Taxation & Estate Planning

NO DEDUCTION FOR SEMINAR EXPENSES

By Charles Rubin

Internal Revenue Code Section 212(1) allows a deduction to individual taxpayers for expenses relating to the production or collection of income. Therefore, if one attended a seminar to learn investment trading techniques, that should be deductible, right?

That's what Carl Jones thought, when he deducted the expenses of a day-trading seminar that he attended to improve his day trading skills. Unfortunately, both the IRS and the Tax Court disagreed, based on an obscure, but directly on point, provision of the Internal Revenue Code Section 274(h)(7).

This provision provides in plain and simple language that "[n]o deduction shall be allowed under section 212 for expenses allocable to a convention, seminar, or similar meeting." This provision is hard to locate, in large part because the title of Section 274 gives only the faintest warning of the existence of the prohibition - "Disallowance of certain entertainment, etc., expenses."

Carl Jones' case is not that interesting, but I mention it here as a public service because I am sure that Carl Jones is not the only one out there that is unaware of the deduction prohibition for seminar attendance. As a tax matter, note that Section 274(h)(7) only applies for Section 212 expenses. If attendance at a seminar qualifies as a Section 162 "trade or business" expense, the provision does not apply.

Carl H. Jones, 131 TC No. 3 (2008)

Full post as published by Rubin on Tax on July 31, 2008 (boomark / email).