                        T.C. Memo. 2010-54



                      UNITED STATES TAX COURT



        DAVID J. AND LETITIA B. CRAWFORD, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 10413-08.               Filed March 22, 2010.



     David J. and Letitia B. Crawford, pro sese.

     Wesley J. Wong, for respondent.



                        MEMORANDUM OPINION


     GERBER, Judge:   Respondent determined a $2,230 deficiency in

petitioners’ 2006 Federal income tax.   The deficiency is

attributable to respondent’s disallowance of David J. Crawford’s

(petitioner’s) deductions for losses and some expenses from

gambling.   The parties submitted this case with the facts fully
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stipulated under Rule 122.1    The two issues presented for our

consideration are whether petitioner, a professional gambler, may

deduct net losses from his gambling activity against other income

and whether petitioner has shown entitlement to a $2,400

deduction for “promotional activities”.

                              Background

     Petitioner and his wife, Letitia B. Crawford (Mrs.

Crawford), resided in Nevada at the time their petition was

filed.2   For 2006 petitioners filed a joint Form 1040, U.S.

Individual Income Tax Return.    Mrs. Crawford reported $41,742 in

wage income, and petitioners reported $42 in interest income.

Attached to the 2006 income tax return was petitioner’s Schedule

C, Profit or Loss From Business, on which he described his

profession as “PROFESSIONAL GAMBLER”.      Petitioner reported

$61,090 in gross income from gambling winnings and the following

costs and expenses:




     1
      Rule references are to this Court’s Rules of Practice and
Procedure, and section references are to the Internal Revenue
Code (Code) in effect for the year in issue. No question was
raised concerning the shifting of the burden of proof under sec.
7491(a).
     2
      When their petition was filed, petitioners elected the
small tax case procedure under sec. 7463. The Court granted
petitioners’ unopposed motion to remove the small tax case
designation.
                               - 3 -

              Cost/Expense                          Amount
     Legal and professional services                  $360
     Deductible meals and entertainment             2,182
     Cost of plays at various casinos              37,231
     Promotional activities                          2,400
     Live action poker playing at various
       casinos                                     46,869
         Total                                     89,042

Accordingly, petitioner had a net loss from his gambling activity

of $27,952.   Petitioners sought to apply the net gambling loss to

reduce their other income.   That reduction, along with other

deductions and personal exemptions would have reduced

petitioners’ tax liability to zero.    Respondent disallowed

$25,410 of the net gambling loss in determining an income tax

deficiency, and petitioners petitioned this Court.    The $2,542

difference between the $25,410 disallowed and the $27,952 loss

claimed is due to respondent’s allowance of petitioner’s $360

legal and professional services expense and the $2,182 meals and

entertainment expense.   Respondent disallowed the $2,400

petitioner claimed as a promotional activities expense.

                             Discussion

     The legal controversy we consider focuses on the interplay

between section 162(a) (which allows deductions for ordinary and

necessary business expenses) and section 165(d) (which limits

wagering losses to the amount of wagering income).    Section

162(a) generally allows a deduction for ordinary and necessary

expenses sustained in carrying on a trade or business.

Subsection (d) of section 165 specifically addresses wagering
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losses, as follows:   “Losses from wagering transactions shall be

allowed only to the extent of the gains from such transactions.”

Petitioner argues that the limitation of section 165(d) does not

apply where a taxpayer is a professional gambler; i.e., in the

business of wagering.   Respondent argues that the limitation of

section 165(d) applies irrespective of whether the wagering

income and losses are in a business or nonbusiness setting.

     Petitioner relies on Commissioner v. Groetzinger, 480 U.S.

23 (1987), in support of his position.     In that case the Supreme

Court considered a substantially similar factual pattern.

However, the question was whether the taxpayer’s gambling loss

deduction was an item of tax preference and caused a minimum tax

liability under section 56(a).    For purposes of section 56(a)

minimum tax preferences, the Supreme Court held that the taxpayer

(a full-time gambler) was in a “trade or business” and that his

loss deduction was not an item of tax preference and therefore

not subject to alternative minimum tax.3

     In a footnote to its Groetzinger opinion the Supreme Court

expressed the caution that it was interpreting the phrase “trade

or business” solely with respect to the Code sections being

considered.   Id. at 27 n.8.   Respondent does not question whether

petitioner is in the business of wagering.    Respondent contends


     3
      In 1982 Congress amended the minimum tax provisions to make
it clear that “gambling” loss deductions were excluded from the
alternative minimum tax base.
                               - 5 -

that section 165(d) applies irrespective of whether petitioner

was in the business of wagering.

     Petitioner is not the first taxpayer to seek to use the

Groetzinger holding in support of offsetting gambling losses

against other income.   See, e.g., Lyle v. Commissioner, T.C.

Memo. 1999-184, affd. without published opinion 218 F.3d 744 (5th

Cir. 2000).   In each such instance the result has been the same--

the explicit language of section 165(d) trumps the general

language of section 162(a) and limits wagering losses to the

amount of wagering gains.   See, e.g., Valenti v. Commissioner,

T.C. Memo. 1994-483.

     Petitioner presented no argument that would cause this Court

to reconsider its prior holdings.   We accordingly hold that

petitioner is not entitled to deduct his gambling losses that

exceed the amount of his gambling gains.

     We now turn to the $2,400 deduction that petitioner claimed

for “promotional activities” and that respondent disallowed in

the notice of deficiency.   Respondent contends that petitioner is

not entitled to that deduction for failure to show that the

expenses were ordinary and necessary and/or that they were

actually incurred.

     This case was submitted fully stipulated.   No facts were

stipulated that would show that these expenses were incurred or

that they were ordinary and necessary business expenses.
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Accordingly, petitioner has failed to show entitlement to the

$2,400 deduction irrespective of the section 165(d) limitation.

See Rule 142(a); Higbee v. Commissioner, 116 T.C. 438, 440

(2001).

     To reflect the foregoing,

                                              Decision will be entered

                                         for respondent.
