In Uncategorized on 07/25/2019 at 16:02

Thus spake Don Schlitz in that all-time classic. But what Don was talking about is different to what Chief Special Trial Judge Lewis (“Don’t Bet Against That Name”) Carluzzo imparts to Jun Wu in 2019 T. C. Sum. Op. 17, filed 7/25/19.

Ev’ry gambler knows that the secret to survivin’ when at the table at 400 Second Street, NW, or any of its satellite locations, is paper…lots and lots of paper. Diaries, bank statements, the plastic cards the casinos give out for you to prepay your bets, canceled checks, spreadsheets, and anything else you can write down, print out, or electronically retrieve.

Jun Wu didn’t.

Jun Wu the gambler falls foul of the “goofy regulation,” Section 1.183-2(b), because Jun had no business (game) plan, and only the W2-Gs the casinos gave him at no extra charge.

“…he did not conduct the gambling activity in a businesslike manner.  Other than the win/loss statements provided by the casinos, petitioner did not maintain any records for the activity, and he did not develop or follow any form of business plan.  See Carmody v. Commissioner, T.C. Memo. 2016-225, at *20-*23 (holding that a taxpayer was not engaged in horse-racing activity for profit when he did not have a written business plan, did not use spreadsheets and invoices to minimize losses or generate profits, and did not engage in any meaningful financial management with respect to his horse-racing activity). Gambling is routinely thought of as a recreational activity, see sec. 1.183-2(b)(9), Income Tax Regs., and while we have noted that no one factor is determinative, the recreational aspect of the gambling activity coupled with his failure to treat the activity as a trade or business from its inception go a long way in undermining his claim that he conducted the activity as a trade or business.” 2019 T. C. Sum. Op. 17, at pp. 10-11.

As for Carmody, see my blogpost “Cleaning the Stables,” 12/14/16.

While my colleague Peter Reilly, CPA, seems to be sanguine about prospects of winning a hobby loss Section 183 goof, I still would look first to the paper. It’s the secret to survivin’, and not only for gamblers.

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