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investments and rent does not in and of itself bar her from being
a professional gambler. Petitioner, however, does not qualify as
a professional gambler because her situation does not satisfy the
test laid out by the Supreme Court. In Commissioner v.
Groetzinger, supra at 33, the Court stated that, if a taxpayer
“devotes his full-time activity to gambling, and it is his
intended livelihood source, it would seem that basic concepts of
fairness * * * demand that his activity be regarded as a trade or
business”. Petitioner’s livelihood was not her winnings from
slot machines; instead, her primary income came from her flower
shop. Her gambling was not a trade or business under section
162. Consequently, petitioner may not deduct her losses on a
Schedule C but must itemize them.3
Respondent determined a section 6662(a) penalty of $1,232
against petitioner. Section 6662(a) provides for a 20-percent
addition to tax for any underpayment to which the section
applies. Respondent determined that section 6662(b) applies to
3 If petitioner qualified as a professional gambler for
purposes of sec. 162, she still could claim her losses only to
the extent she had gains. Sec. 165(d); Praytor v. Commissioner,
T.C. Memo. 2000-282. Because petitioner does not qualify as a
professional gambler, it is not necessary to address whether
petitioner may deduct ATM charges and tips to grocery store
employees as expenses because her slot machine losses alone
exceeded her winnings; therefore, she may not deduct the charges
or tips. In the notice of deficiency, respondent disallowed all
of petitioner’s claimed deductions for gambling losses and other
expenses in excess of gambling income. That computation is
sustained by the Court.
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Last modified: May 25, 2011