Ortega v. Comm'r , 2009 Tax Ct. Summary LEXIS 120 ( 2009 )

T.C. Summary Opinion 2009-120
UNITED STATES TAX COURT
CORINNE N. ORTEGA, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6092-08S. Filed August 3, 2009.
Corinne N. Ortega, pro se.
Michael Medina, for respondent.
ARMEN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect at the time the petition was filed.1 Pursuant to section
7463(b), the decision to be entered is not reviewable by any
1
Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for 2004,
the taxable year in issue.
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other court, and this opinion shall not be treated as precedent
for any other case.
Respondent determined a deficiency of $3,877 in petitioner’s
Federal income tax for 2004. The issue for decision is whether
petitioner is entitled to deduct on Schedule A, Itemized
Deductions, educational expenses of $19,885 under section 162(a).
We hold that she is not.
Background
Some of the facts have been stipulated, and they are so
found. We incorporate by reference the parties’ stipulation of
facts and accompanying exhibits.
When the petition was filed, petitioner resided in the State
of New York.
After graduating from college with a bachelor’s degree in
psychology, petitioner earned a master’s degree in clinical
psychology from the University of Nebraska in 1996. From April
1997 until August 2003 petitioner worked for the State of
Nebraska Department of Corrections (Corrections) as a Mental
Health Practitioner II (MHP II). To qualify for this position,
petitioner was required to be licensed as a mental health
practitioner2 under Neb. Rev. Stat. Ann. sec. 38-2122
2
“Mental health practitioner” was the name of the license
held by petitioner as well as the title of the position she held
at Corrections.
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(LexisNexis 2008)3, hold a master’s degree, and have 3,000 hours
of postdegree supervised counseling experience. In addition to
being licensed as a mental health practitioner, petitioner was
also certified as a psychological assistant.
As an MHP II, petitioner provided mental health services for
individuals, families, and/or groups under the supervision of a
licensed psychologist. Petitioner’s primary job responsibilities
included individual and group therapy with inmates, intake
screening of new inmates, suicide risk assessment, provision of
acute mental health care, mental health conditions screening, and
some staff training. In addition, as a psychological assistant
petitioner was authorized to (but did not in fact in her position
as an MHP II) perform psychological testing at the master’s level
under the supervision of a psychologist.
While working for Corrections, petitioner enrolled in, and
completed, course work at the University of Nebraska leading to a
doctoral degree in psychology. A final requirement for the
doctoral degree was completion of a 1-year internship.
Petitioner’s internship required her to relocate to attend a
program with the U.S. Department of Justice, Federal Bureau of
Prisons (BOP) at the Federal medical center in Devens,
3
Neb. Rev. Stat. Ann. sec. 71-1314, in effect for 2004, is
now Neb. Rev. Stat. Ann. sec. 38-2122 (LexisNexis 2008). There
is no substantive change. See 2007 Neb. Laws 463, 740.
Subsequent references to Neb. Rev. Stat. Ann. are to the current
(LexisNexis 2008) edition.
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Massachusetts. Although petitioner actually completed the
internship in Massachusetts, she was enrolled in a course called
“Internship” at the University of Nebraska.
Petitioner terminated her employment with Corrections in
August 2003 in order to begin the internship with BOP in
September 2003. Petitioner completed the internship in early
September 2004. The internship was a supervised program of study
with the stated objective of preparing interns for entry-level
service as practicing clinical or counseling psychologists.
After completing the internship and graduating with a
doctoral degree, petitioner became licensed in New York as a
psychologist. Had petitioner returned to Nebraska, she would
have been eligible to be licensed there as a psychologist.
Without the doctoral degree, petitioner could not have been
licensed in New York in the field of mental health, as New York
did not then permit an individual to practice in that field with
only a master’s degree.
Petitioner started employment as a staff psychologist with
the BOP in New York at the end of 2006. The minimum education
required for a staff psychologist with the BOP was a doctoral
degree in clinical psychology or a closely related field. As a
staff psychologist, petitioner was charged with making
professional decisions concerning the diagnosis and treatment of
inmates under her care, with consultative supervision from the
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chief of psychology services. Petitioner’s primary job
responsibilities included individual and group therapy with
inmates, intake screening of new inmates, suicide risk
assessments, acute mental health issues screening, psychiatric
referrals, and crisis intervention. In addition, petitioner
administered and interpreted various psychological tests. As
indicated in the job description, a staff psychologist could also
be tasked to supervise the work of graduate-level psychologist
trainees, practicum and intern students, and paraprofessional
counselors. Furthermore, a staff psychologist could assume the
responsibilities of the chief psychologist in his or her absence.
Discussion4
Section 162(a) generally allows as a deduction “all the
ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business”. Expenditures
made by an individual for education are deductible as ordinary
and necessary business expenses if the education maintains or
improves skills required by the individual in her employment or
other trade or business. Sec. 1.162-5(a), Income Tax Regs.
However, the general rule under section 1.162-5(a), Income Tax
Regs., does not apply if the expenditures fall within either of
two specified categories; i.e, they are nondeductible
4
We decide this case without regard to the burden of
proof.
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expenditures if: (1) They are incurred to meet the minimum
education requirements for qualification in a taxpayer’s trade or
business; or (2) they qualify the taxpayer for a new trade or
business. See Robinson v. Commissioner, 78 T.C. 550, 552 (1982);
sec. 1.162-5(b), Income Tax Regs.
