                  T.C. Summary Opinion 2005-36



                     UNITED STATES TAX COURT



                LEROY J. KLINGAMAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 19122-03S.              Filed March 30,   2005.


     Leroy J. Klingaman, pro se.

     Miriam C. Dillard and Sandra K. Reid, for respondent.



     PANUTHOS, Chief Special Trial Judge:   This case was heard

pursuant to the provisions of section 7463 of the Internal

Revenue Code in effect when 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, all subsequent section references are to the Internal

Revenue Code in effect at relevant times, and all Rule references

are to the Tax Court Rules of Practice and Procedure.
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     Respondent determined a deficiency of $998 in petitioner’s

2001 Federal income tax.   The issue for decision is whether

petitioner’s gross income includes unreported gambling winnings

and Social Security benefits as determined by respondent.

                             Background

     Some of the facts have been stipulated, and they are so

found.   The stipulation of facts and the attached exhibits are

incorporated by this reference.   At the time of filing the

petition, petitioner resided in Leesburg, Florida.

     In taxable year 2001, petitioner was retired and received

Social Security benefits of $11,088.      During the year, petitioner

and a companion traveled throughout the United States to visit

friends and members of petitioner’s family.     Petitioner

frequented various casinos to play the slot machines “as a

recreation” during his travels.

     Third party information returns (Forms W-2G, Certain

Gambling Winnings) reflect that petitioner received the following

gambling winnings in 2001:

     Payor                                  Gambling Winnings

     Little River Casino Resort                 $2,400
     Imperial Palace of Mississippi              2,500
     Beau Rivage Resorts, Inc.                   1,440
     Florida Department of the Lottery           1,000
        Total                                    7,340
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Petitioner had gambling losses in 2001 in excess of his gambling

winnings.1

     On his timely filed 2001 Federal income tax return,

petitioner did not report any gambling winnings or Social

Security benefits.     Petitioner’s 2001 return reflects $14,119 in

adjusted gross income, consisting of $13,657 in pension payments,

$39 in taxable interest, $916 of ordinary dividends, and a

capital loss of $493.     Petitioner claimed the applicable standard

deduction of $5,650.

     In a notice of deficiency, respondent determined that

petitioner received $7,340 in unreported gambling winnings and

$1,002 in unreported taxable Social Security benefits (following

a computational adjustment to petitioner’s adjusted gross

income).     Further, respondent determined that petitioner is

entitled to deduct gambling losses of $7,340.




     1
        Petitioner admits that he received additional gambling
winnings of less than $1,200 on several occasions that were not
subject to information reporting. See sec. 7.6041-1(a),
Temporary Income Tax Regs., 42 Fed. Reg. 33286 (June 30, 1977);
see also Lyszkowski v. Commissioner, T.C. Memo. 1995-235
(describing the information reporting requirements for slot
machine jackpots), affd. without published opinion 79 F.3d 1138
(3d Cir. 1996). Respondent’s determination of the deficiency was
limited to the gambling winnings subject to information
reporting, and petitioner’s other winnings are not at issue in
this case.
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                            Discussion

      In general, the Commissioner’s determination set forth in a

notice of deficiency is presumed correct, and the taxpayer bears

the burden of showing that the determination is in error.      Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).       However,

in certain circumstances, if the taxpayer introduces credible

evidence with respect to any factual issue relevant to

ascertaining the proper tax liability, section 7491 places the

burden of proof on the Commissioner.     Sec. 7491(a)(1).   Section

7491(a)(1) applies only if an individual taxpayer complies with

substantiation requirements, maintains all required records, and

cooperates with reasonable requests by the Commissioner for

witnesses, information, documents, meetings, and interviews.

Sec. 7491(a)(2).

      In this case, section 7491 is inapplicable because

petitioner did not introduce any credible evidence with respect

to the gambling winnings and Social Security benefits and failed

to comply with the substantiation and recordkeeping requirements.

