announcing an examination for patent examiner. He also saw a pamphlet issued by the Patent Office entitled "A Career for Engineers and Scientists," in which it was stated that new patent examiners might enroll in the evening law school of one of the four major universities in the Washington, D.C. area. The idea of combining the knowledge of organic chemistry and law appealed to the petitioner. He was not financially able to go to law school full time, and a career as a patent examiner, which would permit him to pursue his legal studies at night, interested him. Accordingly, sometime during the winter of 1959-1960, he took the Law School Admissions Test and about the same time inquired of George Washington University Law School (located in Washington, D.C.) concerning application for admission. This was done before he made any application to the Patent Office, since he was not interested in taking a position as a patent examiner unless he could be admitted to law school. From examining the pamphlet issued by the Patent Office, he was aware that at that time, 1 in general, a law degree or membership in the bar of a state was required for promotion to the top supervisory and technical positions in the Patent Office, and he did not want to take a position in that office unless he had the opportunity to obtain the qualifications necessary for such higher positions.
In the spring of 1960 petitioner applied for a job as a patent examiner with the United States Patent Office. Sometime during the summer of 1960, he moved to the Washington, D.C., area and was employed by a bank. In September 1960, he enrolled in the George Washington University Law School as a degree candidate, taking night courses. In October 1960, he went to work for a patent law firm as a patent searcher. In March 1961, he received from the Patent Office an offer of employment as a patent examiner, but he did not accept it. He received another such offer from the Patent Office in December 1961, which he accepted. He began his employment there as a patent examiner in February 1962, and was so employed at the time of the trial of this case. At that time, he had completed 38 of the 80 credit hours of courses required for a bachelor of laws degree. He continued his course of night study at the law school and received the degree of LL.B. in June 1964. In July 1964, he took the District of Columbia Bar examination but was unsuccessful.
The courses which the petitioner took at George Washington University Law School during the year 1962 were:
| Federal Income Tax | 3 credit hours |
| Trusts & Estates | 3 credit hours |
| Evidence | 4 credit hours |
| Copyright Law | 2 credit hours |
| Equity | 2 credit hours |
| Constitutional Law | 4 credit hours |
When first employed in 1962 as a patent examiner the petitioner was placed in grade GS-7, having met the minimum educational and experience requirements prescribed for a patent examiner in that grade. 2 Later in that year he was promoted to grade GS-9. He served in Division 60 of the Patent Office which dealt with polymer chemistry (resins) and photographic chemistry. He primarily handled patent applications in the fields of ion exchange resins, polycarbonate resins, and phenolic resins.
In general the duties of a patent examiner are to examine patent applications to determine whether a patent should be granted. 3 This involves an analysis of the claim in the application to see whether it meets formal requirements, a search of all prior art relating to the particular claimed invention, formulating decisions as to whether the claimed subject matter is patentable, and writing an "action" in the case. If no equivalent invention in the prior art is found the examiner recommends that a patent be allowed. He conducts interviews with applicants, patent attorneys and patent agents 4 with a view to overcoming objections and rejections. However, a patent examiner below those in grade GS-12 is not authorized to reach final conclusions with respect to issues, although he may participate in the negotiations. When an interference arises (that is, when two applicants are claiming the same invention) the patent examiner makes a search for precedents and assists a primary examiner (one who is employed in grade GS-14 or GS-15), who resolves the issue. If a patent application is rejected the applicant may appeal to the Board of Appeals, an administrative body within the Patent Office. Patent examiners do not appear before such board, but there is filed with the board by a primary examiner a brief which is usually written by the examiner who examined the patent application. In the event of an adverse decision by the board, the applicant may appeal to the Court of Customs and Patent Appeals or to the United States District Court for the District of Columbia. In such a proceeding the Patent Office is represented by attorneys who are employed in the Solicitor's Branch of the Patent Office. Patent examiners are not required to prepare any documents or pleadings for the presentation of a case to any court.
Patent examiners in the lower grades do not deal with any field of law other than patent law. All patent examiners are required upon commencement of their duties in the Patent Office to take a 2-week training course with respect to their duties. During 1962 the Patent Office also conducted an advanced lecture program (2 hours each week for about 40 weeks) which included discussions of various aspects of the law with respect to patents. In December 1962 the Patent Office established the Patent Office Academy to provide patent examiners with a more comprehensive training in the field of patents, and particular stress was placed upon Title 35, United States Code, pertaining to patents. The program provided was for 20 hours each week for about 6 months.
The petitioner attended the Patent Office Academy which commenced in 1962. The Patent Office did not require a patent examiner to have any previous law school education, nor was he required by the Patent Office to pursue a course of legal study in order to maintain his position.
While in 1962 a law degree was not required as a prerequisite to obtaining or holding the position of patent examiner, attendance at law school was encouraged by the Patent Office. If two employees of equal ability were under consideration for promotion to a particular position and one had a law degree and the other did not, the former would be selected because of his potential for higher positions. In petitioner's group there were 4 primary examiners or supervisors and each of them had a law degree.
The Patent Office employed approximately 1,100 patent examiners. Most of the new patent examiners attended law school. Approximately 75% of such new patent examiners who attend law school leave the Patent Office while they are attending law school or within a year or two after graduation. About 80% of the 40 to 45 organic chemistry examiners in petitioner's group have attended law school.
