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expenses of a trade or business under section 162, or, in the
alternative, under section 165.2 Petitioners resided in Clinton,
Iowa, at the time the petition was filed.
Background
The facts may be summarized as follows. Prior to 1998,
petitioner enjoyed “off and on” or “vacation” gambling in Nevada
with her husband. At that time petitioner was a housewife. In
1998, petitioner decided that she could “make some money”
gambling. She began playing the slot machines at a local
riverboat casino (primarily the Mississippi Bell II) and financed
her playing primarily with cash advances from credit cards. On
two occasions she won sufficient money for the casino to issue
Forms W-2G, Certain Gambling Winnings, to petitioner reporting
winnings of $2,500 and $2,000.3 In September or October 1998,
petitioner “looked at her records” and realized that she was
going into debt. She decided to quit gambling, get a job, and
pay off the accumulated debt.
Petitioners did not report the $4,500 on their joint 1998
Federal income tax return. Petitioners claimed the standard
2 Respondent adjusted the taxable amount of Social Security
benefit that was received and reported. Petitioners have not
challenged that adjustment.
3 It appears that petitioner won an additional $2,000 for which
a Form W-2G was issued. Respondent, however, included only
$4,500 in the notice of deficiency and has not asserted an
increased deficiency.
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Last modified: May 25, 2011