OPINION
The petitioner seeks to deduct a fee of $3,016.43 which he paid in 1966 to Frederick Chusid & Co. for its services in securing new employment for him. We have found as a fact that Chusid at the outset virtually guaranteed him a new position and that their efforts did, in fact, result in Ms accepting a new position.
Section 162 (a) of the Code reads in part as follows:
SBC. 162. TRADE OR BUSINESS EXPENSES
(a) In General. — There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, * * *
We hold initially that the above-noted expenditure of $3,016.43 was incurred by the petitioner in carrying on his trade or business of being a corporate executive.
Over the years we have held on more than one occasion that a taxpayer may be in the trade or business of being an employee, such as a corporate executive or manager, Harold A. Chistensen, 17 T.C. 1456 (1952), Benjamin Abraham, 9 T.C. 222 (1947), Ralph G. Holmes, 37 B.T.A. 865 (1938), and Peoples-Pittsburgh Trust Go., 21 B.T.A. 588 (1930), affd. 60 F. 2d 187 (C.A. 3, 1932). To the same effect are Hochschild v. Commissioner, 161 F. 2d 817 (C.A. 2, 1947), reversing on other grounds 7 T.C. 81 (1946), Schmidlapp v. Commissioner, 96 F. 2d 680 (C.A. 2, 1938), modifying a Memorandum Opinion of this Court, and Daily Journal Co. v. Commissioner, 135 F. 2d 689 (C.A. 9, 1943), reversing a Memorandum Opinion of this Court.
The recent decision in Mitchell v. United States, 408 F. 2d 435 (Ct. Cl. 1969), which supports our holding, deserves special mention because its facts are of particular interest. There the taxpayer had taken as an ordinary deduction large amounts of legal fees which he had incurred in defending himself against an action which grew out of his earlier role as chief executive officer and major stockholder of a corporation. At the time the action was commenced he was president of another corporation and was advised that if the action against him was sustained he would be forced to resign. His reputation as a corporate officer was consequently at stake. With this background the court found that the taxpayer’s “primary trade or business has always been that of being a corporate official,” and that therefore the fees were deductible as a business expense.
The fact that the petitioner was employed at the time the fee was paid, which resulted in his securing new employment, is of no moment. We held in Harold Haft, 40 T.C. 2, 6 (1963), that a costume jewelry salesman who had worked as an employee for some 25 years “did not cease to be in the costume jewelry business” simply because he was temporarily unemployed and had no merchandise to sell. Consequently, he was entitled to deduct certain business expenses even though he had no offsetting income during the entire year in question.
A comparable result was reached in Furner v. Commissioner, 393 F. 2d 292 (C.A. 7, 1968), reversing 47 T.C. 165 (1966), where the Seventh Circuit held that a professional teacher, who took a year off to secure a master’s degree, was still carrying on a trade or business with the result that the cost of her courses taken during that year off was deductible. Cf. Ditmars v. Commissioner, 302 F. 2d 481 (C.A. 2, 1962), reversing a Memorandum Opinion of this Court.
The obvious principle to be evolved from the Furrier and Haft cases is that it is possible for an employee to retain, at least temporarily, his status of carrying on his own trade or business independent of receiving any compensation from a particular employer. This being so, it certainly cannot be held against the petitioner that, while actively and gainfully carrying on his trade or business of being a corporate executive, he incurred an expense with a view to receiving his paychecks from a different employer than the one for whom he was working at the time of payment.
Admittedly all the foregoing cases involved an expense which was incurred with respect, and related to, the employee’s current or former employment and do not involve the payment of an employment fee. However, this does not serve to distinguish the principle at issue in those cases from the one before ns. In 1966 petitioner was an executive of one company. He desired to change his employment and to become an executive of another company. To accomplish this purpose he employed Chusid and paid them a fee in 1966. Chusid found him to be a qualified executive and sought other suitable employment for him. They were successful with the result that on Friday, May 12, 1967, petitioner ceased being an executive of one company and on Monday, May 15,1967, became an executive of another company.
