PURSUANT TO
Decision will be entered under Rule 155.
PANUTHOS,
Respondent determined a deficiency of $4,944 with respect to petitioners' Federal income tax for 2009. After concessions,12012 Tax Ct. Summary LEXIS 74">*75 the issue for decision is whether and to what extent petitioners incurred deductible gambling losses.
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. At the time the petition was filed, petitioners resided in San Francisco, California.
Fortunato Gonzalez (petitioner) was employed as president of Gonzalez Concrete Co. Petitioners were recreational gamblers. Petitioners played slot machines regularly on weekends at Cache Creek Casino Resort (casino). Petitioners did not maintain formal records of their gambling activities in 2009. Petitioners did not use a casino members club card because they did not trust it for accurate readings. While petitioners did not maintain a diary, a log, or a regular record of their gambling activity, they did retain copies of canceled checks, totaling $29,700, which were negotiated near weekends or holidays. Petitioners cashed these checks to have funds available for gambling activities.
Petitioners received four Forms W-2G, Certain Gambling Winnings, representing winnings of $2,000, $10,000, $2,700, and $6,000, at the casino.
Petitioners 2012 Tax Ct. Summary LEXIS 74">*76 timely filed a 2009 Form 1040, U.S. Individual Income Tax Return, reporting $34,359 of income earned from wages and $724 from rental activity. Petitioners' return was selected for examination. The Internal Revenue Service (IRS) determined that Forms W-2G provided by the casino reflected gambling income which petitioners failed to report on their 2009 Federal income tax return.
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);
Section 7491 does not require the burden of proof to be placed on respondent. Petitioners have neither asserted that the burden of proof should be placed on respondent nor established 2012 Tax Ct. Summary LEXIS 74">*77 that they complied with the requirements of section 7491(a). Accordingly, petitioners bear the burden of proof.
Gross income includes all income from whatever source derived, including gambling.
As a general matter, when gambling winnings of $1,200 or more from a bingo game or slot machine play are paid, the payor is required to inform the IRS of the payments.
Petitioners attempted to substantiate gambling losses, relying on (1) their general testimony that they lost more money than they won, (2) checks that were cashed regularly so that funds would be available at the casino, and (3) the theory that all gamblers lose money.
As a general rule, if the trial record provides sufficient evidence that a taxpayer has incurred a deductible expense, but the taxpayer is unable to substantiate adequately the precise amount of the deduction to which he or she is otherwise entitled, the Court may estimate the amount of the deductible expense, bearing heavily against the taxpayer whose inexactitude is of his or her own making and allow the deduction to that extent.
In
Petitioners wrote checks to cash at least once a month for most of the year in issue, and most of the checks were negotiated near weekends and holidays. We are satisfied that at least some of these funds and some of the winnings were used to engage in gambling activities. Taking into account the credible testimony of petitioners, the fact that gambling winnings were used to engage in additional gambling activity, the cashing of checks on the weekends, and the fact that petitioners' disposable income from other sources was otherwise limited, and using our best judgment to reasonably estimate the amount of gambling losses, we allow petitioners a gambling loss of $15,000. Accordingly, 2012 Tax Ct. Summary LEXIS 74">*80 petitioners may deduct $15,000 of gambling losses against the $20,700 of gambling winnings.
To reflect the foregoing,
1. Petitioners concede receiving unemployment compensation of $908 from the California Employment Development Department. Petitioners also agree that they received other income of $4,058 from Health Net Class Settlement. Finally, petitioners concede receiving gambling winnings of $20,700 from Cache Creek Casino Resort. Petitioners agree that these items are includable as income for 2009.