Tax court ruling favors educators

Brad: Hello, and welcome back to all our readers. We have very good tax news for educators who like to travel but have been leery of trying to deduct travel-related expenses. A tax court recently allowed an educator a $13,000 deduction for overseas travel expenses even though the travel was not directly related to her area of teaching expertise (Jorgensen, TC Memo 2000-138).

Bob: Before we delve into the details of this case, let's review the IRS's general stance on travel. The IRS has taken the position that travel, as a form of education, is not deductible. The IRS has required educators to demonstrate a link between the trip and their actual job duties in order to deduct travel and related expenses. In some cases, the IRS has disallowed deductions for approved sabbatical leave-related travel because the educator could not show how the travel improved his or her specific teaching expertise.

Brad: Given that background, let's look at the facts surrounding the court case: Ann Jorgensen taught English at a culturally diverse public high school in San Francisco. At the time in question, she was also the department chair. Jorgensen's job description required her to be able to "relate successfully with diverse groups of students and parents" and to "participate in professional growth activities."

Bob: With that in mind, in 1995 Ann enrolled in a University of California extension course on ancient Greece, which was taught in Greece that summer.

The following year, Ann attended another U.C. extension course entitled "Southeast Asia: Sacred Places." This course was taught in Thailand, Cambodia and Indonesia from late December 1996 to early January 1997. Both courses had strong academic purposes, with extensive reading lists coupled with on-site lectures provided by university professors. It should be noted, though, that Jorgensen neither sought nor received any course credits for her work.

Brad: Upon her return, she filed tax returns in which she claimed as "unreimbursed employee expenses" her tuition, airfare, books, visas, lodging, meals and other expenses (taxi fares, airport shuttle fees, etc.). The total bill came to $7,805 for the Southeast Asia course and $5,574 for the trip to Greece.

Bob: In court, the IRS asserted that Ann's expenses should not be deductible because they were neither ordinary nor necessary to perform her job and that the travel was not required by her employer as a condition of continued employment. Nonetheless, the court sided with Jorgensen, who had argued that the trip to Greece enabled her to develop additional curriculum for her English class. She also proposed that the Southeast Asia trip enabled her to work more effectively with her students of Asian descent.

Brad: There is a lesson here: Educators should stick by their deductions if they truly believe they are right. And even though the IRS lost in court, don't expect the agency to back off on challenging travel expenses by educators.

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