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Respondent determined a deficiency of $1,873 in petitioner's
1997 Federal income tax. The issue is whether petitioner is
entitled to a deduction for gambling losses. Petitioner resided
in Quinton, Virginia, when the petition in this case was filed.
The facts may be summarized as follows. During 1997,
petitioner played the Virginia State Lottery and won two amounts
($2,500 and $2,700) that were reported to the Internal Revenue
Service. Petitioner is not in the trade or business of gambling
or playing the lottery. On her 1997 return, petitioner did not
report any income from the lottery. Petitioner did not itemize
deductions and claimed the so-called standard deduction for head
of household in the amount of $6,050. In the notice of
deficiency, respondent determined that petitioner had additional
income in the amount reported by the lottery ($5,200).
Petitioner admits that she won the $5,200 and, indeed,
admits that she additionally won as much as $1,000 a month that
was not reported by the lottery, but she did not know the exact
amount of her total winnings for the year. Petitioner did not
report the additional winnings because she believed that, since
they were not reported to the Internal Revenue Service, they were
not taxable.
Discussion
Section 61(a) defines gross income to mean all income from
whatever source derived. Lottery winnings, whether reported or
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