                  T.C. Summary Opinion 2008-162



                      UNITED STATES TAX COURT



               ALAN A. AND MARY E. SJOBERG, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12245-07S.              Filed December 23, 2008.



     Alan A. and Mary E. Sjoberg, pro sese.

     Michael A. Pesavento, for respondent.



     SWIFT, Judge:   This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed.   Pursuant to section 7463(b), the

decision to be entered is not reviewable by any other court, and

this opinion shall not be treated as precedent for any other

case.
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     Respondent determined a $660 deficiency in petitioners’

Federal income tax for 2004 and a $132 accuracy-related penalty

under section 6662(a).   The primary issue for decision is whether

on their 2004 Federal income tax return petitioners may treat

gambling winnings and expenses as business income and expenses or

whether the gambling winnings must be treated as “Other” income

and the expenses as miscellaneous itemized deductions.   The

resolution of this issue affects only the taxable amount of

petitioners’ Social Security benefits.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue.


                            Background

     Some of the facts have been stipulated and are so found.

Petitioners resided in Minnesota.

     In 2004 petitioners were recreational gamblers.

     In 2004 petitioners received $19,995 in wage income, $1,439

in business income, $10,000 as an individual retirement account

(IRA) distribution, and $20,154 in Social Security benefits.

     Also in 2004, petitioner Mary E. Sjoberg won a $4,000 slot

machine jackpot, which was fully offset by her gambling expenses.

The casino submitted to petitioners and respondent a Form W-2G,

Certain Gambling Winnings, reporting the $4,000 jackpot.

     On their 2004 joint Federal income tax return, petitioners

did not include the $4,000 jackpot in income and they did not
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claim their offsetting gambling expenses.   Rather, petitioners

simply attached a handwritten note to their return disclosing the

$4,000 jackpot.   Petitioners also treated only $4,704 of their

Social Security benefits as includable in income.

     On audit respondent determined that petitioners must include

the $4,000 jackpot in gross income, offset by a $4,000 gambling

loss deduction but triggering a mechanical $2,494 increase in

petitioners’ taxable Social Security benefits and a $130 decrease

in allowable miscellaneous itemized deductions.   Respondent also

determined a $132 accuracy-related penalty under section 6662(a).


                            Discussion

     Petitioners do not dispute that under the provisions of the

Internal Revenue Code respondent’s adjustment with respect to the

Federal income tax treatment of their $4,000 gambling winnings

and offsetting expenses is correct, including the effect thereof

on the taxability of petitioners’ Social Security benefits.

Petitioners, however, contend that this treatment of gambling

winnings and losses is discriminatory against the elderly and

should not be enforced.   Petitioners note that today’s casinos

are like “Disneyland” to the elderly, offering all sorts of

freebies to entice the elderly into casinos to gamble.

Petitioners contend that respondent needs to update the tax rules

to take into account today’s casino operators, casino operations,

and customers.
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     Petitioners complain that it is just “too easy” for the

elderly to gamble and therefore that the tax rules applicable

thereto are outdated and should not be enforced--particularly

those rules that affect the taxability of Social Security

benefits.   Lastly, petitioners allege that some types of gambling

winnings are not required to be reported to respondent by the

casinos (generally poker and blackjack), and petitioners claim

that such differences in the reporting of gambling winnings

constitute discrimination.

     Petitioners’ arguments raise policy issues that do not

relieve petitioners of their liability for the determined

deficiency.

     We sustain respondent’s determination of the $660 deficiency

in petitioners’ Federal income tax and the $132 accuracy-related

penalty under section 6662(a).


                                       Decision will be entered

                                 for respondent.
