Richard Michael Managan, Petitioner

T. C. Memo. 2001-192 . UNITED STATES TAX COURT RICHARD(cid:16)042MICHAELMANAGAN, Petitioner y. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 6795-99.

Filed July 26, 2001.

Richard Michael Managan, pro se.

Michael A. Pesavento, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

FOLEY, Judge:

By notices dated March 17, 1999, respondent determined deficiencies in and additions to petitioner's Federal income taxes as follows:

Year Deficiency 1995 1996 $13,590 12,562 Sec. 6651(a)(1) $1,835 1,922 Additions to Tax Sec. 6651(a)(2) $1,346 Sec. 6654(a) $412 SERVED Jjl 24 2001 Subsequently, on May 31, 1996, petitioner received a check from Brevard County for $15,920.

As a result, petitioner did not file a claim against the county.

In 1992, Mrs. Managan began taking courses at the University of Central Florida (UCF). During 1995 and 1996, petitioner and Mrs. Managan operated a Schedule C business, Monticello Research Group (MRG), which conducted environmental audits of real property. During this same period, Mrs. Managan attended UCF.

While attending UCF, Mrs. Managan did quality control work as an independent contractor for a professor.

In 1996, Mrs. Managan received a bachelor's degree in chemistry.

In 1997, she began working in a chemistry laboratory for BTR Labs.

During 1996, shortly after his motorcycle accident, petitioner began constructing a boat, the Dinky Dau. Petitioner intended to use the boat to fish for lobster off the coasts of Honduras and Nicaragua.

In 1996, petitioner paid $975 to his attorney to obtain a lobster fishing license from Honduras.

OPINION

As a preliminary matter, petitioner contends that, pursuant to section 7491(a), the burden of proof should be on respondent.

The parties agree that the examination began after July 22, 1998.

Respondent, however, contends that the burden of proof is on petitioner because petitioner did not satisfy the requirements of section 7491(a).

In order for respondent to have the burden of from income pursuant to section 104(a)(2), because the remedies available include compensatory and punitive damages, as well as damages for emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other nonpecuniary losses.

Commissioner, T.C. Memo. 1997-336. Petitioner and Mr. Jenkins' testimony established that Brevard County made the payment to settle petitioner's potential ADA claim for wrongful termination.

Petitioner failed, however, to establish that any portion of the payment was.for nonpecuniary damages.

See Getty v. Commissioner,

Memo. 1998-4. Accordingly, petitioner is not entitled to exclude any portion of the settlement.

Because petitioner failed to present any evidence relating to the allocation of the settlement, we conclude that he had the burden of proof.

See Higbee v. Commissioner, supra at ___ (slip op. at 12).

II. Educational Expenses

Respondent determined that petitioner was not entitled to deduct the cost of Mrs. Managan's studies at UCF. Petitioner contends that this course of study did not prepare Mrs. Managan for a new trade or business, but it merely allowed her to maintain and improve her skills, as well as to enhance the reputation of MRG.

Educational costs incurred to maintain or improve skills required by the individual's trade or business are deductible as ordinary and necessary business expenses, unless they are incurred to meet minimum educational requirements for a taxpayer's trade or business or qualify the individual in a new trade or business.

Sec. 1.162-5(a) and (b), Income Tax Regs.

Prior to taking her 1995 and .1996 courses at UCF, Mrs.

Managan performed environmental audits for MRG.

The chemistry degree, however, qualified her for a new trade or business.

Indeed, she used the degree to obtain employment in a laboratory, in 1997.

We need not address the burden of proof relating to this issue because the documentary evidence and Mrs. Managan's testimony established that.Mrs. Managan's UCF classes qualified her for a new trade or business. Accordingly, petitioner is not entitled to deduct Mrs. Managan's 1995 and 1996 educational expenses.

III.

The Boat Respondent determined that petitioner is required to capitalize legal fees paid to obtain a lobster fishing license from Honduras and expenses (i.e., cost of utilities and moving the partially completed vessel) relating to building the Dinky Dau. Petitioner contends that these are deductible business expenses.

Section 162(a) allows a deduction for all ordinary and necessary business expenses paid or incurred during the taxable year.

The cost of acquiring licenses with useful lives exceeding 1 year are capital expenditures and are not deductible as business expenses. Radio Station WBIR, Inc. v. Commissioner, 31 T.C. 803, 815 (1959). Section 263A requires the capitalization of direct and indirect costs incurred in the taxpayer's production of personal property.

We conclude that the burden of proof relating to this.issue is on petitioner. Petitioner presented no evidence that the attorney's fees paid to obtain a lobster fishing license provided a benefit limited to 1996.

Ín addition, petitioner's testimony established that the -utility and moving expenses we're incurred as part of the construction process and are subject to section 263A.

Accordingly, petitioner is not entitled to deduct the attorney's.

fees, moving costs, or utility costs in 1996.

Contentions we have not addressed are moot, irrelevant, or meritless.

To reflect the foregoing, Decision will be entered under Rule 155.

42. U.S.C. sec. 1981a(b) (1994); Phillips v.
91. T.C. 160, 175-176 (1988), affd. on this issue, revd. on other issues 913 F.2d 1486 (9th Cir. 1990); Wise v. Commissioner, T.C.