The burden of proof remains on petitioner to show that

respondent’s determination is in error.

A.   Gambling Winnings and Losses

      Section 61(a) provides that gross income includes all income

from whatever source derived unless excludable by a specific

provision of the Code.   No specific code section excludes
                                - 5 -

gambling winnings from gross income.     Section 165(d) permits a

deduction for gambling losses, but only to the extent of gambling

winnings.

     Petitioner concedes that he “was paid” the amount of

gambling winnings reported by the various casinos.     Petitioner’s

only argument is that he owes tax on only a portion of the

gambling winnings because he split them with his traveling

companion.    As petitioner testified:   “This lady friend of mine

and I were traveling * * * we went from one casino from another.

We figured out how much we could spend and so we’d spend that and

we’d share it [the winnings] * * * I just took the money and then

I gave it to her.”    Petitioner did not identify by name the

person with whom he purportedly split his gambling winnings and

did not offer any proof that he split any of his gambling

winnings.    Further, there is no evidence that a Form W-2G was

issued to petitioner’s companion, and petitioner testified that

his companion did not report any of the gambling winnings on her

2001 return.2   Given the lack of evidence to support petitioner’s

claim that he split the gambling winnings, we sustain

     2
        Since petitioner received Forms W-2G, we assume that
petitioner filled out a Form 5754, Statement by Person(s)
Receiving Gambling Winnings, upon winning slot machine jackpots
of $1,200 or more. A Form 5754 not only is used to identify the
winner of the jackpot, but it may be used to report that the
winnings are shared among a group of people. Given the
circumstances of this case, it seems reasonable to conclude that
petitioner did not report on the Form 5754 that he was splitting
the winnings among others.
                                 - 6 -

respondent’s determination that petitioner must include $7,340 of

gambling winnings in gross income.       We further sustain

respondent’s determination that petitioner is entitled to deduct

gambling losses of $7,340.3

B.   Social Security Benefits

      Section 86 taxes Social Security benefits pursuant to

formula.   If the sum of the taxpayer’s adjusted gross income

(with modifications not relevant here) and one-half of the Social

Security benefits received during the year exceeds the applicable

“base amount”, then a portion of the Social Security benefits is

includable in gross income.     Sec. 86(a) and (b).    For 2001, the

base amount was $25,000 for an unmarried taxpayer not filing a

joint return.   Sec. 86(c)(1).    Once a taxpayer exceeds this base

amount threshold, Social Security benefits are includable in

income in an amount equal to the lesser of (1) one-half of the

Social Security benefits received during the year or (2) one-half

of the amount by which the taxpayer’s modified adjusted gross

income plus one-half of the Social Security benefits received

during the year exceeds the $25,000 base amount.       Sec. 86(a).   An

additional amount of Social Security benefits may be includable




      3
        The standard deduction for 2001 is $5,650; thus
petitioner will receive some tax benefit from an itemized
deduction of $7,340. Petitioner had no other itemized deductions
for 2001.
                                 - 7 -

in income under certain circumstances not applicable to this

case.   Sec. 86(a)(2).

     With the inclusion of $7,340 in gambling winnings,

petitioner’s adjusted gross income is $21,459.    The sum of

petitioner’s adjusted gross income of $21,459 and one-half of

petitioner’s Social Security benefits of $5,544 exceeds the

$25,000 base amount threshold by $2,003.    Since the amount of

Social Security benefits includable in income is equal to the

lesser of (1) one-half of the Social Security benefits received

of $5,544 or (2) one-half of the amount by which petitioner’s

modified adjusted gross income plus one-half of Social Security

benefits received during the year exceeded the $25,000 base

amount, or $1,002 (one-half of $2,003, rounded to the nearest

whole dollar), we sustain respondent’s determination that

petitioner must include $1,002 of Social Security benefits in

gross income.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,


                                 Decision will be entered for

                         respondent.
