Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 78-93

1978-1 C.B. 38

Sec. 162

IRS Headnote

Business expenses; career counseling; part-time lecturer. A full-time practicing attorney and part-time law school lecturer who incurred expenses for career counseling in an effort to secure new employment either practicing or teaching law full time and, as a direct result of the counseling, secured a position as a full-time assistant professor of law may deduct the expenses under section 162 of the Code.

Full Text

Rev. Rul. 78-93

Advice has been requested whether, under the circumstances described below, a taxpayer may deduct expenses paid for career counseling services under section 162 of the Internal Revenue Code of 1954.

The taxpayer was engaged in the full-time practice of law and also was a part-time lecturer at a law school. The taxpayer contracted with an agency specializing in career counseling in an effort to secure new employment either practicing or teaching law full-time.

The contract specified that the agency would provide the taxpayer with the following: (1) a job evaluation that is an appraisal of the taxpayer's strongest capabilities, personality characteristics, motivating factors, education, training, and experience; (2) the ability to pinpoint immediate and long-range objectives, consisting of possible self-improvement, and the establishment of practical and attainable goals consistent with the taxpayer's motivated abilities and aspirations; (3) interviewing preparations, including counseling on all written resumes and graphic material to present the taxpayer's strengths including competitive techniques for interviews; and (4) implementation counseling, which includes offer evaluation, negotiating salary and fringe benefits, and job acceptance protection procedures. In addition, the contract specifically provided that the fees to be paid to the agency by the taxpayer were for job counseling services and not for any specific contracts, interviews, or guarantees of employment.

After obtaining the career counseling services, the taxpayer secured a new position as a full-time law school assistant professor due to the taxpayer's own employment seeking efforts. The taxpayer was directly assisted in the job seeking efforts as a result of the services provided by the agency. The full-time assistant professor position at another law school did not involve the taxpayer's having to perform tasks or activities substantially different from the tasks and activities performed by the taxpayer as a part-time law school lecturer. In addition, the taxpayer was not required to obtain additional education prior to accepting the full-time position as assistant professor of law.

Section 162(a) of the Code provides that 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.

Section 1.162-1 of the Income Tax Regulations provides that the business expenses deductible under section 162 of the Code include the ordinary and necessary expenditures directly connected with or pertaining to the taxpayer's trade or business.

Section 1.162-5(b)(3) of the regulations further provides that a change of duties does not constitute a new trade or business if the new duties involve the same general type or work as is involved in the taxpayer's present employment.

Rev. Rul. 75-120, 1975-1 C.B. 55, holds that bona fide expenses, incurred in seeking new employment in the same trade or business in which a taxpayer is presently engaged, are deductible under section 162 of the Code, if directly connected with such trade or business as determined by all the objective facts and circumstances.

Similarly, Rev. Rul. 77-16, 1977-1 C.B. 37, holds that transportation expenses and travel expenses, incurred in seeking new employment in the same trade or business in which a taxpayer is presently engaged, are allowable as deductions from gross income in computing adjusted gross income, and that typing, printing, and postage expenses, incurred by the taxpayer in seeking new employment in such trade or business, also are deductible if such taxpayer elects to itemize deductions. Fees paid by a taxpayer to an agency to provide services to improve the taxpayer's job opportunities in the taxpayer's current trade or business are deductible under section 162 of the Code regardless of whether the taxpayer succeeds in obtaining another job in the same trade or business. See Cremona v. Commissioner, 58 T.C. 219, 222 (1972), 1975-1 C.B. 1.

Although an isolated or occasional activity is not a trade or business, a taxpayer may engage in several trades or businesses either independent of, or in connection with, the taxpayer's principal trade or business. See Philbin v. Commissioner, 26 T.C. 1159, 1165-66 (1956), and Rev. Rul. 55-109, 1955-1 C.B. 261, 263. Criteria used in determining the existence or nonexistence of a trade or business include continuity and regularity of business activities by a taxpayer.

As determined by the objective facts and circumstances in the instant case, the taxpayer was engaged in two trades or businesses; one being a practicing attorney and the other being a law school teacher. Thus, the taxpayer was not changing the taxpayer's trade or business by seeking a full-time position as an assistant professor of law, but was seeking employment in the same trade or business.

Accordingly, the taxpayer may deduct, under section 162 of the Code, the expenses paid or incurred for the career counseling services, because the counseling directly assisted the taxpayer in the taxpayer's efforts to obtain new employment in the same trade or business.