Ronald J. Lutz, Jr. and Paula M. Lutz - Page 13




                                       - 13 -                                         
          conclude that the unreported gross income indicated by the notice           
          of deficiency is $86,705 ($91,000 less $4,295).                             
               To recap, we conclude that the facts relied upon by                    
          respondent show that petitioners had unreported gambling gross              
          income of $137,700.  This amount is $50,995 greater than the                
          $86,705 unreported gambling gross income indicated by the                   
          unreported gross gambling winnings reflected in the notice of               
          deficiency.  To establish their entitlement to deduct gambling              
          losses from the gross gambling income indicated by the notice of            
          deficiency, petitioners must establish that their gambling losses           
          are greater than the $50,995 of unreported gross gambling income            
          that is not reflected in the notice of deficiency.  See Schooler            
          v. Commissioner, 68 T.C. 867 (1977).  Respondent has conceded               
          that petitioners have gambling losses of $43,818.75, based                  
          largely on the THRs generated by the Casinos Magic with respect             
          to petitioners’ table games play.  Accordingly, petitioners must            
          establish additional gambling losses of at least $7,176.25                  
          ($50,995 less $43,818.75) to show entitlement to any gambling               
          loss deduction.12                                                           



               12 As discussed in more detail in the text, the $43,818.75             
          gambling losses that respondent has conceded represent primarily            
          losses reflected in THRs, relating to table games play at the               
          Casinos Magic.  These conceded losses do not include petitioners’           
          costs of placing slot machine bets and hence do not duplicate the           
          amounts that we have concluded should be allowed as an offset in            
          determining petitioners’ gross income from slot machine winnings.           





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