Estate of Todisco v. Commissioner, Docket No. 9146-76.
| Citation | 1983 TC Memo 247,46 TCM (CCH) 35 |
| Decision Date | 04 May 1983 |
| Docket Number | Docket No. 9146-76. |
| Parties | Estate of Maurice G. Todisco, Framingham Trust Company, Executor v. Commissioner. |
| Court | United States Tax Court |
Chester M. Howe, 1 Federal St., Boston, Mass., for the petitioner. Maureen T. O'Brien, for the respondent.
Memoradum Findings of Fact and Opinion
Respondent determined the following deficiencies in decedent's income tax and additions to tax:
Sec. 6651(a)1 Sec. 6653(a)
Tax Addition Addition
Year Deficiency to Tax to Tax
1972 $76,136.09 $3,735.15 $3,855.70
1973 24,092.24 3,581.14 -0-
Petitioner claims overpayments of $1,348 for 1972 and $218 for 1973.
After concessions by the parties, the issues for decision are: (1) the amount of gross income which decedent received in his bookmaking operation; (2) the amount of deductions associated with the bookmaking operation; and (3) whether petitioner is liable for additions to tax as determined by respondent.
Some of the facts have been stipulated. The stipulation and attached exhibits are incorporated herein by reference.
Maurice G. Todisco ("Todisco") died on May 28, 1974. Framingham Trust Company is the executor of decedent's estate. The executor maintained its principal office in Massachusetts when it filed the petition in this case.
Todisco was an employee and part-owner of The Limelight, a bar and restaurant in Southboro, Massachusetts. Todisco's 1972 and 1973 income tax returns reported the income which he received from The Limelight.
From April 1, 1972, to April 14, 1973, Todisco also engaged in the business of bookmaking. He accepted wagers from bettors on sporting events, horse racing and numbers. Todisco operated his book primarily out of a rented apartment where Anthony Pellegrino ("Pellegrino") answered the telephone and noted the wagers when the bettors called. Todisco's 1972 and 1973 income tax returns reported no income from the bookmaking operation.
The Massachusetts State Police arrested. Todisco for gaming violations on April 14, 1973. The police seized $5,925.25 in cash and a series of betting slips when they arrested Todisco. The police seized $26,000 in cash from Todisco's safe-deposit boxes soon after his arrest. They seized an additional $4,521 from Todisco during November, 1973.
The betting slips showed that Todisco's book contained gross wagers of the following amounts on the following days:
Date Gross Wagers
April 2, 1973 ........... $ 350.84
3 ................. 255.75
4 ................. 4,509.90
5 ................. 11,427.30
6 ................. 1,302.00
7 ................. 11,647.50
8 ................. 10,240.00
9 ................. 768.25
10 ................. 8,244.25
11 ................. 3,067.75
12 ................. 5,049.00
13 ................. 9,093.50
Copies of the April 13, 1973, slips appear in the record. Copies of the slips for the period from April 2, 1973, to April 12, 1973, were not available at the time of trial.
On April 13, 1973, Todisco's book won $4,690.25 and lost $4,140. In other words, the bettors had to pay Todisco $4,690.25 and Todisco had to pay his customers $4,140 as a result of the wagers made that day. Accordingly, Todisco made a gross profit of $550.25 on gross wagers of $9,093.50. Thus, Todisco's gross profit percentage for April 13, 1973, was 6.1 percent of gross wagers.
The April 13, 1973, betting was distributed among sports, horses and numbers in the following way:2
Todisco's
Gross
Gross Bettor Bettor Profit
Bets Lost Won (Loss)
Basketball . $7,450.00 $4,065.00 $3,125.00 $940.00
Baseball ... 330.00 225.00 75.00 150.00
Horses ..... * 350.00 857.00 (507.00)
Numbers .... * 50.25 83.00 ( 32.75)
_________ _________ _________ ________
Total ...... $9,093.50 $4,690.25 $4,140.00 $550.25
* The slips do not reveal the amount bet on horses and numbers. However, the amount bet on horses and numbers must have totaled $1,313.50 because the parties stipulated that the gross bets for basketball and baseball constituted $7,780 of the total gross bets of $9,093.50
Todisco's gross profit on the April 13, 1973, basketball and baseball wagers was 12.6 percent and 45 percent of gross wagers, respectively. Todisco suffered losses on the April 13, 1973, horses and numbers wagers.
Todisco did not keep a balanced book on April 13, 1973. In other words, Todisco's April 13, 1973, book did not contain wagers from bettors with equal amounts at risk on each side of each sporting event or on each horse for each race. For example, on the Boston-Atlanta basketball game played April 13, 1973, the book had $2,885 in gross wagers favoring the Celtics while it had only $1,100 in gross wagers favoring the Hawks. In effect, Todisco wagered against the Celtics in the amount of $1,785 by accepting the full $2,885 favoring Boston. In a similar way, Todisco risked his own money on many of the wagers he accepted because he did not keep a balanced book.
However, when Todisco had a large amount of his own money at risk he would find another bookmaker who would place a balancing bet in Todisco's book which would soak up some or all of the unwanted risk. The betting on the April 13 Boston-Atlanta basketball game provides an example of this type of risk management. All of Todisco's customers bet on the Celtics. Todisco, not wanting to accept the entire risk of the $2,885 bet on the Celtics, found another bookmaker who was willing to bet $1,100 on Atlanta in Todisco's book. Thus Todisco eliminated his risk on $1,100 of the Celtics bets but remained fully at risk on the remaining $1,785 of the Celtics bets.
The level of betting in Todisco's book varied widely from day to day. The following table charts the gross wagers and sporting events from April 2, 1973, through April 13, 1973:
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