Unless one is a professional gambler, that’s what the IRC says. Gambling winnings are ordinary income, gambling losses are itemized Sched A deductions. But the trusty attorney (whom I’ll call Shelly) for Karen Berlant & Wayne Rhine, Docket No. 34622-21L, filed palindromically on 4/2/24, has a novel twist.

K&W netted winnings against losses, came out behind (as must gamblers do) and reported neither.

I’ll give Shelly a mention-in-dispatches, because his bold attempts fall beneath the “Good Try” level, but is worthy of better than an “Oh Please.”

CSTJ Lewis (“Wotta Name!”) Carluzzo Judge-‘splains: “Relying upon a definition of wagering provided in Title 31 or the United States Code, petitioners argue that a gambling transaction should be considered an exchange of property. And, as petitioners correctly note, losses upon the exchange of property are deductible above the line. See sec. 62(a)(3). Petitioners distinguish the long line of cases holding that a gambling loss may only be deductible as an itemized deduction (professional gamblers excepted) by pointing out that none of the previously decided cases addressed the argument they present here, perhaps, as petitioners suggest, because the taxpayers in some or many of those cases were self-represented.” Transcript, at p. 7.

Except.

“The awkwardness of conceptualizing a gambling transaction as an exchange of property is a bit like trying to force a square peg into a round hole, as the saying goes. That awkwardness in and of itself makes petitioners position less than compelling, but more technical reasons suggest that the argument must be rejected.

“Section 62(a)(3) operates, as petitioners suggest, to allow losses from the exchange of property to be deduction in the computation of adjusted gross income, or ‘above the line’. But individuals are only entitled to deductions for losses as provided in section 165, and only losses incurred in the exchange of property fitting the description of a capital asset may be deducted by an individual. See secs. 165(f) and 1211.” Transcript, at pp. 7-8.

All K&W did was put up cash, hardly a capital asset. And granting their argument would strip nonprofessional gamblers of the Section 165(d) deduction they already have.

But Shelly isn’t done.

“Petitioners acknowledge the long line of authority that supports respondent’s position in this case but suggest that the authority reflects what was once a negative public impression of the activity. They point out the increase in the number of casinos over the past few decades and the more recent opportunities for gambling through Internet websites and argue that the change in public sentiment should result in a change in law respect to how gambling losses are treated for federal income tax purposes.” Transcript, at pp. 8-9.

No dice, says CSTJ Lew.

“Changes in the law on the basis of changes in public sentiment, however, are more appropriately given effect by the Congress rather than the courts.” Transcript, at p. 9.