During 1962 the petitioner expended a total of $752.50 in connection with his attendance at law school as described above. This amount consisted of $578 paid for tuition and fees, and $174.50 for books and supplies.
In his return for 1962, the petitioner claimed as a deduction the above amount of $752.50 as "Education." The respondent disallowed this deduction, stating in the notice of deficiency that the claimed expenses are not allowable as a deduction under section 162 of the Internal Revenue Code of 1954.
The law courses which the petitioner took in 1962 were not undertaken primarily for the purpose of maintaining or improving skills required by the petitioner in his employment.
Opinion
Section 162(a) of the Internal Revenue Code of 1954 allows as a deduction all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. Section 262 of the Code provides that, with certain exceptions not here pertinent, no deduction shall be allowed for personal, living, or family expenses. Section 1.162-5 of the Income Tax Regulations5 provides that expenditures made by a taxpayer for his education are deductible if they are for education undertaken primarily for the purpose of maintaining or improving skills required in his employment or other trade or business or meeting the express requirements of his employer as a condition to the retention of his salary, status, or employment. Such regulations further provide that expenditures made by a taxpayer for his education are not deductible if they are for education undertaken primarily for the purpose of obtaining a new position or substantial advancement in position or primarily for the purpose of fulfilling the general educational aspirations or other personal purposes of the taxpayer.
The petitioner does not contend that the education which he took was required as a condition to the retention of his salary, status or employment, but does contend that within the intendment of the regulations it was undertaken primarily for the purpose of maintaining or improving skills required in his employment as a patent examiner and that, therefore, the cost thereof is deductible. In this connection the petitioner contends that the position of patent examiner is quasi-judicial and that the education in question was helpful in improving skills required in his employment.
The respondent, on the other hand, contends that the law school courses taken by the petitioner were not sufficiently related to his employment to make the cost an ordinary and necessary business expense, and that the petitioner did not take the course for the primary purpose of maintaining or improving skills needed in his employment. It is his position that the petitioner's legal education qualified him for a new trade or business for which he was not previously qualified, and that his purpose in taking this education was to fulfill his pre-existing educational aspirations or to obtain substantial promotions within the Patent Office, or to obtain employment outside the Patent Office.
We have heretofore pointed out in Cosimo A. Carlucci, 37 T.C. 695, that the fact that the education taken may result in obtaining a degree, a new position, or advancement does not preclude the deduction of the cost thereof, if the education was undertaken primarily for the purpose of maintaining or improving the skills required by the employee in his then employment. The question of a taxpayer's primary purpose in undertaking the education is essentially one of fact which must be decided upon the basis of all the facts and circumstances in a particular case.
The petitioner first conceived the idea of attending law school while he was finishing his course leading to a bachelor's degree in chemistry. He was not financially able to attend law school full time, and employment as a patent examiner appealed to him since it would permit him to pursue his legal studies at night. He took the test for admission to law school and made inquiries concerning application for admission to George Washington University Law School prior to making any application to the Patent Office. He entered law school in September 1960, at which time he was working in a bank. At the time he entered law school he had no assurance that he would obtain a position as a patent examiner with the Patent Office. It was not until March 1961, that he was offered such a position. He refused the offer at that time, and it was not until February 1962, that he was employed by the Patent Office as a patent examiner. In the light of these facts and the petitioner's testimony, 6 we think it reasonable to conclude that petitioner's primary purpose in entering law school was to qualify himself as a lawyer regardless of whether he might ever become employed by the Patent Office as a patent examiner. When petitioner began his employment as a patent examiner he had 38 of the required 80 credit hours for a degree in law. We are unable to conclude from the evidence that his purpose in continuing his legal courses after he became a patent examiner was any different from his original purpose when he entered law school. Examiners in the two grades which the petitioner occupied in 1962 did not deal with general law, but only with patent law and, as set forth in the Findings of Fact, the Patent Office furnished education in that field. If the petitioner's continuation of his law school courses in 1962 was for purposes connected with his employment as a patent examiner we think that the evidence, including the petitioner's testimony, would require the conclusion that petitioner's primary purpose was to qualify himself as a primary examiner or supervisor in grades GS-14 and GS-15. While the Patent Office, by 1962, had officially eliminated the requirement of a law degree for such higher positions, the evidence establishes that, as a practical matter, such a degree was generally necessary to attain them.
The petitioner relies upon that portion of the regulations which states that if it is customary for other established members of the taxpayer's trade or business to undertake the education in question, the taxpayer will ordinarily be considered to have undertaken the education for the purpose of maintaining or improving skills required in the employment. He points out that about 80% of the group of which he was a part in the Patent Office had attended law school. However, the evidence also shows that approximately 75% of the new patent examiners who attend law school leave the Patent Office while they are attending law school or within a year or two after completion of their law courses. Under the circumstances, we do not think that the fact that 80% of the petitioner's group attended law school is indicative that the petitioner's primary purpose in taking this education was to maintain or improve skills required by him in his employment.
We have carefully examined the various cases cited by the petitioner, but do not consider any of them decisive here. The cases involve varying factual situations and, as stated, each case must be decided upon its particular facts and circumstances.
Upon a full consideration of the record, we have concluded and found as a fact that the education in question was not undertaken primarily for the purpose of maintaining or improving skills required by the petitioner in his employment. We hold, therefore, that the expenditures in question do not constitute ordinary and necessary business expenses within the meaning of section 162(a) of the Code, and the respondent's determination is approved.
Decision will be entered for the respondent.