Evelyn R. Marks v. Commissioner of Internal Revenue

The Petitioner herein, Evelyn R. Marks, is referred to hereinafter as “the taxpayer”. The taxpayer is a teacher. She had taught in California schools until her teaching credentials were revoked at some time before 1961. Thereafter, being unable to teach in California, she obtained employment as a clerk-typist at a substantial cut in pay. In her income tax returns for the years 1961, 1962 and 1963, she reported her actual earnings in each year and claimed as a deduction in each year the amount by which her anticipated earnings as a teacher, if she had been allowed to teach, exceeded the amount of her actual earnings. These deductions in each year were greater than the amount of income reported so each return showed no tax liability. The Tax Court, in an unreported decision, disallowed each year’s deduction and assessed the resulting deficiencies.

The taxpayer contended to the Tax Court that her claimed deductions were valid as “losses”. We find this contention, as did the Tax Court, to be without merit. The word “loss” as used in § 165(c) of the Internal Revenue Code of 1954 requires loss of existing capital and does not include the failure to realize anticipated income. Hort v.…