Once we have made our decision that the petitioner was carrying on a trade or business of being a corporate executive, the problem presented here virtually dissolves for it is difficult to think of a purer business expense than one incurred to permit such an individual to continue to carry on that very trade or business — albeit with a different corporate employer. There can be no question that the fee paid in 1966 resulted directly in petitioner’s securing new employment in 1967. There can be no doubt concerning its proximity.
Furthermore, the expense had no personal overtones, led to no position requiring greater or different qualifications than the one given up, and did not result in the acquisition of any asset as that term has been used in our income tax laws. It was expended for the narrowest and most limited purpose. It was an expense which must be deemed ordinary and necessary from every realistic point of view in today’s marketplace where corporate executives change employers with a noticeable degree of frequency. We have said before, and we say again, that the business expenses which an employee can incur in his own business are rare indeed.4 Virtually all his expenses will be incurred on behalf of, and in furtherance of, his corporate employer’s business. What we have here, however, is an exception to that rule.
Our holding with respect to the precise issue presented herein was foreshadowed by our comments in Eugene A. Carter, 51 T.C. 932, 935 (1969), wherein we said the following with respect to a particular ruling of the respondent to be noted in a moment:
However, we -think this language was not intended to- permit the deduction of a fee where the employment agency merely seeks to locate a position for the taxpayer, as here, but was intended to allow a deduction only where the agency actually obtains a position for the taxpayer. In the latter circumstances, it may be reasoned, the expense (frequently paid from the wages earned from the new employment) relates to and is incurred in connection with the taxpayer’s business of carrying on the new employment. [Footnote omitted. Emphasis supplied.]
Interestingly enough one might hare thought that our decision would foe in keeping with the views of respondent. To amplify, on April 25, 1960, respondent published Eev. Eul. 60-158, 1960-1 O.B. 140, which reads in part: “Accordingly, it is held that expenditures incurred by an individual in seeking employment, including fees paid to 'an employment agency, are not allowable deductions for Federal income tax purposes.” A short time later, on June 6,1960, respondent revoked this ruling in Eev. Eul.
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OPINION
The petitioner seeks to deduct a fee of $3,016.43 which he paid in 1966 to Frederick Chusid & Co. for its services in securing new employment for him. We have found as a fact that Chusid at the outset virtually guaranteed him a new position and that their efforts did, in fact, result in Ms accepting a new position.
Section 162 (a) of the Code reads in part as follows:
SBC. 162. TRADE OR BUSINESS EXPENSES
(a) In General. — There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, * * *
We hold initially that the above-noted expenditure of $3,016.43 was incurred by the petitioner in carrying on his trade or business of being a corporate executive.
Over the years we have held on more than one occasion that a taxpayer may be in the trade or business of being an employee, such as a corporate executive or manager, Harold A. Chistensen, 17 T.C. 1456 (1952), Benjamin Abraham, 9 T.C. 222 (1947), Ralph G. Holmes, 37 B.T.A. 865 (1938), and Peoples-Pittsburgh Trust Go., 21 B.T.A. 588 (1930), affd. 60 F. 2d 187 (C.A. 3, 1932). To the same effect are Hochschild v. Commissioner, 161 F. 2d 817 (C.A. 2, 1947), reversing on other grounds 7 T.C. 81 (1946), Schmidlapp v. Commissioner, 96 F. 2d 680 (C.A. 2, 1938), modifying a Memorandum Opinion of this Court, and Daily Journal Co. v. Commissioner, 135 F. 2d 689 (C.A. 9, 1943), reversing a Memorandum Opinion of this Court.
