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deduction for married filing jointly on their 1998 return. Upon
examination, respondent included the $4,500 in petitioners’ gross
income. Petitioners contend that petitioner was in the trade or
business of gambling and that her losses exceeded the amount of
income she realized from gambling.
Discussion
Section 61(a) defines gross income to mean all income from
whatever source derived. Winnings from slot machines are
includable in gross income. See Bauman v. Commissioner, T.C.
Memo. 1993-112. Section 162(a) allows deductions for all
ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business. The initial
issue here is whether petitioners' gambling activity constituted
a trade or business. If petitioner were engaged in a trade or
business of gambling, losses, to the extent that they would be
deductible under section 165(d), would be deducted in computing
adjusted gross income. See sec. 62. On the other hand, if
petitioner were not in a trade or business of gambling, her
losses would be deductible as an itemized deduction.
To be engaged in a trade or business within the meaning of
section 162(a), an individual must be involved in the activity
with continuity and regularity and the primary purpose for
engaging in the activity must be for income and profit.
Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987). Whether a
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