In Uncategorized on 07/18/2011 at 16:41

But You’re Not a Pro If Gambling  Isn’t Your Full-Time Job

 So learns Randy L. Moore, in 2011 T.C. Mem. 173, filed 7/18/11. Randy delivered food and worked as a traveling x-ray technician. But he spent his every spare moment at the casino, working the slots. He claimed he was a professional gambler, filed Schedule C so claiming, but his expenses were $40K and his winnings only $25K. He claimed a $15K loss against his x-ray wages.

Everyone agrees that gambling losses can be offset against gambling winnings, but any other gambling expense can only be deducted by professional gamblers. Likewise, non-professionals offset their losses against winnings via the Other Income line on Form 1040 for winnings, and on Schedule A for losses. Schedule C is for pros only.

IRS first raised the issue of Randy’s pro status at the answer stage of the proceedings, so IRS had Rule 142(a)(1) burden of proof. IRS claimed that Randy never replied to the answer, so their allegation of his non-professionalism must be deemed admitted under Rule 37.

No need to go there, says Judge Morrison; the trial record is sufficient to show that Randy is an amateur without any deemed admissions. Even though having the burden of proof, IRS discharges it easily.

Randy kept no records. His winnings were established by W-2Gs from two casinos.  Judge Morrison said: “Moore said that he called the IRS in 2004 to ask how to keep track of his gambling losses and that the IRS told him he could use bank statements. Moore claimed to have kept bank statements as records of his gambling transactions, but he did not present any bank statements as evidence.” 2011 T.C. Mem. 173, footnote 3, at pp. 3-4.

Judge Morrison went on: “Other documents from the two casinos purportedly have more data on Moore’s gambling activities, but we do not find the documents comprehensible or reliable.” 2011 T.C. Mem. 173, footnote 4, at p. 4.

Randy never studied gambling in a systematic way (he said he “read a couple books” about gambling, but aside from showing ignorance of the partitive genitive, that was insufficient to show professionalism). He never made a profit gambling, and his gambling certainly afforded him personal pleasure. The greatest part of his income came from his work as a rambling x-ray technician. In fact, he adjusted his gambling time around his x-raying gigs.

Randy apparently (because he never cited it by name) relied on “Commissioner v. Groetzinger, 480 U.S. 23 (1987), which he said supported the notion that he was a professional gambler because he gambled ‘full time’. But Moore’s situation differs from that of the taxpayer in Groetzinger…. The taxpayer in Groetzinger gambled 60 to 80 hours a week for 48 weeks during the year at issue and had no other employment.” 2011 T.C. Mem. 173, at p. 12. Randy was rambling around x-raying 40 hours per week during the year at issue.

So Randy falls foul of Regulation Section 1.6662-4(d)(3)(ii), which provides that an authority is not relevant if materially distinguishable on its facts. Randy was negligent, and if the Rule 155 recomputation shows substantial underpayment, Randy gets the 20% penalty. PS- Randy also left out almost $8900 of wages on his return.

So Randy may have been a rambler, but he wasn’t enough of a gambler to qualify as a pro.

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