Coughlin v. Commissioner
203 F.2d 307 (2d Cir. 1953)

  • Couglin was a tax attorney. In order to stay current on the subject, he attended a training seminar in tax law at NYU.
    • He didn't need to attend the seminar in order to keep his job or retain his bar license, but it did make him a better tax attorney.
  • When he filed his taxes, Couglin deducted the $305 for the training as a business expense. The IRS denied the deduction. Coughlin appealed.
    • The IRS claimed that the expenses were non-business expenses because it was not necessary for Couglin to attend the seminar.
  • The Tax Court denied the deduction. Couglin appealed.
    • The Tax Court looked to the applicable section of the tax code (now known as 26 U.S.C. 162(a)) and found that in order to be deductible an expense must be related to a "trade or business." In this case they denied the deduction "because of the educational and personal nature of the object pursued by the petitioner."
  • The Appellate Court reversed and allowed the deduction.
    • The Appellate Court looked to IRS's tax regulations (T.R. 111 29.23(a)-5) and noted that they explicitly allowed deductions for dues to professional societies and subscriptions to professional journals etc. The Court found that going to a seminar was similar to these expressly characterized allowable deductions. Therefore it should be deductible also.
      • That's the statutory interpretation canon of ejusdem generis (aka "of the same kind").
  • One could argue that Coughlin was involved in continuing education, and that sounds a lot like 'maintenance'. And maintenance is generally deductible as a business expense.
    • As opposed to getting a college degree in the first place, which is more like an 'improvement' which is not typically deductible as a business expense.
    • See Midland Empire Packing Co. v. Commissioner (14 T.C. 635 (1950)).
  • If that tax seminar was about how to get a deduction for educational expenses, it was totally worth the $305!