James Kinsey Case Summary

Overview of the facts of the case:

James Kinsey began employment as a sales associate in March 2001 at Karnes Company after graduating high school in 1998. James was promoted to a position of senior sales associate. James supervisor encouraged him to get a degree in marketing from the local university. The company looked favorably on employees pursuing more education and more education might help James to be considered for more promotions; although the degree was not required for his present position at that time.

James Kinsey enrolled at Kelly University, majoring in business with a concentration in marketing in January 2002. James was promoted to sales manager in May 2002 after one semester at Kelly University. Duties under this position

The return was audited by the IRS and the education deductions were disallowed. James appealed and went to Tax Court for the deductions to be reinstated for allowance of the education deductions.

Facts supporting the IRS disallowing the deductions:

One factor in disallowing the education deductions for James Kinsey was the fact that the classes were not required by his employer upon promotion to his position to sales manager in May 2002. In the case of Laurano v. Commissioner of Internal Revenue, 1978, the education expenses were disallowed because the petitioner was not required by her employer to take the classes in order to fulfill the requirements of her current employer.

As stated in the case of Laurano v. Commissioner of Internal Revenue, 1978, in reference to Section 1.162-5(b)(2)(i), Income Tax Regs., “Once an individual has met the minimum educational requirements for qualification in his employment (as in effect when he enters the employment), he shall be treated as continuing to meet those requirements even though they are changed.” Since, James met the minimum requirements for his position at the time of his promotion; this reasoning could be used to support the IRS disallowing the

United States, 1989, which was a fact that was considered in the decision to reverse the disallowance of education deductions in favor of the petitioner to allow the education deductions. This case, also, points out the “common sense" of determining if the education would qualify the student to perform significantly different duties than they could prior to the education, then the education would qualify for a new trade or business and would not be deductible. In the above case of Wiertzema v. United States, 1989, this was not the case. The petitioner was already doing welding on the farm, a necessary skill for the farming operation, which if they could not do this skill they would have had to hire outside help to do. There was no question that the education received improved this petitioner’s skills in performing his present trade and the education deductions were