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because their gambling losses exceeded their gambling winnings,
the winnings did not have to be reported as gross income, nor
could their gambling losses be claimed as deductions, since they
were not professional gamblers. Respondent does not dispute that
petitioners sustained gambling losses at least equal to or even
greater than their gambling winnings. However, respondent
disagrees with petitioners’ position as to how the gambling
winnings and losses are to be treated for income tax purposes.
The law is clear that income from gambling is includable in
gross income under section 61.3 Moreover, gambling losses are
deductible only to the extent of the taxpayer’s winnings from
similar transactions. Sec. 165(d); Offutt v. Commissioner, 16
T.C. 1214 (1951); sec. 1.165-10, Income Tax Regs. If a taxpayer
is a professional gambler and is engaged in the trade or business
of gambling, the income and losses therefrom are reported for
income tax purposes as a trade or business activity. As such,
the losses sustained in the activity are deductible as ordinary
and necessary expenses paid or incurred in carrying on a trade or
business under section 162(a), subject to section 165(d), which
limits the deduction for losses to the extent of the gains
realized from gambling. Boyd v. United States, 762 F.2d 1369,
3Because the issue in this case is legal in nature, sec.
7491, which in some circumstances shifts the burden of proof to
respondent, is not applicable.
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