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transactions.” Sec. 165(d).
According to petitioners, section 165(d) is not applicable
because petitioner was engaged in a gambling trade or business
during the years in issue. Petitioners further argue that even
if applicable, section 165(d) only limits deductions for losing
wagers and not other expenses incurred in a gambling trade or
business. According to respondent, section 165(d) applies to all
gambling losses whether incurred in connection with a trade or
business or otherwise. Furthermore, according to respondent,
section 165(d) limits deductions not only for losing wagers but
also for any otherwise deductible expense incurred in connection
with gambling transactions.
In Offutt v. Commissioner, 16 T.C. 1214 (1951), we held that
the taxpayer, who was engaged in a gambling trade or business,
was entitled to deduct gambling losses only to the extent of
gambling winnings. Further, we construed the phrase “losses from
wagering transactions” to include not only losing wagers but also
mailing, printing, and stenographic expenses. In the line of
cases following Offutt, this and other Federal Courts have
consistently held that section 165(d), or its predecessor,
applies to gambling losses incurred in a trade or business and
limits deductions not only for losing wagers but also for other
expenses incurred in connection with gambling transactions. See
Estate of Todisco v. Commissioner, 757 F.2d 1 (1st Cir. 1985),
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Last modified: May 25, 2011