                                                                            FILED
                           NOT FOR PUBLICATION
                                                                            MAY 10 2018
                    UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS


                            FOR THE NINTH CIRCUIT


SHIRAZ LAKHANI,                                  No.   14-72576

              Petitioner-Appellant,              Tax Ct. No. 24563-11

 v.
                                                 MEMORANDUM*
COMMISSIONER OF INTERNAL
REVENUE,

              Respondent-Appellee.



SHIRAZ LAKHANI,                                  Nos. 14-72577

              Petitioner-Appellant,
                                                 Tax Ct. No. 21212-10
 v.

COMMISSIONER OF INTERNAL
REVENUE,

              Respondent-Appellee.


                           Appeal from a Decision of the
                             United States Tax Court

                       Argued and Submitted April 11, 2018

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
                                 Pasadena, California

Before: SCHROEDER, CLIFTON, and M. SMITH, Circuit Judges.

      Shiraz Lakhani, an accountant as well as a professional gambler who bets on

horse races, appeals the Tax Court’s decision that under Internal Revenue Code

(“I.R.C.”) section 165(d), 26 U.S.C. § 165(d), he may not deduct from his ordinary

income that portion of his losing wagers representing what is known as the track’s

“takeout.” The takeout is the percentage of all monies wagered on a horse race that

the track retains to offset its business costs. See Cal. Bus. & Prof. Code §§ 19411,

19610.

         The relevant provision of the I.R.C. expressly provides that “[l]osses from

wagering transactions” are deductible “only to the extent of the gains from such

transactions.” I.R.C. § 165(d). Lakhani contends that the takeout is an expense to

him separate and apart from the wager itself and is therefore deductible as an

“ordinary and necessary expense[]” from non-gambling income under I.R.C.

section 162(a), 26 U.S.C. § 162(a).

      This position is not sound. The track’s takeout, as mandated by California

law, comes from all of the money wagered, so it is not an expense to the taxpayer

separate and apart from the wager. See Cal. Bus. & Prof. Code § 19610. As the

Tax Court said, “[E]xpenses discharged from the takeout are expenses imposed


                                           2
upon the track, not the bettors. . . . [N]one of the takeout can be said to come from

a winning bettor’s wager, which in all events must be returned to [the bettors] in

full and with at least a small profit.” See also 4 Cal. Admin. Code § 1960.

Furthermore, as the Tax Court recognized, “the takeout [cannot] be said to add to

the loss of a losing bettor, who loses the same [amount] whether the takeout is

15% . . . or [nothing at all] on account of a minus pool so deep as to deprive the

track of any take after paying all winning wagers.” See also Cal. Bus. & Prof.

Code § 19613.5.

      Even if there were any doubt as to whether the wagering loss provision in

section 165(d) or the more general provision regarding business expenses in

section 162(a) applies, the more specific wagering provision would control. See

Nitzberg v. Comm’r, 580 F.2d 357, 358 (9th Cir. 1978).

      The Tax Court’s decision here is also consistent with the Tax Court’s

decision in Mayo v. Commissioner, 136 T.C. 81, 83–84, 97 (2011), recognizing a

distinction between deductions for wagering losses limited to gains, and the

deductions available for non-wagering gambling expenses that could be deducted

from other income. In Mayo, the Tax Court allowed the taxpayer to deduct, among

other expenses, car, office, travel, telephone, internet, admission, and ATM fees.

136 T.C. at 83–84, 97. In this case, the Commissioner does not contest Lakhani’s


                                           3
deductions for similar fees. The Tax Court’s decision in this case is consistent

with Mayo, because Mayo did not involve, as this case does, the house takeout.1

      Lakhani’s motion for relief, filed September 18, 2015, is DENIED as moot.

      AFFIRMED.




      1
        Congress recently amended section 165(d), and expenses are now treated
as losses. See I.R.C. § 165(d) (Westlaw through Pub. L. No. 115-140). The
amendment does not affect the taxable years at issue here. See id.
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