We previously blogged the Tax Court’s decision in Allemeier v. Commissioner, T.C. Memo. 2005-207 (8/31/05), which permitted a salesman of othodontic appliances to deduct the expenses of obtaining an M.B.A. at Pepperdine.  The Tax Court yesterday refused to award the taxpayer attorneys’ fees in the case. Allemeier v. Commissioner, T.C. Memo. 2006-28 (2/16/06):

In Allemeier I, respondent’s position was that petitioner was not entitled to an MBA-related expense deduction on two bases. Respondent argued, first, that petitioner’s enrollment in the MBA program constituted a “minimum educational requirement” to continue his employment at the company. See Reg. § 1.162- 5(b)(2). Respondent argued, second, that petitioner’s MBA qualified him for a new trade or business. See § 1.162-5(b)(3). Although we found that petitioner was encouraged rather than required to obtain the MBA, we find that respondent was substantially justified in arguing that the MBA program constituted a minimum educational requirement.

Similarly, although we found that petitioner’s MBA “enhanced” his preexisting skills rather than qualified him to perform “significantly” different tasks and activities, we find that respondent was substantially justified in arguing that petitioner’s course of study qualified him for a new trade or business. Accordingly, we find that respondent’s position was substantially justified.

Petitioner is therefore not the prevailing party and may not recover any litigation costs.