Question

Assume Sally is a professor who has a PhD in accounting and teaches tax courses. She decides that it would help her teaching to earn a law degree with a heavy emphasis on tax classes. Can she deduct the cost of the tax courses offered as part of her law degree? Explain and cite to specific provisions in the Code and Treasury Regulation.

Answer 1

Imposition of penalty

If this section applies to any portion of an underpayment of tax required to be shown on a return, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which this section applies.

Portion of underpayment to which section appliesThis section shall apply to the portion of any underpayment which is attributable to 1 or more of the following:

(1)

Negligence or disregard of rules or regulations.

(2)

Any substantial understatement of income tax.

(3)

Any substantial valuation misstatement under chapter 1.

(4)

Any substantial overstatement of pension liabilities.

(5)

Any substantial estate or gift tax valuation understatement.

(6)

Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to meet the requirements of any similar rule of law.

(7)

Any undisclosed foreign financial asset understatement.

(8)

Any inconsistent estate basis.

This section shall not apply to any portion of an underpayment on which a penalty is imposed under section 6663. Except as provided in paragraph (1) or (2)(B) of section 6662A(e), this section shall not apply to the portion of any underpayment which is attributable to a reportable transaction understatement on which a penalty is imposed under section 6662A.