study and agreed with its conclusions. Mr. Gaissert concluded that the financial difficulties experienced by VGS stemmed from inexperienced management, lack of capital, and a gas supply contract which required excessive payments under the minimum take-or-pay provision. In addition, he maintained that the market emphasis should be shifted away from commercial customers and instead focused upon residential consumers. After the reorganization it was precisely these changes which were made and perhaps more importantly, the Vermont division of VGS continued to conduct substantial business activities and was certainly anything but a mere corporate shell. These facts lend substantial credence to petitioner's contention. Naeter Bros. Publishing Co. v. Commissioner, 42 T.C. 1, 8 (1964). Respondent argues that because New Southland was a successful and profitable business and VGS was financially distressed and the principals of New Southland were aware of the VGS tax attributes that the principal purpose of the acquisition was tax avoidance. Indeed, the operating losses and investment credits were considered and, in fact, used in calculating the amount of capital which New Southland would be able to supply to VGS. Complicated business transactions do not take place in a vacuum and we find this to be nothing more than prudent business planning. D'ArcyMacManus & Masius, Inc. v. Commissioner, supra; Glen Raven Mills, Inc. v. Commissioner, 59 T.C. 1, 15 (1972). Moreover, simply arguing that a profitable corporation acquired a loss corporation and hence section 269 applies merely begs the question. Mr. Hearin and Mr. Else testified that it was felt that the acquisition of VGS would provide a sound opportunity for diversification in a related business area and that from a cash flow standpoint the merger was particularly attractive because the operations of New Southland reached their peak in the summer months while VGS could be expected to provide a substantial source of funds in the winter months. We find their testimony to be forthright, credible, and supported by the record. Moreover, based on the Gaissert study we conclude that the principals of New Southland had substantial reason to be optimistic because New Southland was in a position to provide enough cash to meet the financial requirements of VGS. After the acquisition, the assets of New Southland were subject to demands of VGS' creditors and potential liability under the long-term gas supply contract with Trans-Canada. After the reorganization New Southland injected over $4 million into the operations of VGS in addition to the purchase price. While losses continued until 1971, profits were realized in 1971 through 1973 and in 1974 and 1975 substantial pretax profits were earned. These facts strongly support petitioner's position that the principal purpose of the acquisition was other than the avoidance of Federal income tax. Compare F.C. Publication Liquidating Corp. v. Commissioner, 36 T.C. 836, 850 (1961), affd. 304 F.2d 779 (2d Cir. 1962) (wherein the taxpayer did not enter into a single contract which could subject its assets to the creditors of the acquired corporation for longer than 6 months). Respondent further contends that New Southland could have obtained funds to purchase the stock or the assets of VGS and, therefore, proceeding as they did indicates a taxavoidance purpose, citing Canaveral International Corp. v. Commissioner, supra at 541. In Canaveral we stated that "when section 269 is placed in issue, it does require a showing that the most favorable tax route, when that route involves the acquisition of a corporation, was principally motivated by non-tax-related business reasons." While it is true that the methods selected did facilitate the utilization of VGS' tax attributes, petitioner has shown substantial business purpose for the merger as implemented. An acquisition for stock was chosen so that New Southland's future cash flow could be used to finance the future capital requirement of VGS. Not only did Vermont law appear to require the continued existence of VGS as a public service corporation, but also various permits from the State of Vermont, the United States, and Canada authorizing the transaction of business as a public utility were nontransferable and, therefore, considerable time and expense would be required to secure new permits. The evidence is such that we do not believe the transaction was a "C" reorganization simply in an effort to obtain the tax benefits of VGS. From the record as a whole we can only conclude that the primary purpose of the acquisition of VGS by New Southland and its shareholders was their belief that VGS would become a highly profitable public utility. Accordingly, we hold that the principal purpose of the acquisition was not the avoidance or evasion of Federal income tax and, therefore, section 269 does not operate to deny the carryover of the VGS net operating losses and investment credit. Decisions will be entered under Rule 155. ORRIN GROVER AND ANN SEGARS (FORMERLY GROVER), Docket No. 5651-75. Filed July 26, 1977. Petitioner, a commissioned officer in the United States Marine Corps, seeks to deduct the expenses he incurred in attending law school. He also seeks to deduct home office expenses which he incurred in connection with his study of law. Held, petitioner's law school expenses are not deductible as ordinary and necessary business expenses