Question

This fall Manfred enrolled in the law school at State University (a qualified educational institution) and paid $6,200 in tuition. Until his enrollment Manfred worked as a stock broker and this year he reports $70,000 in wages. If Manfred files single and reports no other items of income or expense how much of the tuition can he deduct as a business expense?

A. Manfred can deduct half of his tuition for AGI.

B. Manfred can deduct half of his tuition as a miscellaneous itemized deduction.

C. Manfred can deduct $6,200 for AGI.

D. Manfred can deduct $6,200 as a miscellaneous itemized deduction.

E. None - the tuition is not deductible as a business expense.

Answer 1

The tuition Manfred paid for law school cannot be deducted as a business expense since the expenses are for education related to a new trade or business. He may be eligible for education-related tax credits but not business expense deductions. Option E

Step-by-step explanation:

Manfred cannot deduct his tuition as a business expense because, generally, education expenses are not directly deductible as a business expense unless they are related to maintaining or improving skills required in one's current business or employment, or if they are required by law or employer to keep one's salary, status, or job.

Since Manfred is transitioning from being a stock broker to a law student, the tuition costs are considered personal expenses and are for a new trade or business, which makes them non-deductible.

However, Manfred may be eligible for other tax benefits related to education expenses, such as the American Opportunity Credit or the Lifetime Learning Credit, if he meets the requirements. These credits can provide a significant tax reduction but are not treated as business expense deductions.

Therefore, the correct answer is: E. None - the tuition is not deductible as a business expense.