- 4 -
principal business or profession was professional gambling.
Petitioner reported gross receipts of $132,800, cost of goods
sold of $180,300, and deducted $3,150 in travel expenses, for a
net Schedule C loss of $50,650. After deducting the Schedule C
loss and a net operating loss carryover of $1,106, petitioner
reported total income of $113,723. Petitioner claimed itemized
deductions of $14,077 and a personal exemption of $3,000,
resulting in taxable income of $96,646 and total tax of $23,303.
On March 21, 2005, respondent issued petitioner a notice of
deficiency. Respondent determined petitioner was not engaged in
the trade or business of gambling during 2002 and therefore could
not deduct his gambling losses on Schedule C. Instead,
respondent determined petitioner could deduct the gambling losses
as an itemized deduction, but only to the extent of his gambling
winnings.5 Based on the above, respondent determined the amount
of tax required to be shown on petitioner’s 2002 return was
$40,399, resulting in a deficiency of $17,096. Respondent also
determined petitioner was liable for an accuracy-related penalty
under section 6662(a) of $3,419.
In response to the notice of deficiency, petitioner filed
his petition with this Court on April 18, 2005.
5 Respondent also disallowed the claimed personal exemption
deduction because petitioner’s adjusted gross income exceeded the
allowable amount for such a deduction. Petitioner does not
dispute this determination.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011