                            T.C. Memo. 1995-508



                          UNITED STATES TAX COURT



               STANLEY B. AND ROSE M. WHITTEN, Petitioners v.
               COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 19965-94.          Filed October 25, 1995.



        Stanley B. and Rose M. Whitten, pro sese.

        Marjory A. Gilbert, for respondent.



                            MEMORANDUM OPINION


        ARMEN, Special Trial Judge:    This case was assigned pursuant

to the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1

        1
            Unless otherwise indicated, all section references are to
                                                        (continued...)
                                - 2 -


     This case is before the Court on the parties' cross-motions

for summary judgment.   The issue for decision concerns the proper

characterization of expenses incurred by petitioner Stanley B.

Whitten in attending and participating in the television game

show "Wheel of Fortune".

     Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.    Florida Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988).    Summary judgment may be

granted with respect to all or any part of the legal issues in

controversy "if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that a decision may be

rendered as a matter of law."   Rule 121(b); Sundstrand Corp. v.

Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th

Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);

Naftel v. Commissioner, 85 T.C. 527, 529 (1985).    The moving

party bears the burden of proving that there is no genuine issue

of material fact, and factual inferences will be read in a manner

most favorable to the party opposing summary judgment.    Dahlstrom




     1
      (...continued)
the Internal Revenue Code in effect for the taxable year in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                               - 3 -


v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.

Commissioner, 79 T.C. 340, 344 (1982).

     As explained in more detail below, we agree with the parties

that the issue before us is ripe for summary adjudication.

     The following is a summary of the relevant facts that do not

appear to be in dispute.   They are stated solely for purposes of

deciding the pending motions and are not findings of fact for

this case.   Fed. R. Civ. P. 52(a); Sundstrand Corp. v.

Commissioner, supra at 520.

Background

      Stanley B. and Rose M. Whitten (petitioners) are husband

and wife who filed a joint Federal income tax return for 1991.

At the time that their petition was filed in this case,

petitioners resided in Northbrook, Illinois.

     Stanley B. Whitten (petitioner) is a criminal investigator

with the United States Securities and Exchange Commission.   He is

also a nationally recognized cruciverbalist who has constructed

crossword puzzles that have appeared in newspapers and magazines

throughout the United States, including the Chicago Tribune, the

New York Times, and the Washington Post.

     In early 1990, petitioner learned that the staff of the

"Wheel of Fortune" television game show was coming to Chicago,

Illinois, to interview and select contestants to appear on the

program.   Petitioner applied for and received an invitation to
                               - 4 -


compete to be a contestant.   The selection process began with a

written examination that served to eliminate many of the

applicants from consideration, followed by a personal interview

and a mock session of the game.   At the conclusion of this

process, petitioner was one of approximately 30 applicants who

were selected to appear on the program.

     In mid-January 1991, petitioner was contacted by the "Wheel

of Fortune" game show and arrangements were made for petitioner

to take part in the taping of the program to be conducted in Los

Angeles, California, on February 8, 1991.   In anticipation of his

appearance on the program, petitioner watched "Wheel of Fortune"

nearly every night and acquired both a computerized and manual

version of the game with which to practice.

     Because the producers of the "Wheel of Fortune" program film

8 shows in one day, contestants are required to bring additional

changes of clothing so that the winner of one show can reappear

on the next show in a different outfit and thereby simulate

different days.   Contestants who win three games in a row are not

permitted to return for a fourth show.

     "Wheel of Fortune" contestants are required to sign a

document entitled "CONTESTANT RELEASE FORM" which states in part:

     I have not paid or accepted any money or other valuable
     consideration (including a division of prizes) in
     connection with my appearance on the Program, or
     authorized anyone else to do so. I am aware that
     payment or acceptance of or agreement to pay or accept
     any money or valuable consideration for the appearance
                               - 5 -


     of any person or the mention of anything on the Program
     without disclosure to NBC prior to broadcast is a
     federal offense punishable by fine and/or imprisonment.
     I agree that if anyone tries to induce me to do any
     such act, I shall immediately notify a NBC Program
     Practices representative.


The release form further states that any travel undertaken by a

contestant in connection with the contestant's appearance on the

program shall be at the contestant's sole risk and expense.

     Petitioner, as well as his wife and three of his children,

flew to Los Angeles on February 7, 1991, and petitioner appeared

for the taping of "Wheel of Fortune" as scheduled.    Petitioner

won three consecutive games and was awarded cash prizes in the

total amount of $14,850 and a 1991 Chevrolet Geo Tracker

automobile.   The "Wheel of Fortune" programs that petitioner

appeared on were televised nationally on February 18, 19, and 20,

1991.