The recent decision in Mitchell v. United States, 408 F. 2d 435 (Ct. Cl. 1969), which supports our holding, deserves special mention because its facts are of particular interest. There the taxpayer had taken as an ordinary deduction large amounts of legal fees which he had incurred in defending himself against an action which grew out of his earlier role as chief executive officer and major stockholder of a corporation. At the time the action was commenced he was president of another corporation and was advised that if the action against him was sustained he would be forced to resign. His reputation as a corporate officer was consequently at stake. With this background the court found that the taxpayer’s “primary trade or business has always been that of being a corporate official,” and that therefore the fees were deductible as a business expense.
The fact that the petitioner was employed at the time the fee was paid, which resulted in his securing new employment, is of no moment. We held in Harold Haft, 40 T.C. 2, 6 (1963), that a costume jewelry salesman who had worked as an employee for some 25 years “did not cease to be in the costume jewelry business” simply because he was temporarily unemployed and had no merchandise to sell. Consequently, he was entitled to deduct certain business expenses even though he had no offsetting income during the entire year in question.
A comparable result was reached in Furner v. Commissioner, 393 F. 2d 292 (C.A. 7, 1968), reversing 47 T.C. 165 (1966), where the Seventh Circuit held that a professional teacher, who took a year off to secure a master’s degree, was still carrying on a trade or business with the result that the cost of her courses taken during that year off was deductible. Cf. Ditmars v. Commissioner, 302 F. 2d 481 (C.A. 2, 1962), reversing a Memorandum Opinion of this Court.
The obvious principle to be evolved from the Furrier and Haft cases is that it is possible for an employee to retain, at least temporarily, his status of carrying on his own trade or business independent of receiving any compensation from a particular employer. This being so, it certainly cannot be held against the petitioner that, while actively and gainfully carrying on his trade or business of being a corporate executive, he incurred an expense with a view to receiving his paychecks from a different employer than the one for whom he was working at the time of payment.
Admittedly all the foregoing cases involved an expense which was incurred with respect, and related to, the employee’s current or former employment and do not involve the payment of an employment fee. However, this does not serve to distinguish the principle at issue in those cases from the one before ns. In 1966 petitioner was an executive of one company. He desired to change his employment and to become an executive of another company. To accomplish this purpose he employed Chusid and paid them a fee in 1966. Chusid found him to be a qualified executive and sought other suitable employment for him. They were successful with the result that on Friday, May 12, 1967, petitioner ceased being an executive of one company and on Monday, May 15,1967, became an executive of another company.
Once we have made our decision that the petitioner was carrying on a trade or business of being a corporate executive, the problem presented here virtually dissolves for it is difficult to think of a purer business expense than one incurred to permit such an individual to continue to carry on that very trade or business — albeit with a different corporate employer. There can be no question that the fee paid in 1966 resulted directly in petitioner’s securing new employment in 1967. There can be no doubt concerning its proximity.
Furthermore, the expense had no personal overtones, led to no position requiring greater or different qualifications than the one given up, and did not result in the acquisition of any asset as that term has been used in our income tax laws. It was expended for the narrowest and most limited purpose. It was an expense which must be deemed ordinary and necessary from every realistic point of view in today’s marketplace where corporate executives change employers with a noticeable degree of frequency. We have said before, and we say again, that the business expenses which an employee can incur in his own business are rare indeed.4 Virtually all his expenses will be incurred on behalf of, and in furtherance of, his corporate employer’s business. What we have here, however, is an exception to that rule.
Our holding with respect to the precise issue presented herein was foreshadowed by our comments in Eugene A. Carter, 51 T.C. 932, 935 (1969), wherein we said the following with respect to a particular ruling of the respondent to be noted in a moment:
However, we -think this language was not intended to- permit the deduction of a fee where the employment agency merely seeks to locate a position for the taxpayer, as here, but was intended to allow a deduction only where the agency actually obtains a position for the taxpayer. In the latter circumstances, it may be reasoned, the expense (frequently paid from the wages earned from the new employment) relates to and is incurred in connection with the taxpayer’s business of carrying on the new employment. [Footnote omitted. Emphasis supplied.]
