John Manocchio v. Commissioner of Internal Revenue

Manocehio (taxpayer) appeals from the Tax Court’s decision to deny in part his deduction of the cost of a flight training course as a business expense. Ninety percent of the expense of the course had been reimbursed under a veterans’ benefit program. The Tax Court held that the reimbursed portion of the expense was not deductible, that a prior revenue ruling and I.R.S. publication to the contrary did not estop the I.R.S. from retroactively denying the deduction, and that the I.R.S.’s decision did not impermissibly single out veterans who received flight training allowances. We affirm the holding of nondeductibility on the grounds that a reimbursed expense is not deductible and that the I.R.S. is not estopped from applying this rule to taxpayer.

PACTS AND PROCEDURAL BACKGROUND

In 1977, taxpayer took a flight training course and deducted the entire cost of the course as a business expense. The Internal Revenue Service (Service) concedes that this course maintained and improved skills required in taxpayer’s employment as a pilot. Its costs would thus ordinarily be deductible as a business expense under I.R.C. § 162(a) (1976). As a veteran eligible for educational assistance,…