                  T.C. Summary Opinion 2007-163



                      UNITED STATES TAX COURT



          ALI AND ARLENE MOHAMMADPOUR, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3787-06S.              Filed September 12, 2007.



     Ali Mohammadpour, pro se.

     Emly B. Berndt, for respondent.



     JACOBS, 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   Pursuant to section

7463(b), the decision to be entered is not reviewable by any



     1
      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.
                               - 2 -

other court, and this opinion shall not be treated as precedent

for any other case.

     Respondent determined a $1,410 deficiency in petitioners’

2003 Federal income tax.   The underlying issue to be resolved is

whether Ali Mohammadpour’s (Mr. Mohammadpour) gambling activity

constituted a trade or business.   Resolution of this issue will

affect petitioners’ entitlement to a claimed child tax credit and

the amount of petitioners’ allowable itemized deductions.

                            Background

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

The stipulation of facts and the exhibits attached thereto are

incorporated herein by this reference.

     Mr. Mohammadpour is a certified public accountant.   During

2003, he conducted an accounting services business as a sole

proprietorship.   Arlene Mohammadpour was employed elsewhere as a

payroll clerk.

     Petitioners timely filed a joint Form 1040, U.S. Individual

Income Tax Return, for 2003 in which they reported adjusted gross

income of $59,917 and claimed a child tax credit of $1,200.    In

computing their adjusted gross income, petitioners reported

$41,246 of wage income and, by means of a Schedule C, Profit or

Loss From Business, reported $21,553 of net profit from Mr.
                               - 3 -

Mohammadpour’s accounting services business.2   Petitioners

included a second Schedule C with their return in which they

reported $83,451 of gross income from Mr. Mohammadpour’s gambling

activity which was offset by gambling losses in the same amount.3

     On the basis of information provided to respondent by means

of Form W-2G, Certain Gambling Winnings,4 respondent adjusted

petitioners’ 2003 return to reflect gross income from gambling of

$84,730 ($1,279 more than petitioners reported), as well as an

additional $3 of interest income.   Petitioners do not dispute

these adjustments.   Respondent also determined that Mr.

Mohammadpour’s gambling activity did not constitute a trade or

business, and therefore his losses from gambling should not have



     2
      In their 2001 return, petitioners reported $76,181 of wage
income and $7,252 of net profit from Mr. Mohammadpour’s
accounting services business. In 2002, petitioners reported
$60,638 of wage income and $26,712 of net profit from Mr.
Mohammadpour’s accounting services business. In 2004,
petitioners reported $41,986 of wage income and $50,900 of net
profit from Mr. Mohammadpour’s accounting services business.
Petitioners consistently reported Mr. Mohammadpour’s occupation
as that of accountant.
     3
      Petitioners first reported Mr. Mohammadpour’s gambling
activity on their 2001 return, where they reported $3,333 of
gambling income and claimed a deduction of $3,333 on Schedule A,
Itemized Deductions, for a gambling loss. In their 2002 return,
petitioners reported, by means of Schedule C, $23,793 of gambling
income offset by gambling losses in the same amount. In their
2004 return, petitioners reported, by means of Schedule C,
$75,347 of gambling income offset by gambling losses in the same
amount.
     4
      Generally, gambling winnings are reportable to the Internal
Revenue Service (IRS) by the payer (with a statement provided to
the winner) if the payment is $600 or more. See sec. 6041(a).
                               - 4 -

been reported as a loss from business.    Instead, respondent

allowed a deduction of $83,451 for the claimed loss from gambling

as a Schedule A itemized deduction.

     Reclassification of Mr. Mohammadpour’s gambling activity

resulted in the disallowance of petitioners’ claimed child tax

credit and in a reduction in the amount of otherwise allowable

itemized deductions.

                             Discussion

      As a general rule, the Commissioner’s determinations in the

notice of deficiency are presumed correct, and the burden of

proving an error is on the taxpayer.    Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).    Petitioners have neither

claimed nor shown that they satisfied the requirements of section

7491(a) to shift the burden of proof to respondent.    Hence,

petitioners bear the burden of proving that respondent’s

deficiency determinations are incorrect.

     In general, all ordinary and necessary expenses paid or

incurred in carrying on a trade or business during the taxable

year are deductible.   Sec. 162(a).    A taxpayer may have more than

one trade or business.   Curphey v. Commissioner, 73 T.C. 766

(1980); Calvao v. Commissioner, T.C. Memo. 2007-57; Barrish v.

