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for each dollar bet he placed. According to petitioner, Yonkers
typically pays back about 83 cents for each dollar bet placed.
Petitioner’s 2001 Federal income tax return was timely
filed. The taxable income and income tax liability shown on that
return take into account the standard deduction applicable to
petitioner’s filing status. Included with that return is a
Schedule C, Profit or Loss From Business, which lists his
principal business activity as “Parimutuel Wagering”.
On the Schedule C, petitioner reported the following
amounts:
Gross receipts
from wagers $52,501
Total wagered 50,725
Gross Income 1,776
Total expenses (1,542)
Net Profit 234
Petitioner’s total expenses consisted of supplies of $162 and
forms and programs of $1,380.3
In the notice of deficiency respondent determined that
petitioner’s gambling activity did not constitute a trade or
business during 2001. The gambling income reported on the
Schedule C was recharacterized as “other income”, and the
wagering losses were allowed as a miscellaneous itemized
deduction in lieu of the standard deduction.
3 Respondent does not contest that petitioner incurred
these gambling-related expenses.
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