I’m blogging Shiraz Noormohamed Lakhani, 142 T. C. 8, filed 3/11/14, because he’s a fellow horseplayer. And I’m giving him a Taishoff “good try”, even though Judge Halpern DQs him at the post.

Now Shiraz is a heavier bettor than I by orders of magnitude. So he wants NOLs for his losing years, and wants to take losses above his winnings.

He claims Section 165(d), the “no losses above winnings” provision, unconstitutionally discriminates against professional gamblers (and IRS apparently concedes Shiraz’s pro status, even though he’s a CPA with a tax prep practice), now that wagering on the ponies and playing poker for money are legal almost everywhere.

No go, says Judge Halpern. The argument “borders of the frivolous”, because other cases have held that there is a rational basis for Congress to distinguish between gambling for money and other trades or businesses, although I can’t see the difference in, for example, speculating on futures.

Shiraz also wants to deduct his share of the takeout. Now we horseplayers know the track (or the racing authority) takes a piece of the pool of money wagered on any race (whether at the track or via telephone or other legal means) for upkeep, maintenance, education, fees, and to pay a guaranteed minimum on every winning ticket sold, even if that would cost more than what remained in the pool. It’s called the “takeout”.

Shiraz says that’s like withholding on wages, but the obligation to pay the takeout is imposed on the track, not Shiraz. It doesn’t increase his winnings or add to his losings.

Judge Halpern has a lengthy explanation of the takeout and pari-mutuel betting in general, and that’s good for beginners, but for those of us who have torn up a few losing tickets, we know it already.

Shiraz gets the Section 6662(a) substantial understatement chop, although he claims he didn’t know about the Section 165(d) limitation.

But that’s a real nonstarter: “Moreover, petitioner, a certified public accountant with an active tax preparation practice, and admittedly aware of section 165 governing the deductibility of losses, should have been aware of the section 165(d) limitation on net gambling losses. Also, as a professional gambler who regularly bets on horse races and understands parimutuel betting, he must have known that takeout represents the track’s share of the betting pool and that the expenditures therefrom satisfy obligations of the track, not the bettors.” 142 T. C. 8, at pp. 22-23.

Shiraz, you can beat a race, but you can’t beat the races.