employee held to be in a trade or business for purposes of section 162
How later courts described this case
- employee held to be in a trade or business for purposes of section 162
- employee held to be in a trade or business for purposes of sec. 162
- fee in order to secure employment held deductible
Written by the judges who cited it.
The opinion
SimpsoN, /., concurring: Although I agree with the conclusion of the majority in this case, I do not wish to be understood as approving our decision in Eugene A. Carter, 51 T.C. 932 (1969), or approving Rev. Rul. 60-223, 1960- 1 C.B. 57 , if the intent of such ruling is to deny a deduction for the expenses of seeking employment. In my opinion, there is no legal basis for denying a deduction for the expenses of seeking a new position in the same trade or business.
In our society, it is common practice for an employee to move from one position to another in the same trade or business for a variety of reasons. If an individual wishes to change his position in his trade or business, it is surely appropriate for him to secure the assistance of an employment agency in finding a new position. Hence, any fee that he pays to the agency meets the test of being an ordinary and necessary expense of his trade or business. Cosimo A. Carlucci, 37 T.C. 695 (1962). Business expenses need not lead to profit to be deductible. Sec. 1.162-1, Income Tax Regs. Therefore, it would be a novel rule to disallow a deduction merely because the expense does not lead to a new position. The ordinary test is merely whether there is a bona fide expectation that the expense will lead to profit. L. W. Brooks, Jr., 50 T.C. 927, 932-933 (1968). Under this test, many expenditures in unsuccessful causes have nonetheless been allowed as deductions. Doggett v. Burnet, 65 F. 2d 191 (C.A.D.C. 1933). I see no reason to exclude from the application of this rule expenses incurred in seeking employment. Accordingly, I disagree with our decision in Carter.
The position of the respondent is not altogether clear. On the one hand, his regulations under section 212 provide that expenses incurred in seeking employment are not deductible. Sec. 1.212-1 (f), Income Tax Regs. On the other hand, he has long held by ruling that fees paid to secure employment are deductible. O.D. 579, 3 C.B. 130 (1920); Rev. Rul. 60-223, supra. Additional confusion results from Rev. Rui. 60-223, which may be reasonably interpreted as allowing the deduction of all expenses incurred in seeking employment.
Whatever the respondent’s intended position may be, there is, in my opinion, no sufficient legal basis for treating the expenses of securing employment differently from those of seeking employment. The arguments sometimes given for denying a deduction for the expenses of seeking an employment include the contention that the employee is not engaged in the new trade or business at the time he incurred the expenses, the contention that such expenses are personal or capital in nature, and the contention that to allow such expenses as a deduction would lead to numerous administrative problems. Yet, these same arguments apply with equal force to the expenses of securing a new position. To allow deductions for securing employment and deny deductions for seeking employment seems unreasonable and arbitrary.
TaNNENwald, /., agrees with this concurring opinion.