                  T.C. Summary Opinion 2001-132



                     UNITED STATES TAX COURT



                 BRENDA T. FARRIS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 2251-00S.             Filed September 4, 2001.


     Brenda T. Farris, pro se.

     Veena Luthra, for respondent.



     POWELL, Special Trial Judge:    This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.1    The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.




     1
          Unless otherwise indicated, subsequent section
references are to the Internal Revenue Code in effect for the
year in issue.
                                - 2 -

     Respondent determined a deficiency of $1,873 in petitioner's

1997 Federal income tax.   The issue is whether petitioner is

entitled to a deduction for gambling losses.     Petitioner resided

in Quinton, Virginia, when the petition in this case was filed.

     The facts may be summarized as follows.     During 1997,

petitioner played the Virginia State Lottery and won two amounts

($2,500 and $2,700) that were reported to the Internal Revenue

Service.   Petitioner is not in the trade or business of gambling

or playing the lottery.    On her 1997 return, petitioner did not

report any income from the lottery.     Petitioner did not itemize

deductions and claimed the so-called standard deduction for head

of household in the amount of $6,050.     In the notice of

deficiency, respondent determined that petitioner had additional

income in the amount reported by the lottery ($5,200).

     Petitioner admits that she won the $5,200 and, indeed,

admits that she additionally won as much as $1,000 a month that

was not reported by the lottery, but she did not know the exact

amount of her total winnings for the year.     Petitioner did not

report the additional winnings because she believed that, since

they were not reported to the Internal Revenue Service, they were

not taxable.

                             Discussion

     Section 61(a) defines gross income to mean all income from

whatever source derived.   Lottery winnings, whether reported or
                                 - 3 -

not by the lottery operator, are includable in gross income.

Paul v. Commissioner, T.C. Memo. 1992-582.     As we understand,

petitioner's position is that she incurred losses from her

gambling activities during 1997, and, when considered with other

itemized deductions she did not claim on her return, the amount

would have been greater than the standard deduction of $6,050

that she claimed.   Petitioner claims that she donated to Goodwill

Industries tangible personal property that she estimates had a

fair market value of $1,225 and that she is entitled to a

charitable deduction in that amount.     The record shows that

petitioner also paid $653 in State income taxes.

     In the case of an individual, section 62(a) defines adjusted

gross income as gross income less certain deductions, including

deductions attributable to a trade or business carried on by the

taxpayer.   Sec. 62(a)(1).    If petitioner's gambling activity

constituted a trade or business, her gambling losses would be

deductible from gross income in arriving at adjusted gross income

on Schedule C, Profit or Loss From Business.     See id.   If

petitioner's gambling activity did not constitute a trade or

business, her gambling losses would be deductible as an itemized

deduction in arriving at taxable income on Schedule A, Itemized

Deductions.   Sec. 63(a).    But, regardless whether or not the

activity constituted a trade or business, section 165(d) provides

that “Losses from wagering transactions shall be allowed only to
                                - 4 -

the extent of the gains from such transactions.”    See also sec.

1.165-10, Income Tax Regs.    Petitioner does not claim to be in

the trade or business of gambling, and we are, therefore, faced

with the question whether she is entitled to claim itemized

deductions on a Schedule A.

     While we are convinced that petitioner purchased lottery

tickets that did not pay off, there are some obstacles in her

path.   First, we have no idea as to the dollar amount of those

tickets.   Petitioner appeared at trial with a paper bag full of

tickets; however, she did not know how many losing tickets were

in the bag.   She had not counted them, and the Court eschews that

responsibility.   We did, however, examine some of the tickets and

there appears to be an unsettling number of tickets from certain

days, even though petitioner testified that she played the

lottery almost daily.   It seems as if the tickets had been picked

up on a random basis rather than daily.

     Equally important, even if we were to assume that the amount

of losing tickets was as petitioner alleges (between $4,752 shown

in the petition and $6,000 at trial), we are still faced with the

problem that petitioner admits that she won considerably more

money than that which was reported to the Internal Revenue

Service.   While respondent did not move to increase the

deficiency, the additional amount of unreported lottery winnings

and the amount contained in the notice of deficiency ($5,200)
                               - 5 -

certainly exceeds $1,828 which is the difference between the

standard deduction ($6,050) and the maximum itemized deductions

($7,878) that petitioner could have claimed ($6,000 gambling

losses, $1,225 charitable contribution, and $653 State income

taxes).   Accordingly, respondent’s determination is sustained.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                       Decision will be entered

                               for respondent.
