                  T.C. Summary Opinion 2005-98



                     UNITED STATES TAX COURT



                    BILL REMOS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8398-03S.               Filed July 21, 2005.


     Bill Remos, pro se.

     Laurie A. Nasky, for respondent.



     GOLDBERG, 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.    The decision to be

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

should not be cited as authority.   Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in

effect for the year in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.
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     Respondent determined a deficiency in petitioner’s Federal

income tax of $14,339 for the taxable year 1999.

     The issues for decision are:    (1) Whether petitioner

received and failed to report gambling income in the amount of

$50,000 in taxable year 1999; and (2) in the event petitioner had

gambling income in the amount of $50,000, whether petitioner had

gambling losses in taxable year 1999 to offset any of this

income.

                           Background

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    Petitioner resided in

Chicago, Illinois, on the date the petition was filed in this

case.

     Petitioner timely filed his Federal income tax return

electronically for the 1999 taxable year.    On Form 1040, U.S.

Individual Income Tax Return, for taxable year 1999, petitioner

reported $32,412 in wage income.    Petitioner did not report any

other income.

     During tax year 1999, petitioner was employed full time as a

“delivery driver” by Coca-Cola.    Petitioner gambled at two

casinos during taxable year 1999:    the Grand Victoria Casino and

Hollywood Casino-Aurora, Inc. (Hollywood Casino).    During taxable
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year 1999, petitioner received gambling winnings of $50,000 from

a game of blackjack he played at the Grand Victoria Casino.

     Respondent received a Form W-2G, Certain Gambling Winnings,

for taxable year 1999 from Grand Victoria Casino reporting

gambling winnings paid to petitioner in the amount of $50,000.

From this Form W-2G, respondent determined that petitioner had

unreported income of $50,000 for taxable year 1999.    Accordingly,

respondent issued petitioner a notice of deficiency for taxable

year 1999, in which respondent determined that petitioner had

unreported income of $50,000 and that he was liable for a tax

deficiency in the amount of $14,339.

     At trial, petitioner claimed that he had documents and other

evidence to show that he suffered unreported gambling losses

equal to his gambling winnings.    However, he did not possess this

evidence at the time of trial.    The Court left the record open

and gave petitioner 30 days to present these documents and other

support to respondent.   Petitioner did not avail himself of the

opportunity to submit this evidence, and on January 13, 2005, the

record in this case was closed.

                            Discussion

     In general, the Commissioner’s determination set forth in a

notice of deficiency is presumed correct, and the taxpayer bears

the burden of showing that the determination is in error.    Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).    As one
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exception to this rule, section 7491(a) places upon the

Commissioner the burden of proof with respect to any factual

issue relating to liability for tax if the taxpayer maintained

adequate records, satisfied the substantiation requirements,

cooperated with the Commissioner, and introduced during the Court

proceeding credible evidence with respect to the factual issue.

Although neither party alleges the applicability of section

7491(a), we conclude that the burden of proof has not shifted to

respondent with respect to either the unreported income or the

gambling loss deductions.   Therefore, petitioner bears the burden

of showing that he correctly reported his gross income for

taxable year 1999, and, in the event he had unreported gambling

income, petitioner bears the burden of showing that he is

entitled to gambling loss deductions to offset that income.

1.   Unreported Income

      As stated previously, respondent determined that petitioner

failed to report gambling income in tax year 1999 of $50,000.

However, petitioner argues that the moneys won gambling were not

income to him because they were won at the blackjack table,1 and

the “pit boss” of the Grand Victoria Casino said they were not

taxable.


      1
      Petitioner testified, at trial, that the Grand Victoria
Casino’s “pit boss” told him that winnings received on a gambling
table were not gross income, but winnings received from slot
machine gambling were gross income.
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     Section 61(a) defines gross income as “all income from

whatever source derived,” including gambling, unless otherwise

provided.   McClanahan v. United States, 292 F.2d 630, 631-632

(5th Cir. 1961).   The Supreme Court has consistently given this

definition of gross income a liberal construction “in recognition

of the intention of Congress to tax all gains except those

specifically exempted.”   Commissioner v. Glenshaw Glass Co., 348

U.S. 426, 430 (1955); see also Roemer v. Commissioner, 716 F.2d

693, 696 (9th Cir. 1983) (all realized accessions to wealth are

presumed taxable income, unless the taxpayer can demonstrate that

an acquisition is specifically exempted from taxation), revg. 79

T.C. 398 (1982).

     Petitioner stipulated and admitted at trial that during

taxable year 1999, he received gambling winnings of $50,000 at

the Grand Victoria Casino.   Petitioner did not report the

aforesaid winnings on his 1999 Federal income tax return.

Petitioner’s reliance on the advice of the Grand Victoria

Casino’s pit boss is misplaced.   This Court has repeatedly held

that gambling winnings are includable in the taxpayer’s gross

income for the taxable year in which the winnings were received.

See Petty v. Commissioner, T.C. Memo. 2004-144; see also Lutz v.

Commissioner, T.C. Memo. 2002-89; Sadlier v. Commissioner, T.C.

Memo. 1997-45.   Therefore, respondent’s determination as to

petitioner’s unreported income is sustained.
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2.   Gambling Loss Deductions

      In his petition to this Court, petitioner implies that he

had gambling loss deductions that would offset any gambling

income he received during taxable year 1999.   Respondent contends

that petitioner has not substantiated any such deductions.

      Deductions are a matter of legislative grace and are allowed

only as specifically provided by statute, and petitioner bears

the burden of proving that he is entitled to the claimed

deductions.   INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84

(1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440

(1934).   This includes the burden of substantiation.   Hradesky v.

