Question

Instructions: Please read the following prompt and craft a response to all three questions. I want to see you follow the format in the guide a posted. You need facts, issues, authority (at least one primary and one secondary), analysis, and a conclusion. If you feel that you need more information to render an answer please write me as if I’m the client.

Case 1

Jake and Katrina two friends from high school both go onto university to study accounting. Both Jake and Katrina are proud graduates.

Katrina’s path: Katrina does not get picked up by any of the firms in the area, so she decides to open her own tax practice. Worried that she will not be able to practice before the IRS, Katrina enrolls and purchases the Becker CPA review course for $3,500. She passes the test in 2020 and opens her own practice. She thinks to herself “wow it would be nice to deduct the cost of my CPA review course on my tax return.” Since she is just starting out, she asks you can I deduct the cost of my education.

Jake’s path: Jake finished school and passed the CPA test . He took a job with a local accounting firm but did not like the profession. Jake decided to try his hand in the law and enrolled in law school. After law school Jake sat and passed the bar test but decided law was not all it was cracked up to be. Jake decided that using both his law and CPA license would be a great idea, so Jake enrolled in a Maters of Taxation (MST) program. In 2020 Jake finished the MST program all while owning his own business and working for a local law firm. He was a busy man indeed. Jake is filing his 2020 tax return and ponders to himself can II deduct the cost of MST program on my tax return. He asks you what are his options?

The convergence: In 2021 both Jake and Katrina decided to partner up and own their own business together. Together they form Creative Accounting LLC. Their revenues are fantastic despite their name. Both Jake and Katrina hate their CPE (continuing professional education) and CLE (continuing legal education) requirements. It is expensive to do all this extra schooling every…single…year. They both agree they should deduct this education expense on their Form 1065. They ask you, are we allowed to deduct.         

Answer 1

Katrina's path: Katrina cannot deduct the cost of her review course because she paid for it before starting her practice.

Jake's path: Since Jake was already employed with an accounting firm when he enrolled for his Master of Taxation program and since this course is relevant and related to his job , he can deduct the cost of this course in his tax return.

Convergence: Since CLE and CPE is useful and relevant to their business, they are allowed deduct these expenses.