T.C. Memo. 2008-176
UNITED STATES TAX COURT
RAYMOND AND JACQUE CROMLEY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 3499-06, 19563-06.1 Filed July 28, 2008.
Raymond and Jacque Cromley, pro se.
Anita Gill, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
WELLS, Judge: Respondent determined deficiencies in tax of
$1,393 and $795 for petitioners’ taxable years 2003 and 2004,
respectively. Unless otherwise indicated, all section references
are to the Internal Revenue Code as in effect for the years in
issue, and all Rule references are to the Tax Court Rules of
1
These cases are consolidated for trial, briefing, and
opinion.
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Practice and Procedure. The issues we must decide are as
follows: (1) Whether petitioners are entitled to deduct gambling
expenses for the taxable years in issue; and (2) whether
petitioners have unreported interest income for 2004.
FINDINGS OF FACT
Some of the facts have been stipulated for trial pursuant to
Rule 91. The parties’ stipulations are incorporated herein by
reference and are found accordingly.
At the time the petitions were filed, petitioners resided
in Ohio.
During 2003 petitioner husband received gambling income of
$668 from Carat Co., Inc., and $792 from Washington Trotting
Association, Inc. During 2004 petitioner husband received $900
from Washington Trotting Association, Inc. Petitioners failed to
report the gambling income on their respective tax returns for
2003 and 2004.
During 2003 and 2004 petitioner husband received Social
Security income of $9,296 and $9,487, respectively. Petitioners
failed to report the taxable portion of the Social Security
income of $3,484 on their tax return for 2003 and of $4,304 on
their tax return for 2004.
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During 2003 petitioner wife received taxable pension and
annuity income of $490 from Principal Life Insurance Co.
Petitioners failed to report the pension and annuity income on
their tax return for 2003.
During 2003 petitioners received $2,055 from H&R Block as a
result of a “breach of contract” suit. Petitioners failed to
report the income from the suit on their tax return for 2003.
OPINION
Section 61 provides that gross income is defined as “all
income from whatever source derived”. Gross income includes
all “accessions to wealth, clearly realized, and over which
the taxpayers have complete dominion.” Commissioner v.
Glenshaw Glass Co., 348 U.S. 426, 431 (1955).
Section 86 provides for the inclusion in gross income of
Social Security benefits if the taxpayer’s modified adjusted
gross income plus one-half the Social Security benefits exceeds
a base amount.
Section 165(a) provides the general rule that there shall be
allowed as a deduction any loss sustained during the taxable year
and not compensated by insurance or otherwise. Section 165(d)
limits the loss deduction of section 165(a), providing: “Losses
from wagering transactions shall be allowed only to the extent of
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the gains from such transactions.” Section 165 permits
deductions for gambling losses for a taxpayer who is not in the
business of gambling, see Commissioner v. Groetzinger, 480 U.S.
23, 35 (1987), only to the extent the taxpayer is permitted to
itemize, sec. 63(a); see Calvao v. Commissioner, T.C. Memo. 2007-
57; Heidelberg v. Commissioner, T.C. Memo. 1977-133.
All of the income items have been stipulated by the parties
except for the $100 in interest income for 2004, as to which
petitioners do not make any argument and which we take as a
concession by petitioners. Consequently, the only issue left to
decide is whether petitioners are entitled to deductions for
gambling expenses for the years in issue. Petitioners raised the
gambling expense issue at trial. Petitioners have not argued
that petitioner husband is in the gambling trade or business.
Consequently, if we were to allow petitioners’ claimed gambling
expenses, they would be deductible only as itemized expenses.
However, petitioners concede they do not itemize their expenses,
and, in any case, as the record shows, petitioners do not have
sufficient expenses to allow them to itemize their expenses for
the years in issue. Accordingly, as petitioners have failed to
establish their right to deduct any gambling expenses for the
years in issue, we hold that petitioners are not entitled to
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deduct their claimed gambling expenses. Consequently, on the
basis of the record, we sustain respondent on the issues raised
herein. We have considered all of the arguments of the parties,
and, to the extent not addressed herein, we deem those arguments
to be without merit, irrelevant, or unnecessary to reach.
To reflect the foregoing,
Decisions will be entered
for respondent.