                  T.C. Summary Opinion 2005-109



                     UNITED STATES TAX COURT



                JIMMIE L. CLEMONS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 20040-03S.              Filed August 1, 2005.


     Jimmie L. Clemons, pro se.

     Jeanne Gramling and Blake W. Ferguson, 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 $1,601 for the taxable year 2001.1

     After concessions,2 the issue for decision is whether

petitioner must include in his gross income gambling winnings of

$44,833 for taxable year 2001.3   The amount of petitioner’s

Social Security benefits received during taxable year 2001 that

must be included in his 2001 gross income is a computational

matter and will be resolved by our decision on the unreported

gambling income issue.

                           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

Flat Rock, North Carolina, on the date the petition was filed in

this case.




     1
      At trial, respondent conceded that the amount of the
deficiency for taxable year 2001 set forth in the notice of
deficiency was not correct. Instead, respondent claims that the
correct deficiency is $1,046.
     2
      At trial, respondent conceded that petitioner was entitled
to Schedule A deductions for taxable year 2001 of $44,833 and
$500 for gambling losses and charitable contributions,
respectively.
     3
      If the $44,833 gambling winnings are included in
petitioner’s gross income, he must also include Social Security
benefits received of $8,690 in his gross income for taxable year
2001 pursuant to sec. 86.
                                 - 3 -

     Petitioner timely filed his Federal income tax return for

the 2001 taxable year. On Form 1040, U.S. Individual Income Tax

Return, for taxable year 2001, petitioner reported capital gain

income of $1,663.13.    Petitioner did not report any other income.

Petitioner also claimed a personal exemption and the standard

deduction.    Petitioner did not attach a Schedule A, Itemized

Deductions, to his Form 1040.

     During taxable year 2001, petitioner was retired.

Petitioner gambled at Harrah’s Cherokee Smokey Mountain Casino

(Cherokee Casino), and during taxable year 2001, petitioner

received gambling winnings of $44,833 from Cherokee Casino.

     Both petitioner and respondent received seven Forms W-2G,

Certain Gambling Winnings, for taxable year 2001, all seven of

which were from Cherokee Casino in the amounts of $16,000,

$2,500, $4,000, $4,000, $4,500, $12,583, and $1,250, for a total

of $44,833.    Petitioner attached these Forms W-2G to his 2001

Form 1040, but, as previously stated, he did not report the

amounts as gross income.    From these Forms W-2G, respondent

determined that petitioner had unreported gambling income of

$44,833 for taxable year 2001.

     Accordingly, in the notice of deficiency for taxable year

2001, dated November 3, 2003, respondent determined that

petitioner must include gambling winnings in the amount of

$44,833 in his gross income.    Respondent also determined that
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petitioner was entitled to Schedule A itemized miscellaneous

deductions in the amount of $44,523, rather than the standard

deduction, and respondent further determined that petitioner must

include taxable Social Security benefits of $8,690 in his gross

income for taxable year 2001.   The taxable Social Security income

was computed at 85 percent of the total amount of $10,244, which

petitioner received as Social Security benefits during taxable

year 2001.

     After the issuance of the notice of deficiency, but before

trial, respondent conceded that he failed to allow petitioner a

personal exemption and understated the allowable itemized

miscellaneous deductions in his computation of the deficiency

reflected in the notice of deficiency.

     As previously noted, at trial, respondent conceded that

petitioner was entitled to Schedule A itemized miscellaneous

deductions of $45,333, consisting of $44,833 for gambling losses

incurred by petitioner during taxable year 2001 and $500 for

charitable contributions made by petitioner during taxable year

2001.   Respondent also conceded, at trial, that the correct

amount of the deficiency for taxable year 2001 was $1,046.

                            Discussion

     As a general rule, the determinations of the Commissioner in

a notice of deficiency are presumed correct, and the taxpayer

bears the burden of proving the Commissioner’s determinations to
                                 - 5 -

be in error.     Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

(1933).     As one 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.     We decide the issue in this case without regard

to the burden of proof.     Accordingly, we need not decide whether

the general rule of section 7491(a)(1) is applicable in this

case.     See Higbee v. Commissioner, 116 T.C. 438 (2001).

        Petitioner contends that his $44,833 gambling winnings need

not be included in his gross income because he had gambling

losses to offset these winnings.     Respondent, however, contends

that petitioner must include his gambling winnings in his gross

income and is then entitled to a Schedule A miscellaneous

itemized deduction for his gambling losses.

        The present problem seems to be that petitioner steadfastly

rejects or ignores certain basic principles of the Federal income

tax laws.     Petitioner wishes to net his winnings and losses and,

on his tax return, report in gross income only the amount of any

net gambling winnings.     Petitioner considers as “actual income”

only his capital gain proceeds and any net gambling winnings.

Petitioner is in error.
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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).

     Section 62 defines adjusted gross income and allows expenses

of a trade or business and certain employee business expenses to

be deducted from gross income.    These deductions are sometimes

referred to as deductions “above the line,” meaning simply that

they are deducted from gross income to arrive at “adjusted gross

income.”    Gamblers who are engaged in a trade or business of

gambling may be able to deduct their gambling losses above the

line; indeed, courts have based their decisions in some cases on

the proposition that such a professional gambler may net losses

against winnings for purposes of determining what is includable

in gross income.    See Winkler v. United States, 230 F.2d 766 (1st
                               - 7 -

Cir. 1956); Green v. Commissioner, 66 T.C. 538 (1976).     This is

not the present case.

     In the case of a taxpayer not engaged in the trade or

business of gambling, gambling losses are allowable as a

miscellaneous itemized deduction, but only to the extent of gains

from such transactions.   See sec. 165(d); McClanahan v. United

States, supra; Winkler v. United States, supra; Gajewski v.

Commissioner, 84 T.C. 980 (1985); Lutz v. Commissioner, T.C.

Memo. 2002-89; see also Stein v. Commissioner, T.C. Memo. 1984-

403; Umstead v. Commissioner, T.C. Memo. 1982-573.

     The parties agree that, during taxable year 2001, petitioner

received gambling winnings of $44,833 at the Cherokee Casino.

The parties further agree that petitioner incurred gambling

losses, during taxable year 2001, in excess of $44,833.

Petitioner did not report the aforesaid gambling winnings as

gross income on his 2001 Federal income tax return.   Instead,

petitioner merely offset his gambling income with his sustained

gambling losses and did not report either of these amounts on his

2001 Federal income tax return.

     Petitioner presented no evidence to show that he was a

professional gambler, nor did he contend that he was a

professional gambler.   On the basis of the evidence in the

record, we conclude that petitioner was a recreational gambler

and not a professional gambler.   Therefore, the gambling losses
                                 - 8 -

incurred by petitioner during taxable year 2001 are allowable

only as an miscellaneous itemized deduction on Schedule A, to the

extent of gains from gambling.    See sec. 165(d); sec. 1.165-10,

Income Tax Regs.   Thus, petitioner must include his gambling

winnings in his adjusted gross income and is entitled only then

to a Schedule A miscellaneous itemized deduction, to the extent

of his gains from gambling, for his gambling losses.       See sec.

165(d); sec. 1.165-10, Income Tax Regs.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect respondent’s concessions and our resolution of

the disputed matters,


                                         Decision will be entered

                                 under Rule 155.
