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the results using the aforementioned formula. We find the
methodology and assumptions made by Mr. Nicely to calculate the
likelihood and extent of Mr. Gagliardi’s gambling losses at slot
machines during the years in issue to be reasonable.
Mr. Nicely opined on the basis of the extent of Mr.
Gagliardi’s gambling activity that (1) Mr. Gagliardi’s breaking
even from slot machine play was astronomically unlikely
(substantially greater than 1 in 1 trillion);22 and (2) the
estimated net losses from slot machine play for the tax years
1999, 2000, and 2001 were most likely approximately $637,000,
$678,000, and $507,000, respectively, with an error range of plus
or minus $65,000, $72,000, and $83,000, respectively.
Mr. Nicely’s estimate of Mr. Gagliardi’s total net losses
from slot machine play for the years at issue, $1,822,000 (with
an error range of a maximum net loss of $2,042,00 and a minimum
net loss of $1,602,000), is consistent and greater than Mr.
Gagliardi’s total claimed net gambling losses from slot machine
play for the tax years at issue ($1,446,740).23 Additionally, the
22 Mr. Nicely explained that “7.5G” equals 1 in 13
trillion. (Sigma (G) is also designated by “Z” and called a “Z
score” or “Z factor”.) His calculations revealed that the
possibility of Mr. Gagliardi’s breaking even was “19G” which is
infinitesimal (it is so small that the amount technically is
incalculable and assigning a number to it is not practical).
23 Petitioner reported casino winnings of $127,073,
$270,052, and $631,629 in 1999, 2000, and 2001, respectively.
See supra p. 14. Petitioner reported casino losses of $502,433,
(continued...)
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