David is on the audit staff of a national accounting firm. He has been with the

Question

David is on the audit staff of a national accounting firm. He has been with the firm for three years and is a CPA. David has applied and been accepted into a prestigious MBA program. The program is two years in duration. David has decided to resign from the accounting firm even though the firm has indicated that it would very much like David to return to work for the firm after he receives his MBA degree. David is somewhat interested in returning to public accounting but will certainly look at all of his options when he com- pletes the program. David wants to deduct his education expenses. What are the relevant tax issues in this case?

Explanation / Answer

Step 1

The tax issues in the problem are

• Whether the education qualifies David for a new job.

• Whether the education is directly related to David’s employment.

If the education qualifies David for a new job, a new trade, or a new business, then none of the education expenses is deductible.

Step 2

The education might not be directly related to David’s employment because David is not on an employment for the time being. Hence, the education expenses might not be deductible.

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