Commissioner, 65 T.C. 87, 89-90 (1975), affd. per curiam 540 F.2d

821 (5th Cir. 1976).

      Section 6001 and the regulations promulgated thereunder

require taxpayers to maintain records sufficient to permit

verification of income and expenses.    As a general rule, if the

trial record provides sufficient evidence that the taxpayer has

incurred a deductible expense, but the taxpayer is unable to

substantiate adequately the precise amount of the deduction to

which he or she is otherwise entitled, the Court may estimate the

amount of the deductible expense, bearing heavily against the

taxpayer whose inexactitude in substantiating the amount of the

expense is of his own making, and allow the deduction to that

extent.   Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930).
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However, in order for the Court to estimate the amount of an

expense, the Court must have some basis upon which an estimate

may be made.   Vanicek v. Commissioner, 85 T.C. 731, 742-743

(1985).   Without such a basis, any allowance would amount to

unguided largesse.     Williams v. United States, 245 F.2d 559, 560-

561 (5th Cir. 1957).    With these well-established propositions in

mind, we must determine whether petitioner has satisfied his

burden of proving that he is entitled to the claimed gambling

loss deductions mentioned above.

      In order to establish entitlement to a deduction for

wagering losses in this Court, the taxpayer must prove the losses

sustained during the taxable year.       Mack v. Commissioner, 429

F.2d 182 (6th Cir. 1970), affg. T.C. Memo. 1969-26; Stein v.

Commissioner, 322 F.2d 78 (5th Cir. 1963), affg. T.C. Memo. 1962-

19.   The taxpayer must also prove that the amount of wagering

losses claimed as a deduction exceeds the amount of the

taxpayer’s gains from wagering transactions.      Sec. 165(d).

Implicitly, this requires the taxpayer to prove both the amount

of losses and the amount of winnings.       Schooler v. Commissioner,

68 T.C. 867, 869 (1977); Donovan v. Commissioner, T.C. Memo.

1965-247, affd. per curiam 359 F.2d 64 (1st Cir. 1966).

Otherwise, there would be no way of knowing whether the sum of

the losses deducted on the return is greater or less than the

taxpayer’s winnings.     Schooler v. Commissioner, supra at 869.
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     Petitioner did not maintain a diary or any other

contemporaneous record reflecting either his winnings or his

losses from gambling during the 1999 taxable year.    At trial,

petitioner did not testify to any specific gambling losses he

incurred during taxable year 1999.    However, in an attempt to

substantiate his gambling losses, petitioner offered into

evidence a letter from Hollywood Casino addressed to petitioner.

Such letter was received into evidence by the Court.    The letter

from Hollywood Casino stated, in pertinent part:

          We are in receipt of your request for your gaming
     history at Hollywood Casino - Aurora, Inc. (“Hollywood”) for
     the calendar year 1999.

          Kindly note, that our system records a total win or
     loss amount on slot gaming activity during your trip(s)
     based on information captured with the use of a player-
     tracking card. Accordingly, slot play without the insertion
     of your player-tracking card cannot be captured.

               *    *    *    *       *   *    *

          The records provided are based on “rating information”
     and are not accounting records. Stated differently,
     Hollywood either employs raters, whose responsibility it is
     to walk the Casino floor and record the amount placed into
     play by a patron as well as the time spent by such patron
     playing a particular game, or uses electronically-computed
     rating entries. Such information is then input into the
     Hollywood’s computer system which, by means of certain
     proprietary statistical analyses which account for the type
     of game, amount wagered, time of play, and statistical
     advantage of the game played, generates these rating
     reports. Therefore, based on such analyses and in order to
     represent the same as records of gaming wins or losses, it
     must be assumed that (i) the rating information placed into
     the computer system is accurate and (ii) except as otherwise
     noted, no other extraordinary winnings were held.
                               - 9 -

          Based on such analyses and assumptions, the Hollywood’s
     computer-generated records reflect that, after calculating
     your Coin-in, Coin-out, all Jackpots won and/or your rated
     Table play, for the calendar year 1999, you experienced an
     aggregate $6,600.00 gaming loss. * * *

     Further, petitioner offered into evidence, to substantiate

his gambling loss deductions, a computer printout, which he

claims was issued by Grand Victoria Casino, of numerical

transactions which show values for “money in”, “money out”, and

“net proceeds”.   Said computer printout was received into

evidence by the Court.   Petitioner could not explain how the

information on the computer printout was compiled or its specific

implications.   Also, the computer printout did not contain

petitioner’s name; it did not contain the name of any casino; and

petitioner did not substantiate that the computer printout

displayed transactions of his own personal account.

     As previously stated, at trial, petitioner claimed that he

had additional documents and other evidence to support his

claimed gambling loss deductions.   However, he did not possess

this evidence at the time of trial.    The Court left the record

open and gave petitioner 30 days to present these documents and

other support to respondent.   Petitioner did not avail himself of

the opportunity to submit this evidence, and on January 13, 2005,

the record in this case was closed.

     We have taken into consideration petitioner’s testimony and

the documents offered into evidence by petitioner.    Although the
                               - 10 -

Court acknowledges that petitioner most likely had some gambling

losses during the year, we are unable to determine (either with

specificity or by estimation) the amount of those losses on the

basis of the record at hand.   We conclude that petitioner has

failed to satisfy his burden of proof on this issue.   See Mayer

v. Commissioner, T.C. Memo. 2000-295, affd. 29 Fed. Appx. 706 (2d

Cir. 2002); see also Zielonka v. Commissioner, T.C. Memo. 1997-

81.   Therefore, we are unable to allow any deduction for gambling

losses.

      Reviewed and adopted as the report of the Small Tax Case

Division.


                                    Decision will be entered

                               for respondent.
