Green’s gambling activities do not qualify as a trade or business, can he deduct his gambling-related travel and lodging expenses against his gambling winnings? Applicable Case Law, Code & Regulations Per Section 165(d) of the Internal Revenue Code (IRC), a taxpayer may deduct their gambling losses to the extent of their gambling winnings. However, Section 262 of the IRC indicates, “…no deduction shall be allowed for personal, living, or family expenses.” In ruling on Stanley B. and Rose M. Whitten v. Commission of Internal Revenue, the US Tax Court has stipulated that travel and lodging expenses are not considered losses and therefore cannot be used as a deduction. Conclusion Given the current tax regulations and case law, travel and lodging expenses associated to Dr. Green’s gambling activities cannot be categorized as a loss. The Tax Court clearly established in Stanley B. and Rose M. Whitten v. Commission of Internal Revenue the difference between gambling losses and travel and lodging expenses in the closing of the judgment wherein they stated there is no need, “…to eliminate the distinction between wagering losses, i.e., the amount of wagers or bets lost on wagering transactions, and expenses related thereto, e.g., expenses for transportation, meals, and lodging incurred to engage in wagering transactions… Unlike a wager or bet, petitioner incurred the expenses in question in exchange for specific goods and services, such as transportation,
However, to qualify for this section, the properties exchanged must be like-kind and used for a trade or business or for investment. (4)So, in this case, the property exchanged is a house and not one used in any trade, business or for investment purposes. Hence, it does not qualify for Sec 1031 tax exchange. 2(c) As Sec 61 of IRS, any activity which is carried with the intention of earning any income will be classified by the IRS as a business and taxed accordingly. (5) So the distinction between hobby and business is important to determine the taxability of the profits earned from such activity.
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You can deduct gambling losses on your tax return only if you itemize tax deductions and only to the extent of your gambling winnings. Claim your gambling losses as a miscellaneous tax deduction on Schedule a of Form 1040. It is important to keep an accurate diary or similar record of your gambling winnings and gambling losses. To deduct your gambling losses on your tax return, you must be able to provide receipts, tickets, statements or other records that show the amount of both your gambling winnings and gambling losses. You cannot deduct or carry forward a net gambling loss on your tax return; even if you are a professional