because they were incurred in the pursuit of a program of study "which will lead to qualifying him in a new trade or business," sec. 1.1625(b)(3)(i), Income Tax Regs., namely, the practice of law. Held, further, petitioner failed to show the expenses incurred in connection with the use of his home were ordinary and necessary business expenses within the meaning of sec. 162, I.R.C. 1954. Orrin L. Grover, pro se. Rebecca T. Hill, for the respondent. IRWIN, Judge: The Commissioner determined a deficiency of $269 in petitioners' joint Federal income tax for the calendar year 1972. The issues for our decision are: (1) Whether petitioners are entitled to a deduction for expenses incurred by Orrin L. Grover while attending law school; and (2) whether home office expenses incurred in connection with petitioner's study of law are deductible business expenses under section 162.1 All statutory references are to the Internal Revenue Code of 1954 as in effect for the year in issue. FINDINGS OF FACT Some of the facts have been stipulated. This stipulation of facts, along with attached exhibits, is incorporated herein by this reference. Petitioners, formerly husband and wife, resided in San Francisco and Piedmont, Calif., respectively, at the time of filing their petition herein. They filed a joint Federal income tax return for the calendar year 1972 with the District Director of Internal Revenue, Fresno, Calif. Since Ann M. Segars (formerly Grover) is a party hereto solely by reason of having filed a joint return with her husband for the year in issue, Orrin Grover will hereafter be referred to as the petitioner. Petitioner was a student at the United States Naval Academy until June 3, 1970, at which time he graduated and received a commission as a Marine Corps officer. Upon receiving his commission, petitioner was given orders to attend Officers' Basic School in Quantico, Va., which he successfully completed in March 1971. While awaiting orders for his first transfer, petitioner was assigned to the Military Law Department at Officers' Basic School where he worked as an assistant instructor in military law. After 2 months, he was transferred to the base legal office on the Marine Corps base where he worked preparing administrative opinions for the commanding general and representing the Government before administrative discharge boards. Then, in August 1971, petitioner was transferred from the Marine base at Quantico to Treasure Island Naval Base where he was given the military occupational specialty of basic lawyer. Within 3 weeks thereafter petitioner was placed in "excess leave status" so that he could attend law school. This meant that petitioner was in a status where he did not receive pay but was entitled to all other privileges which went along with his rank. For the periods of September 1971 to June 1972, September 1972 to May 1973, and September 1973 to May 1974 petitioner was a law student at Golden Gate University in San Francisco, Calif. During the remaining 3 months of each year he performed duties as a Marine officer assigned the military occupational specialty of basic lawyer at the 12th District Naval Law Center at Treasure Island. His duties included working with judge advocates and attorneys, process ing personal and Federal tort claims, working as an assistant trial counsel and trial counsel representing the Government before special court-martials, performing duties for the commandant of the 12th Naval District in reviewing summary, special, and general court-martials, preparing administrative advice, and writing legal opinions. After his graduation in June 1974, petitioner reported for full active duty and served as a basic lawyer until his discharge from the Marine Corps. During this period of time he served as an appellate clerk for the commandant of the 12th Naval District, representing the Government as assistant trial counsel before general courtmartials and representing the Government as trial counsel and associate trial counsel before special court-martials. He also performed other duties such as counseling persons seeking legal advice. Petitioner was discharged from the Marine Corps on February 25, 1975, and took the California bar examination on February 25, 26, and 27 of that same year. He was admitted to the California Bar in June of 1975. Petitioner paid all the expenses incident to his study of law and was not reimbursed for said expenses. He sought to deduct these expenses along with certain home office expenses, which he claims he incurred incident to his study of law, on his 1972 individual income tax return. In the notice of deficiency respondent disallowed the education expense deduction asserting that it qualified petitioner for a new trade or business. Respondent also disallowed the home office expense deduction stating that it was not established as an ordinary and necessary business expense. OPINION We are thus confronted with two issues, to wit: (1) Whether petitioner's law school education led him toward qualifying in a new trade or business; and (2) Whether the home office expenses which petitioner seeks to deduct are ordinary and necessary business expenses within the meaning of section 162. Section 162 allows a deduction for ordinary and necessary business expenses. Section 1.162-5, Income Tax Regs., sets forth guidelines for determining those educational expenses which are ordinary and necessary expenses incident to a |