                  T.C. Summary Opinion 2001-94



                     UNITED STATES TAX COURT



          EDDIE L. AND MARY E. CARVER, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5566-99S.                      Filed June 25, 2001.



     Eddie L. Carver and Mary E. Carver, pro sese.

     Jason W. Anderson, for respondent.



     PAJAK, 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 of $532 in petitioners'

1996 Federal income tax.    Respondent conceded that petitioners

did not fail to include original issue discount of $20.75 in

their income.    The sole issue for decision is whether petitioners

failed to report as income gambling winnings of $3,500.

     Some of the facts in this case have been stipulated and are

so found.    Petitioners resided in Wilmington, Illinois, at the

time they filed their petition.

     In 1996, petitioners, who are not professional gamblers,

gambled at the Empress Casino Joliet, the Empress Casino Hammond,

and Harrah's Joliet Casino.    Petitioner Mary Carver won $2,000 on

one occasion, and petitioner Eddie Carver won $1,500 on one

occasion.    These amounts were reported to the Internal Revenue

Service.    We accept petitioner Mary Carver’s testimony that their

gambling losses exceeded their gambling winnings.    Petitioners

did not report the gambling winnings or losses on their 1996 tax

return.    They did not itemize their deductions, and instead

claimed the standard deduction.

     Petitioners contend that the gambling winnings should not be

included in their income because they had losses that exceeded

their winnings.    Respondent contends that the winnings must be

included in petitioners' income.

     Gross income includes all income from whatever source

derived, including gambling winnings.    Sec. 61(a); Commissioner
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v. Groetzinger, 480 U.S. 23, 34 (1987).     Gambling losses are

deductible only to the extent of the taxpayer's winnings from

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

Taxpayers not engaged in the trade or business of gambling must

report all gambling winnings as gross income and may claim

gambling losses only as an itemized deduction to the extent of

the gambling income.   McClanahan v. United States, 292 F.2d 630,

631-632 (5th Cir. 1961).

     We hold that petitioners must include the $3,500 of gambling

winnings in their income.   Petitioners have no other itemized

deductions to add to the $3,500 of gambling losses which were

eligible to be taken as an itemized deduction.     Petitioners

benefited from the election of the standard deduction of $6,700.

Accordingly, we sustain respondent's determination on this issue.

     Reviewed and adopted as the report of the Small Tax Case

Division.



                                       Decision will be entered

                               under Rule 155.
