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1372 (9th Cir. 1985); Valenti v. Commissioner, T.C. Memo. 1994-483.
The parties agree that petitioners were not professional
gamblers and were not engaged in gambling as a trade or business
activity. Therefore, the income and losses from the activity
could not be reported on their return on Schedule C, Profit or
Loss From Business. Petitioners’ gambling winnings,
nevertheless, constituted gross income under section 61(a), and
such income was required to be reported on Form 1040 of their
income tax return. Petitioners did not report any of their
gambling winnings on their income tax return. The deductions for
losses attributable to the gambling activity were allowed by
respondent (to the extent of the winnings) as an itemized
deduction. Sec. 63(b) and (c); Stein v. Commissioner, T.C. Memo.
1984-403, affd. without published opinion 770 F.2d 1075 (3d Cir.
1985); Heidelberg v. Commissioner, T.C. Memo. 1977-133. As a
consequence, respondent sustained the aforedescribed adjustments
giving rise to the determined deficiency.
Petitioners contend that itemized-deduction treatment of
their gambling income and losses is unfair, and that they can
simply ignore the winnings and the losses by not reporting the
same on their return. They take strong issue with respondent’s
determination that causes them to recognize a greater amount of
their Social Security benefits as gross income and to lose the
tax credit and the standard deduction, both of which are
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