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Applying to B-School in 2010/11? By taking action now, you can dramatically improve your chances of gaining admission to a top-MBA program next year. Indeed, it is never too soon (and certainly not too late) to take several crucial steps to shape your MBA candidacy. Join an mbaMission Founder, Jeremy Shinewald, as he leads prospective applicants through a Long Term Planning seminar.

Topics of discussion will include:

• Creating your 10 month timeline
• Maximizing the Impact of Community Activities
• Accelerating Personal Goals
• Building an Alternative Transcript
• Taking and Retaking the GMAT
• Making the Most of Campus Visits
• Understanding the differences between MBA programs
• More…  

All attendees of this exclusive event will receive:

• 10% off any 9-session ManhattanGMAT course
•  Free access to a ManhattanGMAT computer adaptive practice exam 

Sign up today!

There is a first for everything and the following is – after four years – our first guest blog post ever. We recently blogged about a landmark tax case, wherein a nurse took on the IRS with regard to the deductibility of her MBA tuition and won. Soon after, Benjamin Post, an alumnus of the University of Texas – McCombs (’08) contacted mbaMission to offer insight from his own experiences and those of his classmates. We asked him to share his research and experience and he has done so via the entry below. We thank Benjamin for taking some of his time to help others in the MBA community.

 Sometime in 2006, a professional colleague forwarded me an article that was of great benefit to me and several of my MBA classmates. This article discusses the deductibility of MBA tuition within the context of Daniel Allemeir’s tax dispute with the IRS, and it has ended up saving me (and some of my classmates) thousands of dollars. Given the result of a recent case (similar to Allemeier’s) discussed on the mbaMission.com weblog January 10, 2010, it is likely that many more MBA students can benefit as well.

Based on the decision rendered under Daniel R. Allemeier v. Comm’r (Tax Court Memo 2005-207), Mr. Allemieir was able to deduct, as an unreimbursed business expense, the tuition he paid for his MBA. A few other cases are briefly discussed for comparative purposes, but they all underscore the theme that under certain circumstances, an individual can deduct the costs of education as a business expense. This is of specific interest to MBA students, who can easily spend several tens of thousands of dollars on their degrees. The tax savings on such amounts are quite significant.

Not all MBA students will meet the requirements to deduct their tuition as an unreimbursed business expense, but there is a good rule of thumb for determining eligibility in the form of the flowchart found in IRS publication 970. This form is the 2008 version. The flowchart is found on page 65, under Chapter 12, as Exhibit 12-1. Chapter 12 includes the IRS’ guidance on deducting expenses associated with work-related education.

For those interested in my particular situation, I have worked for the same organization since 2004 in Finance/Accounting. I have received three promotions, two of which occurred either before I began my MBA program (Fall 2005), or prior to my graduation (Spring 2008). Although my employer does reimburse a portion of my tuition, I of course did not claim any of that portion as a deduction. My employer did not require me to obtain the MBA, but the MBA did maintain and improve my skills in my current line of work. The MBA was not needed to meet the minimum requirement in my current line of work, and fortunately the recent decisions of the Tax Court seem to favor the idea that an MBA doesn’t necessarily qualify one for a “new trade or business”, much like a law degree would.

For the convenience of readers, the links to the Tax Court rulings of Daniel Allemeier and Lori Singleton-Clarke appear below. It should be noted that the ruling in Mr. Allemeir’s case is a “Tax Court Memorandum”, whereas Ms. Singleton-Clarke’s is a “Tax Court Summary Opinion.” The distinction is important, because the former may be treated as precedent; the latter may not. Nevertheless, the ruling in Ms. Singleton-Clarke’s case is a good indication of the court’s view on the deductibility of MBA expenses.

http://www.ustaxcourt.gov/InOpHistoric/allemeier.TCM.WPD.pdf

http://www.ustaxcourt.gov/InOpHistoric/SINGLETON-CLARKE.SUM.WPD.pdf

Due to the exceedingly complex, interpretive, and dynamic nature of tax law, readers are strongly encouraged to consult a tax professional regarding their particular situations. This weblog post is not intended to constitute tax advice. It is presented only for the information and convenience of the reader. It is solely the responsibility of the reader to ensure that he or she is in compliance with the law. Furthermore, the writer is not responsible for any of the content of the materials accessible via the hyperlinks.

I wish to thank the CPA Journal and its writers for pioneering this discussion back in 2005.

