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to show that their gambling losses equal or exceed their gambling
winnings.8
In contending that petitioners had at least $144,645 of
unreported gambling winnings, respondent relies on stipulations
and undisputed evidence which show that petitioners had
unreported gambling winnings from the following sources:
Boomtown Casino $2,645
Jubilation Casino 3,100
Bay St. Louis Casino Magic 99,500
Biloxi Casino Magic 39,400
Total 144,645
While we agree (and petitioners do not dispute) that
petitioners had unreported gambling winnings of $144,645,
respondent has not shown that the entire $144,645 represents
gross income to petitioners. The evidence shows, and we have
found, that the $99,500 gambling winnings from the Bay St. Louis
Casino Magic, as reported on Forms W-2G, were all from slot
machine play and that to win this $99,500, petitioners placed
bets of $4,975. Therefore, $4,975 of the $99,500 slot machine
winnings is in the nature of a recovery of capital and should be
excluded from petitioners’ gross gambling winnings to arrive at
8 Sec. 7491 does not define what constitutes credible
evidence. The pertinent legislative history states: “Credible
evidence is the quality of evidence which, after critical
analysis, the court would find sufficient upon which to base a
decision on the issue if no contrary evidence were submitted
(without regard to the judicial presumption of IRS correctness).”
H. Conf. Rept. 105-599, at 240-241 (1998), 1998-3 C.B. 747, 994-
995; see Higbee v. Commissioner, 116 T.C. 438, 442 (2001).
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