Interestingly enough one might hare thought that our decision would foe in keeping with the views of respondent. To amplify, on April 25, 1960, respondent published Eev. Eul. 60-158, 1960-1 O.B. 140, which reads in part: “Accordingly, it is held that expenditures incurred by an individual in seeking employment, including fees paid to 'an employment agency, are not allowable deductions for Federal income tax purposes.” A short time later, on June 6,1960, respondent revoked this ruling in Eev. Eul. 60-223,1960-1 C.B. 57, which states in entirety:
Revenue Ruling 60-158, page 140, this BuEetin, which holds that expenses incurred in seeking employment, including fees paid to an employment agency, are not deductible for Federal income tax purposes, is revoked. This ruling Would have been effective for taxable years beginning after December 31, 1959.
The Internal Revenue Service will continue to allow deductions for fees paid to employment -agencies for securing employment.
It was this ruling to which we had reference in the Garter case.
Eespondent seeks to avoid the effect of the plain language contained in the last sentence of his own Eev. Eul. 60-223 on two grounds. First, he contends that Ohusid was not an employment agency noting in support thereof that it was not so registered under Illinois law. Whether Ohusid can be classified within the technical definition, whatever that might be, of an employment agency is irrelevant. What is relevant is the fact that Ohusid did all any third party can do to secure employment for the petitioner, and -its efforts proved successful.
Secondly, respondent contends that his revenue ruling is not applicable because it only covers the situation where the payment of the fee is contingent upon the securing of a position -and not the situation where, as is true here, the fee is payable in all events. In the case where the payment of a fee does in fact result in the securing of a job this seems to us to be a distinction without a difference. In both cases the purpose of the payment, and the results thereof, are identical. Furthermore, we noted in our Findings of Fact that a representative of Chusid practically guaranteed the petitioner, on the occasion of their first interview, that they would secure a job for him.
Admittedly this decision was not reached without some conceptual difficulties. It might be argued that the payment of an employment fee is capital in nature and hence not currently deductible. Presumably, under this view the fee would be deductible when the related employment is terminated. However, the difficulty with this view is to conjure up a capital asset which had been purchased. Certainly, the expense was not related to the purchase or sale of a capital asset. Further, we do not find the instant situation analogous to the capital expense incurred by an individual in the course of changing his field of endeavor.
A further objection can be made on the basis that the expenditure is basically personal in nature, analogous perhaps to general educational expenses. However, here we have an expense which was paid for the limited purpose of securing employment at a particular time and whose direct relationship to the obtaining of said employment cannot be questioned. There was no element in incurring the expense of qualifying for a new trade or business or better preparing oneself to take advantage of any number of unknown opportunities or of making life more enjoyable generally. Nor is it analogous to commuting expenses which are dependent in extent upon one’s own convenience in choosing a personal residence. An. employment fee by its very nature bears no relationship to a personal expense but instead bears a direct relationship to the receipt of income. Personal expenses should be limited to those which are not acquisitive in character from an income-producing point of view.
Our holding herein makes it unnecessary for us to consider the applicability of section 212 (1) which authorizes the deduction of expenses paid “for the production * * * of income.” The literal language of the statute would surely seem to apply and the fee was certainly “expended in the pursuit of income,” to use the language of H. Rept. No. 2333,77th Cong., 2d Sess., p. 46, which accompanied the progenitor of section 212 (1). See also Caruso v. United States, 236 F. Supp. 88 (1964). However, we are concerned by the language of the Supreme Court in McDonald v. Commissioner, 323 U.S. 57 (1944), which seems to limit section 212 (1) to serving as an offset to nonbusiness income. We are further troubled by the statutory scheme for the computation of a net operating loss deduction under section 172 which seems to prohibit the offsetting in the first instance of a section 212 (1) deduction against salary. Income Tax Pegs., sec. 1.172-3 (a) (3).
Eeviewed by the Court.
Decision will be entered for the petitioner.