Next month it’ll be just about thirty-five years since President Reagan left office, but his famous catchphrase has taken on its own life. “The seven most dangerous words in our language” are first set forth at the head hereof. Just ask Syd Ginsberg & Michelle Ginsberg, Docket No. 17920-22S, filed 12/27/23, an off-the-bencher from CSTJ Lewis (“Say It Loud!”) Carluzzo.

Syd & Michelle were part-time gamblers, and like all of their colleagues, they won some and they lost some. At end of year at issue, they were behind, so they netted gains and losses, and took the post-TCJA enhanced standard deduction.

Of course, the W-2Gs hit IRS’ computers, but not with the usual SNOD. IRS, graciously figuring that the allowable losses would have resulted in less tax due, unelected the standard deduction. IRS then recomputed tax as if Sched A had been filed, and gave Syd & Michelle a lower deficiency.

“Respondent’s approach, in this regard, actually benefits petitioners, although we doubt they feel in any way benefited from any action taken by respondent in connection with their [year at issue] federal income tax liability.” Transcript, at p. 5.

Syd & Michelle claim this unguided largesse resulted in a higher marginal tax rate, but CSTJ Lew isn’t going “that far into the weeds to examine whether the marginal tax rate applicable to the taxable income reported on the return is lower than the marginal tax rate applicable to petitioners’ taxable income as show [sic] in the notice, although we doubt that to be true. We have, however, reviewed the notice carefully enough to see that deficiency probably has little to do with any change to petitioners’ marginal tax bracket; instead the deficiency results primarily, if not entirely, from an increase to petitioners’ taxable income. And that increase in taxable income does not result directly from the manner that respondent has treated petitioners’ gambling winnings and losses; the increase results directly from the effective denial of the standard deduction claimed on the return. To the extent this has resulted in a higher marginal tax rate, the result is computational as might be the case with other adjustments to petitioners’ income made in the notice.” Transcript, at pp. 6-7.

You can’t take gambling losses against gambling winnings unless (a) you’re a professional (which Syd & Michelle don’t claim) or (b) you don’t take the standard deduction.