Benjamin Post ([email protected])

Applying to B-School in 2010/11? By taking action now, you can dramatically improve your chances of gaining admission to a top-MBA program next year. Indeed, it is never too soon (and certainly not too late) to take several crucial steps to shape your MBA candidacy. Join an mbaMission senior consultant in Washington, D.C., Chicago, San Francisco or LA, as we lead prospective applicants through a Long Term Planning seminar.

Topics of discussion will include:

• Creating your 10 month timeline
• Maximizing the Impact of Community Activities
• Accelerating Personal Goals
• Building an Alternative Transcript
• Taking and Retaking the GMAT
• Making the Most of Campus Visits
• Understanding the differences between MBA programs
• More…  

All attendees of this exclusive event will receive:

• 10% off any 9-session ManhattanGMAT course
•  Free access to a ManhattanGMAT computer adaptive practice exam 

Sign up for our seminar today!

In this week’s New Yorker, Professors from Chicago Booth figure prominently in an article entitled “After the Blowup.” The article profiles Richard Posner, a former Chicago School economist (the market is efficient and self-correcting) who repudiates his long held ideas in favor of Keynesian economics (government intervention moderates economic problems) and thus takes on Chicago Booth professor Eugene Fama, who pioneered the efficient market theory. As we read about economic theory, we also come to know some of the personalities at the school – professors Becker and Thaler – and gain a window into academia and human nature.  Quite an interesting read…

mbaMission writes a monthly feature for our friends at Beat the GMAT. The following piece was penned for BTG by mbaMission Founder, Jeremy Shinewald:  

What could be more nerve-wracking than applying to business school without a job? After all, how can you reveal your strong management traits if you are struggling to manage your own career? Well, your internal voice need not be that cruel. Thousands upon thousands of people—and indeed, thousands of MBA applicants—have been negatively affected by the implosion of Wall Street firms, the decline of the automakers, the real estate bust and more. If you had been laid off and unable to find a job during the boom, that might have made a statement about your desirability to employers and thus as an MBA candidate, but this is 2010, and having been laid off now is hardly a scarlett letter. If the top MBA programs were to shun anyone who had been laid off and then gotten back on his or her feet, or anyone who has been laid off and has not yet found his or her new path, then they would certainly miss out on some tremendously talented and accomplished people.

Remember, admissions offices are governed by self-interest. The admissions committees want the best candidates, period. So, you should not overly concern yourself with your layoff and attempt to hide it. Rose Martinelli, director of admissions at Chicago Booth, told mbaMission,

“Bottom line: we all understand that people have lost jobs for no reason other than the economy …. People just need to be honest. This is a very unusual time, and B-schools haven’t seen this type of situation across so many sectors, so we are learning, too. I think honesty and transparency is the best that we can hope for from one another.”

And Soojin Kwon Koh, director of admissions at Michigan Ross, added a little more perspective by saying,

“We understand that great employees at all levels within an organization can get laid off … We’re going to look at an applicant’s entire professional history and not just the last year. And we’re going to look at all the pieces of the application, not just the work history.”

Indeed, we have spoken with several admissions officers on this point, all of whom emphasized that a layoff itself is not an issue and that unemployed candidates should certainly still apply to their preferred business schools. However, they also stressed that they would want to hear that such candidates did not simply take the time off but instead made the most of that time. Darden director of admissions Sara Neher explained that candidates need not fear taking a professional “step down,” stating that she was impressed by a particular candidate who rolled up her sleeves, quite literally, when she found herself out of a job:

“I had someone this year who got laid off but knew she wanted to start a restaurant someday. … So she ended up working as a waitress and then got into the kitchen a little bit and got to do some managing, and spent five months working in a restaurant. … It wasn’t for the money; it was to learn something on the ground that she could put into practice. … She fired people, she hired people, she dealt with a lot of interpersonal issues, and that will be good fodder for class and for learning.”

MBA applicants need not interpret “staying active” as gaining immediate employment. According to Peter Johnson, director of admissions at Berkeley-Haas, those who are stifled in their job hunt should consider undertaking informational interviews, job-shadowing and/or unpaid internships; doing so can send a significant signal to an admissions committee about a candidate’s determination and resiliency. Further, many admissions directors pointed to community leadership as a clear way for applicants to prove that they have remained engaged and spent their time productively. While the time one spends laid off can undoubtedly be trying, the admissions officers we interviewed seemed to regard these tough times as somewhat of an unfortunate test. The Admissions Committees want to see that unemployed applicants are still building their cases and shoring up their candidacies, even as the economy is in retreat, so that they will have a story to showcase and be poised to excel when the economy recovers.