Michael Ferguson - Page 7

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          extent deductible under section 165(d), would be deductible as an           
          itemized deduction in the computation of taxable income.  See,              
          e.g., Gajewski v. Commissioner, 84 T.C. 980, 982 (1985); Johnston           
          v. Commissioner, 25 T.C. 106, 108 (1955); see also secs. 67(a),             
          68(a), 151(d)(3).                                                           
               In general, section 162(a) allows a deduction for all                  
          ordinary and necessary expenses paid or incurred during the                 
          taxable year in carrying on a trade or business.  The term “trade           
          or business” is not defined in the Internal Revenue Code or the             
          regulations.  That said, it is well established that in order for           
          an activity to be considered a trade or business for the purposes           
          of section 162, the activity must be conducted with “continuity             
          and regularity” and “the taxpayer’s primary purpose for engaging            
          in the activity must be for income or profit.”  Commissioner v.             
          Groetzinger, 480 U.S. 23, 35 (1987).                                        
               Petitioner testified at trial that playing video poker                 
          totally consumed his free time and caused him to lose a lot of              
          money.  But simply spending all of one’s free time on an activity           
          does not transform that activity into a trade or business, nor              
          does it make the participant a professional.  Occasionally,                 
          devoting all of one’s free time to a particular activity may be a           
          sign of addiction.9  Further, the amount of time spent engaged in           


               9  At trial, petitioner testified that he had himself barred           
          from his usual casinos for 5 years to prevent him from continuing           
          to gamble there.                                                            




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