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itemized deductions in lieu of the claimed standard deduction and
allowed petitioner an additional itemized deduction for the
payment of taxes. Finally, a computational adjustment was made
to the amount of taxable Social Security benefits. Petitioner
disputes respondent’s determination that he was not engaged in
the trade or business of gambling.
Ordinary and necessary expenses paid in carrying on a trade
or business generally are deductible under section 162(a). A
taxpayer who is engaged in the trade or business of gambling may
deduct gambling losses and expenses, if otherwise permitted, only
to the extent of the taxpayer’s gambling winnings. See secs.
162(a) and 165(d); Valenti v. Commissioner, T.C. Memo. 1994-483.
A taxpayer who is not engaged in the trade or business of
gambling also may deduct such losses and expenses to the extent
of their winnings, but must do so under section 165(a). A
deduction under section 165(a) reduces a taxpayer’s taxable
income only if the taxpayer elects to forgo the standard
deduction. See sec. 63.
Resolving the question whether a taxpayer is engaged in a
trade or business “requires an examination of the facts in each
case.” Commissioner v. Groetzinger, 480 U.S. 23, 36 (1987)
(quoting Higgins v. Commissioner, 312 U.S. 212, 217 (1941)). The
Supreme Court in Commissioner v. Groetzinger, supra, addressing
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