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Trump Plaza Associates cannot be treated as 'gains from wagering
transactions' pursuant to Internal Revenue Code Section 165(d)."
Discussion
Legal gambling is a multi-billion-dollar industry that has
proliferated across the country and has become a major source of
adult entertainment. In an effort to attract the attention of
patrons, gaming establishments routinely offer comps. In the
instant case, Trump paid more than $2.5 million in comps to
petitioner during the subject years. The term "comps" is
generally understood to imply "free of charge". Common sense,
however, makes one strongly suspicious as to whether the comps
received by petitioner were free of charge. If there is any
truth to the time-tested adage that there is "no free lunch", one
can hardly be surprised that respondent argues that petitioner's
comps are taxable to him.
Petitioner reported the subject comps as gross income on his
1987 through 1989 Federal income tax returns (including the
amendment to his 1987 return). Petitioner argues that the comps
are not taxable to him because they are wagering gains which may
be offset by his larger wagering losses.8 See sec. 165(d).
Respondent asserts that the comps are not wagering gains because
they do not have a "strong nexus" to petitioner's wagering
8 Petitioner also makes alternative arguments that the comps
are not income. For purposes of deciding the sec. 165(d) issue,
we will assume that the comps are properly includable in gross
income.
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