Schnackenberg, Kiley and Fairchild, Circuit Judges.
FAIRCHILD, Circuit Judge.
Petitioner Mary O. Furner is a junior high school teacher who devoted the school year 1960-1 to full time graduate study and claimed the expenses as deductions from income for those years. The commissioner disallowed the deductions and the tax court, in a reviewed opinion, with two judges dissenting, upheld the commissioner.*fn1
The "historical" facts are undisputed, and this statement of them is condensed from the findings of the tax court:
Petitioner majored in social studies at a teachers' college, and received her bachelor's degree in 1957. She taught at Argyle, Minnesota in grades 7-12 during the school year, 1957-8. In the school years 1958-9 and 1959-60 she taught social studies (primarily history) at eighth grade level at Crookston, Minnesota.
Petitioner believed that her teaching required greater depth of subject matter than she possessed. Because it would be difficult to obtain the course work she wanted in history on a part time basis, she arranged to attend Northwestern University as a full time graduate student during the school year 1960-1. The Crookston school system does not customarily grant leaves of absence and she resigned in June, 1960.
She taught at a reading camp during the summer of 1960, and attended Northwestern from September, 1960 until she received a master of arts degree in August, 1961. She performed no teaching duties during that period.
In April, 1961, petitioner signed a contract to teach in a junior high school in De Kalb, Illinois, beginning in September, 1961. In De Kalb she has taught two history courses, regarded as "social studies".
The tax court found as ultimate facts (1) that petitioner was not engaged in carrying on a trade or business of teaching during the time she was attending Northwestern University and (2) that she took the graduate work primarily for the purpose of obtaining a new position or substantial advancement in position or for meeting the minimum qualifications of certain schools for a teacher of social studies at the junior high school level. The tax court held that each of those facts made the expenses nondeductible.
The commissioner concedes on review that ultimate fact (2) is no longer relevant, even if correctly determined. His counsel tells us that
"new Treasury Regulations were promulgated on May 1, 1967, by T.D. 6918, 1967-21 Int. Rev. Bull. 8 (amending Section 1.162-5, Treasury Regulations on Income Tax (1954 Code)), and these Regulations are to be applied retroactively. They supply more objective criteria for determining if educational expenditures are properly deductible as business expenses than was the case under pre-existing Regulations which emphasized the taxpayer's subjective intent. For example, they provide that educational expenses will be nondeductible if they relate to training for a 'new trade or business', but treat all teaching and related duties as involving the same general type of work. (Sec. 1.162-5(b)(3).) They do not use the 'new position' test, and we therefore do not propose to argue here that taxpayer was undertaking her graduate training in order to obtain such a 'new position'. Further, it appears that the Commissioner did not assert the 'minimum requirements' argument in the Tax Court, and the taxpayer's discussion of the record evidence relating to this point * * * has merit. We therefore do not propose to raise the 'minimum requirements' theory in this Court."
Thus we are concerned solely with the tax court's determination, whether it be finding of fact or conclusion of law, that petitioner was not carrying on a trade or business of teaching while a graduate student under these circumstances.
The fact that petitioner was not on leave from a school system employer while studying during a normal school year seems to have been deemed critical. If petitioner had been on leave from Crookston without pay, all other facts being identical, the commissioner's present position,*fn2 though his ...