     As indicated, petitioners filed a joint 1991 Federal income

tax return (Form 1040).   Petitioner's winnings from the "Wheel of

Fortune" game show were reported as "other income" on line 22 of

Form 1040 in the amount of $19,830.    The $19,830 entry represents

the sum of the value of the GEO Tracker and petitioner's cash

winnings of $14,850, reduced by the expenses that petitioner and

his family purportedly incurred, namely $1,820, for

transportation, meals, and lodging in order to participate as a
                               - 6 -


contestant on the show in Los Angeles.2   Petitioners' reporting

position is premised on the theory that the foregoing expenses

represent "gambling losses" that may be offset directly against

petitioner's "gambling winnings" from the program.

     Respondent determined a deficiency in the amount of $582 in

petitioners' Federal income tax for 1991.   Specifically,

respondent determined that petitioners failed to report $1,820 in

income from petitioner's winnings on the "Wheel of Fortune" game

show.3   In respondent's view, the $1,820 in expenses that

petitioner purportedly incurred in attending and participating in

the game show are properly characterized either as nondeductible

personal expenses under section 262 or as miscellaneous itemized

deductions that may only be deducted subject to the 2-percent

floor prescribed by section 67(b).4




     2
        It would appear that the expenses in issue include a
charge of $58.71 for the cost of printing 200 postcards depicting
petitioner standing on the set of "Wheel of Fortune" with Vanna
White, the program's hostess. Petitioner apparently distributed
the postcards to family and friends.
     3
       In turn, the resulting increase in petitioners' adjusted
gross income generated a small decrease in petitioners' itemized
deductions pursuant to the limitation set forth in sec. 68.
     4
       The notice of deficiency states in part: "The expenses
attributable to the taxable [gambling] winnings are reportable on
Schedule A, lines 20 and 24." Petitioners construe this language
to mean that respondent concedes the deductibility of the
expenses in issue. Respondent denies that this language reflects
any concession.
                               - 7 -


     Petitioners invoked this Court's jurisdiction by filing a

timely petition for redetermination.    After respondent filed her

answer and petitioners filed a reply, petitioners filed a Motion

for Summary Judgment, supported by a memorandum of law, an

affidavit, and several exhibits.    Petitioners contend that they

are entitled to summary judgment because:

     Petitioner's winnings on the "Wheel of Fortune"
     television show were gambling winnings and that,
     accordingly, the Petitioner's expenses attributable to
     the winnings are aggregable with wagering losses and
     deductible pursuant to I.R.C. § 67(b)(3) and I.R.C. §
     165(d), not subject to the 2-percent floor on
     miscellaneous itemized deductions, up to the amount
     that the aggregate amount does not exceed the amount of
     gambling winnings. [Fn. ref. omitted.]

Notably, petitioners do not seek summary judgment with respect to

the specific amount of petitioner's purported "wagering losses",

but instead assume erroneously that said issue can be resolved

under Rule 155.   In this regard, petitioners' pending motion is

more appropriately characterized as a motion for partial summary

judgment.

     Respondent filed an objection to petitioners' motion along

with her own Motion for Summary Judgment.    Both documents were

accompanied by a supporting memorandum of law and an affidavit.

   The parties' cross-motions for summary judgment were called

for hearing in Washington, D.C.    Both parties appeared and

presented argument with respect to the motions.    In addition to

appearing at the hearing, petitioners filed a written statement
                               - 8 -


with the Court pursuant to Rule 50(c) and a Motion to Strike

certain portions of respondent's supporting memorandum of law and

affidavit.5

     During the course of the hearing in Washington, D.C.,

petitioner conceded that he is not in the trade or business of

either gambling or appearing as a contestant on television game

shows.   In addition, petitioner stated that his theory of the

case rests solely on section 165.

Discussion

     The issue for decision concerns the proper characterization

of the expenses incurred by petitioner in attending and

participating in the television game show "Wheel of Fortune".6

Respondent determined that petitioners erred in netting the

expenses that petitioner incurred for transportation, meals, and

lodging against petitioner's "Wheel of Fortune" winnings.    As

indicated, respondent determined that the expenses in dispute are

     5
        Petitioners' Motion to Strike is directed at what
petitioners believe are unfair or inaccurate allegations,
particularly certain allegations in which respondent
characterizes the expenses incurred by petitioner as vacation
expenses. Given that motions to strike are not favored, see
Estate of Jephson v. Commissioner, 81 T.C. 999, 1001 (1983), and
in view of the fact that the allegations in question have not
influenced our disposition of the pending motions, we see no
prejudice to petitioners and shall deny their Motion to Strike.
     6
       Because petitioner concedes that he is not in the trade or
business of either gambling or appearing as a contestant on
television game shows, it follows that the expenses in question,
if deductible, would not be deductible from gross income. Sec.
62(a)(1); see sec. 162(a).
                              - 9 -


either nondeductible personal expenses under section 2627 or

miscellaneous itemized deductions that may only be deducted

subject to the 2-percent floor prescribed by section 67(a).

