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cumulative amount petitioner lost in gambling during 1996 is
unclear, the parties seem to agree that he lost more than he won.
On his 1996 return petitioner deducted $858 in determining
his adjusted gross income. Petitioner did not itemize deductions
and claimed the so-called standard deduction. In the notice of
deficiency, respondent determined that the $858 deduction was not
allowable.
Discussion
Section 61(a)1 defines gross income to mean all income from
whatever source derived. Lottery winnings are includable in
gross income. See Paul v. Commissioner, T.C. Memo. 1992-582.
Petitioner admits that he won $858. As we understand,
petitioner's position is that he sustained a net loss from his
gambling activities during 1996, and, therefore, he should be
able to deduct the losses that he incurred in determining the
amount of gambling income that he received.
Respondent argues that, even if the Court finds that
petitioner sustained gambling losses during 1996, which we do,
the deductible amount of such gambling losses would be limited to
the amount of the gambling winnings reported. Respondent further
argues that, even if petitioner were entitled to a Schedule A
itemized deduction for any such gambling loss, the claimed
1 Unless otherwise indicated, section references are to
the Internal Revenue Code in effect for the year in issue.
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Last modified: May 25, 2011