John Allen and Glenna A. Lyle - Page 14

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          V.  Gambling Losses                                                         
                                  FINDINGS OF FACT                                    
               Petitioner gambled every day from April until he left Las              
          Vegas in late July 1995.  Petitioners claimed "gaming wins" of              
          $1,200 and gambling expenses and losses of $35,034 on their 1995            
          Federal income tax return.  Respondent disallowed petitioners'              
          gambling expenses and losses in excess of gambling winnings.                
               Petitioners maintain that, pursuant to section 162(a), the             
          net wagering losses represented a deductible trade or business              
          expense.  Respondent contends that the deduction of net wagering            
          losses is precluded by section 165(d).  We agree with respondent.           
          Section 165(d) provides that "Losses from wagering transactions             
          shall be allowed only to the extent of the gains from such                  
          transactions."  In other words, a taxpayer is not entitled, as a            
          matter of law, to deduct a net gambling loss.                               
               Petitioner relies on Commissioner v. Groetzinger, 480 U.S.             
          23 (1987), for the proposition that net gambling losses are                 
          properly deductible in full as trade or business expenses under             
          section 162(a).  Petitioners' discussion of Groetzinger ignores             
          the fact that the section 165(d) restriction was not at issue in            
          Groetzinger.  The issue in Groetzinger was whether a full-time              
          gambler, who made wagers solely on his own account, was engaged             
          in a trade or business under section 162 for purposes of treating           

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