Either theory would provide a sound basis for sustaining

respondent's deficiency determination.8

     In contrast, petitioners contend that the expenses in issue

represent petitioner's wager or bet that he would win cash or

other valuable prizes on the "Wheel of Fortune" game show.     As

such, petitioners maintain that the prizes that petitioner

actually won are wagering winnings and that the expenses incurred

are properly characterized as wagering losses under section




     7
       Sec. 262(a) provides the general rule that no deduction
shall be allowed for personal, living, or family expenses. Sec.
1.262-1(b)(5), Income Tax Regs., provides in pertinent part:

     Expenses incurred in traveling away from home (which
     include transportation expenses, meals, and lodging)
     and any other transportation expenses are not
     deductible unless they qualify as expenses deductible
     under section 162 * * * (relating to trade or business
     expenses), section 170 * * * (relating to charitable
     contributions), section 212 * * * (relating to expenses
     for production of income), section 213(e) * * *
     (relating to medical expenses), or section 217(a) * * *
     (relating to moving expenses). * * *
     8
       Respondent's determination will be sustained even if we
conclude that the expenses in question are properly characterized
as miscellaneous itemized deductions because these expenses do
not exceed 2 percent of petitioners' adjusted gross income and,
therefore, would provide no tax benefit to petitioners. See sec.
67.
                                  - 10 -


165(d).9       Wagering losses under section 165(d) are excluded from

the definition of miscellaneous itemized deductions for purposes

of the 2-percent floor on miscellaneous itemized deductions

prescribed by section 67.       Sec. 67(b)(3); cf. sec. 68, and see

n.4.

       The Commissioner's determinations in a notice of deficiency

are presumed to be correct, and the taxpayer bears the burden of

proving that those determinations are erroneous.       Rule 142(a);

Welch v. Helvering, 290 U.S. 111, 115 (1933).       Moreover, because

deductions are a matter of legislative grace, the taxpayer must

show that he or she comes squarely within the terms of the

statute granting such deduction.       New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934); Nelson v. Commissioner, 30

T.C. 1151, 1154 (1958).

       The parties have devoted a substantial amount of time and

effort debating the issue of whether a contestant's appearance on

the "Wheel of Fortune" game show constitutes a wagering

transaction governed by the provisions of section 165(d).        In our

opinion it does not.10      However, we need not definitively decide

       9
            Sec. 165(d) provides as follows:

            (d) Wagering Losses.--Losses from wagering
       transactions shall be allowed only to the extent of the
       gains from such transactions.
       10
       In this regard we observe that the release form executed
by each contestant on "Wheel of Fortune" expressly provides that
                                                   (continued...)
                              - 11 -


this because such issue begs the question regarding the proper

characterization of the expenses incurred by petitioner in

attending and participating in the "Wheel of Fortune" game show.

Consequently, we will focus our attention on the more pertinent

issue of whether the expenses in dispute can be characterized as

wagering losses within the meaning of section 165(d).

     Section 165(d) was originally codified as section 23(g) of

the Revenue Act of 1934, ch. 277, tit. I, 48 Stat. 680, 689.11

Notwithstanding the long history of the section, the term

"wagering losses" is not defined in either the Internal Revenue

Code or the regulations.   Nor is the term defined in the

legislative history underlying section 165(d).   See H. Rept. 704,

73d Cong., 2d Sess. (1934), 1939-1 C.B. (Part 2) 554, 570; S.




     10
      (...continued)
the contestant may not pay or agree to pay money or valuable
consideration in connection with his or her appearance on the
program. In other words, no bet or wager between "Wheel of
Fortune" and the contestant is permitted. Moreover, if
petitioner's contention was correct and if a contestant's
appearance on "Wheel of Fortune" constituted a wagering
transaction governed by the provisions of sec. 165(d), then so
would any other activity where there was an element of risk, such
as investing in the stock market or traveling cross-country for a
job interview. See Jasinski v. Commissioner, T.C. Memo. 1978-1
(investing in capital assets is not a wagering transaction within
the meaning of sec. 165(d)).
     11
        Sec. 23(g) of the Revenue Act of 1934 was subsequently
redesignated as sec. 23(h) by the Revenue Act of 1938, ch. 289,
52 Stat. 447, 461, and continued as such in the 1939 Code until
enacted as sec. 165(d) in the 1954 Code.
                               - 12 -


Rept. 558, 73d Cong., 2d Sess. (1934), 1939-1 C.B. (Part 2) 586,

605.

       It is within this relative vacuum of authority that

petitioners rely on Kozma v. Commissioner, T.C. Memo. 1986-177,

as support for their position that the expenses disputed herein

constitute wagering losses under section 165(d).     As explained

below, petitioners' reliance on Kozma v. Commissioner is

misplaced.