Commissioner, T.C. Memo. 1984-602.
                               - 5 -

     For a taxpayer engaged in the trade or business of gambling,

gambling losses are deductible from gross income in arriving at

adjusted gross income.   See sec. 62.   However, for a taxpayer not

in the trade or business of gambling, gambling losses are not

taken into account in computing adjusted gross income but rather

are deductible as an itemized deduction in arriving at taxable

income.   See sec. 63(a).5

     Petitioners do not dispute that if they are required to

report Mr. Mohammadpour’s gambling losses as an itemized

deduction, they are not entitled to the child tax credit and

their itemized deductions are as determined by respondent.

However, they contest respondent’s categorization of Mr.

Mohammadpour’s losses from gambling as an itemized deduction,

claiming that his gambling activity was a trade or business.

     The Supreme Court, in Commissioner v. Groetzinger, 480 U.S.

23 (1987), held that a taxpayer may be in the trade or business

of gambling where he or she engages in the gambling activity with

continuity and regularity and with the primary purpose of making

a profit.   A sporadic activity, hobby, or amusement diversion


     5
      Regardless of whether a taxpayer’s gambling activity
constitutes a trade or business, sec. 165(d) provides: “Losses
from wagering transactions shall be allowed only to the extent of
the gains from such transactions.” See also sec. 1.165-10,
Income Tax Regs. Petitioners do not dispute that sec. 165(d)
limits their gambling loss deduction to the amount of their
winnings. Nor do they seek to offset gambling losses against
income from other sources or to carry over gambling losses to
other tax years.
                                 - 6 -

does not qualify.   Id. at 35.   Resolution of the issue of whether

gambling activity constitutes a trade or business requires an

examination of the facts in each case.    Id. at 36; Higgins v.

Commissioner, 312 U.S. 212, 217 (1941).

     The taxpayer in Groetzinger pursued his gambling activity

full time, attending the racetrack 6 days a week for 48 weeks (or

288 days) during the tax year in question and devoting 60 to 80

hours each week to gambling-related endeavors.   He had no

profession or type of employment (other than gambling) during the

48-week period and kept detailed records of his daily winnings

and losses.

     Mr. Mohammadpour, in contrast, dedicated approximately 900

hours to his gambling activity in 2003 (or approximately 17 hours

per week on average), which appear to have been distributed over

136 days.   Petitioners reported no net income from Mr.

Mohammadpour’s gambling activity on their return for 2001, 2002,

2003 (the year in issue), or 2004 but reported substantial

amounts of wage income and net profit from Mr. Mohammadpour’s

accounting services business over that period.   It is evident,

and Mr. Mohammadpour admitted, that petitioners relied on other

sources of income for their livelihood for 2003 as in other

years.6


     6
      Cf. Barrish v. Commissioner, T.C. Memo. 1984-602, in which
the taxpayer, listing his occupation on his returns as
                                                   (continued...)
                               - 7 -

     Also in contrast to the taxpayer in Commissioner v.

Groetzinger, supra, petitioners did not keep reliable records of

Mr. Mohammadpour’s gambling activity.   This was due in part to

error,7 and also to the fact that Mr. Mohammadpour intentionally

ignored, for record-keeping purposes, bets on which he won less

than $600 and which therefore were not reported to the IRS by

means of Form W-2G.   These winning bets of less than $600 made up

approximately 10 percent of all Mr. Mohammadpour’s bets.    In

other words, petitioners adopted record-keeping practices which

would merely approximate Mr. Mohammadpour’s gambling performance.

Such is inconsistent with a conclusion that Mr. Mohammadpour

engaged in his gambling activity with the primary purpose of

making a profit.   As we found in Calvao v. Commissioner, supra:

“[P]etitioner’s efforts * * * are consistent with the desire to

win money * * *.   However, we find petitioner’s desire to win

money and his strategy for doing so is also consistent with

gambling purely for its entertainment or recreational aspects.”

     On the record before us, we are unable to conclude that Mr.

Mohammadpour’s gambling activity was a trade or business.   Even


     6
      (...continued)
“Attorney/Handicapper” and “Attorney/Greyhound Racing Wagerer”,
reported $20,373 of net income from his gambling activity and
$20,550 from his business as an attorney.
     7
      Mr. Mohammadpour testified that in preparing petitioners’
2003 return he overlooked some records of winnings and “we did
not account for the recent amounts of perhaps no more than
$10,000 maximum.”
                                 - 8 -

as a second trade or business to that of Mr. Mohammadpour’s

accounting services business, we do not detect the level of

continuity or regularity of gambling activity that is required by

Commissioner v. Groetzinger, supra.       Furthermore, we cannot say

that the primary purpose of Mr. Mohammadpour’s gambling activity

was to make a profit.

     Concluding, we hold that respondent properly disallowed

petitioners’ claimed gambling loss other than as an itemized

deduction.   Consequently, petitioners are not entitled to the

child tax credit, and their itemized deductions are as determined

by respondent.

     To reflect the foregoing,


                                              Decision will be entered

                                         for respondent.
