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standard deduction for 1996 of $3,000, see sec. 63(c)(2)(C),
would exceed the maximum gambling loss deduction.
In the case of an individual, section 62(a) defines adjusted
gross income as gross income less certain deductions, including
deductions attributable to a trade or business carried on by the
taxpayer. See sec. 62(a)(1). If petitioner's gambling activity
constituted a trade or business, his gambling losses would be
deductible from gross income in arriving at adjusted gross income
on Schedule C, Profit or Loss from Business. See id. If
petitioner's gambling activity did not constitute a trade or
business, his gambling losses would be deductible as an itemized
deduction in arriving at taxable income on Schedule A, Itemized
Deductions. See sec. 63(a). But, regardless whether or not the
activity constituted a trade or business, section 165(d) provides
that “Losses from wagering transactions shall be allowed only to
the extent of the gains from such transactions.” See also sec.
1.165-10, Income Tax Regs.
Petitioner has not argued, nor do we find, that he was in a
trade or business of gambling. To be engaged in a trade or
business, an individual must be involved in the activity with
continuity and regularity, and the primary purpose for engaging
in the activity must be for income or profit. See Commissioner
v. Groetzinger, 480 U.S. 23, 35 (1987). “A sporadic activity, a
hobby, or an amusement diversion does not qualify [as a trade or
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