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gambling activities allegedly showing cash withdrawals for each
day and the amount of individual gain or loss at the end of the
day. For example, the credit card account statement shows that
on June 14, 2001, they withdrew $600, and the gambling activity
records for that day show that they lost $600.
Discussion
Section 61(a) defines gross income to mean all income from
whatever source derived. Winnings from slot machines and other
gambling winnings are includable in gross income. See Lyszkowski
v. Commissioner, T.C. Memo. 1995-235, affd. without published
opinion 79 F.3d 1138 (3d Cir. 1996). In the case of an
individual, section 62(a) defines adjusted gross income as gross
income less certain deductions, including deductions attributable
to a trade or business carried on by the taxpayer. Sec.
62(a)(1). If a taxpayer’s gambling activity constituted a trade
or business, his or her gambling losses would be deductible from
gross income in arriving at adjusted gross income on Schedule C,
Profit or Loss From Business. If a taxpayer’s gambling activity
did not constitute a trade or business, his or her gambling
losses would be deductible as an itemized deduction in arriving
at taxable income on Schedule A. Sec. 63(a). Petitioners do not
claim that they were in the trade or business of gambling.
Regardless whether or not the activity constituted a trade
or business, section 165(d) provides that “Losses from wagering
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Last modified: May 25, 2011