Respondent argues that the educational expenses incurred by
petitioner qualified her for a new trade or business and
therefore are nondeductible. Petitioner contends that the
educational expenses are deductible because she worked in the
field of psychology both before and after the educational
expenses were incurred. On balance, the facts favor the
Government, and for that reason we hold for respondent.
An individual who, through education, improves her skills in
an existing trade or business may also become qualified for a new
trade or business. Thompson v. Commissioner, T.C. Memo. 2007-
174. If the education in question qualifies the taxpayer to
perform tasks and activities significantly different from those
she could perform before the education, then the education is
deemed to qualify the taxpayer for a new trade or business.
Robinson v. Commissioner, supra at 552 (citing Browne v.
Commissioner, 73 T.C. 723, 726 (1980), Diaz v. Commissioner, 70
T.C. 1067, 1074 (1978), affd. without published opinion 607 F.2d
995 (2d Cir. 1979), Glenn v. Commissioner, 62 T.C. 270, 275
(1974), and Weiszmann v. Commissioner, 52 T.C. 1106, 1110 (1969),
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affd. 443 F.2d 29 (9th Cir. 1971)). The mere capacity to engage
in a new trade or business is sufficient to disqualify the
expenses for the deduction. See Weiszmann v. Commissioner, supra
at 1111.
Although the duties of an MHP II and a staff psychologist
overlapped, the MHP II position was a subordinate position under
the supervision of a psychologist, such as a staff psychologist.
As an MHP II, petitioner provided mental health services under
supervision to inmates. The psychological assistant
certification permitted petitioner to perform psychological
testing only under the supervision of a psychologist.
Conversely, as a staff psychologist, petitioner provided
mental health services to inmates with only consultative
supervision from the chief of psychology services. A staff
psychologist could also supervise master’s-level psychologist
trainees, interns, and paraprofessional counselors; consequently,
petitioner could supervise others in positions comparable to the
position she held at Corrections and as an intern. Moreover, the
staff psychologist could function as the acting chief
psychologist when that person was absent from the institution.
Thus, as a staff psychologist, petitioner was a peer of the chief
psychologist, not a subordinate as in her Corrections position
and internship.
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This Court has disallowed the educational expense deduction
in cases where the taxpayer was in the same general field both
before and after the educational expenses were incurred and the
education qualified the taxpayer for a new trade or business in
that same general field. E.g., Robinson v. Commissioner, supra
at 552-557 (licensed practical nurse and registered nurse);
Johnson v. Commissioner, 77 T.C. 876, 878-880 (1981) (real estate
agent and real estate broker); Glenn v. Commissioner, supra at
275 (licensed public accountant and certified public accountant);
Antzoulatos v. Commissioner, T.C. Memo. 1975-327 (intern
pharmacist and registered pharmacist). The basis for these
determinations was informed by applicable State law provisions.
Under Nebraska State law, the minimum educational
requirement to be licensed as a mental health practitioner was a
master’s degree. Neb. Rev. Stat. Ann. sec. 38-2122. However, to
be licensed as a psychologist an applicant was required to
possess a doctoral degree. Neb. Rev. Stat. Ann. sec. 38-3114.
Mental health practice includes the provision of treatment,
assessment, psychotherapy, counseling, or equivalent activities
but specifically excludes the practice of psychology, diagnosis
of major mental illness or disorder without consultation with a
qualified physician or a licensed psychologist, measuring
personality or intelligence for the purpose of diagnosis or
treatment planning, and using psychotherapy to treat the
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psychological aspects of physical illness. Neb. Rev. Stat. Ann.
sec. 38-2115. The practice of psychology specifically includes
psychological testing and the evaluation or assessment of
personal characteristics such as intelligence and personality,
diagnosis and treatment of mental and emotional disorders and the
psychological aspects of physical illness, and supervision of
qualified individuals performing such services. Neb. Rev. Stat.
Ann. sec. 38-3108.
Similarly, New York State law requires, inter alia, a
doctoral degree in psychology to qualify for a license as a
psychologist. N.Y. Educ. Law sec. 7603 (McKinney 2001). The
practice of psychology includes psychological testing and
counseling, and diagnosis and treatment of mental illness and
disorders including the psychological aspects of physical
illness. Id. sec. 7601-a (McKinney Supp. 2009). Until January
2005 there was no equivalent to the Nebraska mental health
practitioner classification in New York. See id. sec. 8402.
Beginning in January 2005, to be licensed as a mental health
counselor in New York an applicant must have attained at least a
master’s degree. Id. Therefore, at the time petitioner enrolled
in the internship in September 2003 she was only qualified to
provide services as a mental health practitioner in Nebraska and
not in New York. Following the internship, she possessed the
requisite education necessary to apply for a license as a
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psychologist in both New York and Nebraska. Consequently, State
law provisions precluded petitioner from practicing psychology
until she completed her doctoral degree.
Indeed, the self-proclaimed goal of the internship program
was to prepare interns for entry-level service as practicing
psychologists. Even though petitioner was in the field of
psychology before and after the internship, the doctorate
fulfilled the statutory requirements for licensing as a
psychologist in both New York and Nebraska, met the minimum
qualifications for staff psychologist, and qualified her to
perform tasks and activities significantly different from those
she could perform before the education. Thus, petitioner’s
education qualified her for a new trade or business. As a
result, petitioner is not entitled to deduct the educational
expenses under section 162(a).
Conclusion
We have considered all of the arguments made by petitioner,
and, to the extent that we have not specifically addressed them,
we conclude they are unpersuasive.
To reflect the foregoing,
Decision will be entered
for respondent.