ACC Tax – Research Problem


Research Problem:

Samantha Spartan is an instructor of Accounting at Bull Ranch Community College (BRCC) located in

Lakewood Ranch, Florida. Instructors at BRCC are hired on a semester by semester basis as needed and

are paid as independent contractors receiving a 1099 for each semester’s work. Samantha has filed her

personal 1040 using a Schedule C to report income from self-employment. Samantha also prepares tax

returns for a number of clients and includes that income (and expenses from her account ting business)

on the same Schedule C along with her BRCC income. Samantha considers all her work “accounting”

and includes the teaching and client work on the same Schedule C since many of her clients are

recruited from her former students to subsequently become her clients. Samantha also sometimes

employs former students to help her with her growing accounting business.

Typically, instructors like Samantha have masters degrees and a professional credential such as the CPA.

These so-called “term faculty” receive contracts each semester based on student demand for classes at


Samantha has been teaching at BRCC each fall and spring semester for four years as she has been

offered a new contract for each semester (except summer) since she started teaching. Instructors like

Samantha teach classes at the undergraduate level and advise students.

The Dean of the Business College at BRCC has indicated to Samantha that there will no longer be

instructor positions like hers available at BRCC. The school is becoming a University and would be

required by statute to employ “terminally qualified” faculty as part of the school’s conversion to

University status. In order to continue working at BRCC Samantha would need to show progress toward

her Ph.D. degree.

Samantha enrolled in the highly regarded Ph.D. program at Southern State University in Atlanta and

must be on campus in Atlanta two days a month for her doctoral seminars. Samantha also recruited

clients in Atlanta so that she could service the clients when she made her trips to Atlanta. The Dean at

BRCC has arranged her classes so that Samantha can meet her obligations at BRCC and make her trips to

Atlanta. Additionally, the Dean provided a letter to Samantha indicating that the requirements for

teaching at BRCC would (by statute) require a Ph.D. degree from a respected school such as Southern

State in order for Samantha to keep her teaching position.

Samantha completed her first year at Southern State and (on her Schedule C) deducted her tuition

($28,000), travel costs to Atlanta ($12,000) and her books & supplies ($2,800) which included a new

Surface PC required in the program.

The IRS has examined Samantha’s return and disallowed all of the deductions claimed on Samantha’s

Schedule C in connection with pursuing her degree. Samantha paid the tax assessment and has sued for

a refund in Federal District Court for the Middle District of Florida. What result? Your answer should

include Code, Regs., and case law.

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