Final answer:
George’s education costs may be deductible if they are related to maintaining or improving skills for his current employment, but likely not if they qualify him for a new trade or business. The correct answer is nuanced and may depend on specific IRS regulations and George’s current job requirements.
Step-by-step explanation:
When it comes to the deductibility of education costs for tax purposes, the Internal Revenue Code provides specific criteria that must be met. In the case of George, who is a full-time student at Indiana State University majoring in accounting and works part-time at a local CPA firm, the determination of the deductibility of his educational expenses depends on whether his education is maintaining or improving skills required in his current business or if it is for the purpose of meeting the minimum educational requirements of his current trade or business or is qualifying him for a new trade or business.
Option (a), stating that educational costs are deductible from AGI because they prepare him for a new trade or business, is incorrect because the costs must be related to his current job, not a new trade or business. Option (b) asserts that the education costs are deductible because it is part of a program that will qualify George to become a CPA, which theoretically might be true if his current position requires him to become a CPA to advance further. However, this reasoning is more nuanced, especially if he currently works in a job that requires accounting skills and his education is intended to maintain or improve those skills. Option (c), which states 'NEITHER,' would be correct if the education is required to meet the minimum educational requirements for qualification in his current employment or if it qualifies him for a new trade or business.