Lillie M. Petty - Page 2

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               Some of the facts in this case have been stipulated and are            
          so found.  Petitioner resided in Chicago, Illinois, at the time             
          she filed her petition.                                                     
               Section 7491(a) does not apply because this case involves              
          legal issues.                                                               
               On Form 1040, U.S. Individual Tax Return, for taxable year             
          2000, petitioner reported $11,835 in wage income.  Petitioner did           
          not report any other income.  Petitioner also claimed head of               
          household filing status, two dependency exemptions, and the                 
          standard deduction.  Petitioner claimed the earned income credit            
          (EIC) in the amount of $3,888.                                              
               Respondent received five Forms W-2G, Certain Gambling                  
          Winnings, for taxable year 2000, four from Hollywood Casino                 
          Aurora in the amounts of $2,500, $2,000, $1,800, and $1,440,                
          respectively, and one from Showboat Marina Casino Partnership in            
          the amount of $1,440, for a total of $9,180.  From these Forms              
          W-2G, respondent determined that petitioner had unreported                  
          gambling income of $9,180 for taxable year 2000.  Accordingly,              
          respondent increased petitioner’s adjusted gross income to                  
          $21,015 and decreased petitioner’s EIC by $1,755.                           
               Section 61(a) provides that gross income includes all income           
          from whatever source derived, unless excludable by a specific               
          provision of the Code.  No specific code section excludes                   
          gambling winnings from gross income.  Section 165(d) allows                 






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