       In Kozma v. Commissioner, supra, the taxpayer, an individual

engaged in the trade or business of gambling, enjoyed gross

gambling winnings (gross receipts) of $9,750 and $15,191 for 1980

and 1981, respectively.    However, after combining the amounts

that he paid for wagering tickets with business expenses for

transportation, depreciation, meals and lodging, admission fees,

and office supplies, the taxpayer reported net losses in respect

of his gambling business for both 1980 and 1981.12    The

Commissioner issued a notice of deficiency disallowing the losses

claimed by the taxpayer on the ground that gambling losses are


       12
        The taxpayer paid $9,506 and $14,085 for wagering
tickets in 1980 and 1981, respectively, leaving him with a gross
profit from gambling of $244 and $1,106 for 1980 and 1981,
respectively. In addition, the taxpayer incurred business
expenses for transportation, depreciation, meals and lodging,
admission fees, and office supplies in the amounts of $3,468 and
$8,148 for 1980 and 1981, respectively. After subtracting both
the cost of his wagering tickets and his business expenses, the
taxpayer reported a net loss from gambling in the amount of
$3,244 and $7,042 for 1980 and 1981, respectively.
                              - 13 -


allowable only to the extent of gambling winnings under section

165(d).

     In proceedings before this Court, the taxpayer argued that

the expenses incurred for transportation, depreciation, meals and

lodging, admission fees, and office supplies constitute business

expenses under section 162(a), rather than wagering losses under

section 165(d), and that such expenses are deductible by virtue

of section 162(a) notwithstanding the limitation imposed by

section 165(d).

     Focusing on the tension between section 162(a) and section

165(d), we held that the Commissioner was correct in disallowing

the taxpayer's business expenses to the extent that those

expenses generated an overall loss from the taxpayer's gambling

business.   In so holding, we relied on Estate of Todisco v.

Commissioner, 757 F.2d 1 (1st Cir. 1985), affg. T.C. Memo. 1983-

247, and Offut v. Commissioner, 16 T.C. 1214 (1951), as well as

the well-settled principle that a taxpayer cannot use a net

operating loss from gambling to offset income from other sources

or carry such a loss over or back to another taxable year.

     Unlike the taxpayer in Kozma v. Commissioner, supra,

petitioner admits that he is not in the trade or business of

gambling and that he did not incur losses or expenses in excess

of his "wagering winnings".   In this light, it is evident that
                             - 14 -


Kozma v. Commissioner can be distinguished on its facts from the

present case.

     Nor are we persuaded that the legal holding in Kozma v.

Commissioner, supra, is controlling in the present case.       Rather,

Kozma v. Commissioner stands for the narrow proposition that, in

the case of a professional gambler, the limitation imposed under

section 165(d) limiting wagering losses to wagering winnings

overrides the deduction otherwise allowable under section 162(a)

for ordinary and necessary business expenses.   See Valenti v.

Commissioner, T.C. Memo. 1994-483.    Petitioners apparently

believe that Kozma v. Commissioner, supra, together with the

cases cited therein, stand for the proposition that all expenses

related to a wagering activity are properly characterized as

wagering losses under section 165(d).   However, we do not glean

from those cases any intention to eliminate the distinction

between wagering losses, i.e., the amount of wagers or bets lost

on wagering transactions, and expenses related thereto, e.g.,

expenses for transportation, meals, and lodging incurred to

engage in wagering transactions.   See Boyd v. United States, 762

F.2d 1369, 1372-1373 (9th Cir. 1985).

     Consistent with the foregoing, we conclude that wagering

losses must be accounted for and reported separately from the

expenses incurred by the taxpayer in order to engage in the

underlying wagering transaction.   In applying this rule to the
                              - 15 -


facts presented herein, we hold that the expenses incurred by

petitioner in order to attend and participate in the "Wheel of

Fortune" game show are at best expenses, deductible as a

miscellaneous itemized deduction under section 67, rather than

wagering losses under section 165(d).   In so holding, we reject

petitioners' contention that the expenses in issue are tantamount

to a bet or wager.   Unlike a wager or bet, petitioner incurred

the expenses in question in exchange for specific goods and

services, such as transportation, meals, and lodging.    Further,

we doubt that Congress ever intended to allow casual gamblers to

treat expenses for transportation, meals, and lodging as anything

other than either miscellaneous itemized deductions or

nondeductible personal expenses.   Consequently, we shall deny

petitioners' Motion for Summary Judgment and grant respondent's

cross motion.
                        - 16 -




In order to reflect the foregoing,



                             An order denying petitioners'

                         Motion for Summary Judgment and

                         petitioners' Motion to Strike and

                         granting respondent's Motion for

                         Summary Judgment will be entered.
