Johnston v. Comm'r of Internal Revenue, Docket No. 48254.
| Decision Date | 26 October 1955 |
| Docket Number | Docket No. 48254. |
| Citation | 25 T.C. 106 |
| Parties | ROBERT V. AND JENNIE J. JOHNSTON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Held, where taxpayer in his return elected to take the standard deduction in lieu of specific deductions and on audit respondent added certain gambling gains to gross income, the election being irrevocable by statute, taxpayer may not revoke his election and claim specific deductions including gambling losses. Robert V. Johnston, pro se.
William H. Welch, Esq., for the respondent.
Respondent determined a deficiency of $141.90 and a negligence penalty of $7.10 in petitioner's income tax for the taxable year 1949. The facts, with an insignificant exception, were stipulated substantially as follows:
During the year 1949, the petitioner, Robert V. Johnston, was employed by the Phillips Petroleum Company with offices at 2185 Broadway, Denver, Colorado. He was a salesman of products used by aviation companies. His wife, Jennie J. Johnston, had no separate income.
Petitioners filed a joint income tax return for the year 1949. Petitioners elected to take the standard deduction. Petitioners' return does not disclose any entry for either gambling wins or losses.
Petitioners are nonprofessional gamblers. They attended the dog races at Mile High Kennel Club, Denver, Colorado, on many occasions during 1949. On each occasion they placed bets on the races. On September 2, 1949, Mr. Johnston won the sum of $950. That amount was paid him by check number 739, dated September 2, 1949, and issued by the Mile High Kennel Club. This check was deposited to petitioners' joint checking account at the First National Bank, Denver, Colorado, on September 6, 1949.
Betting transactions at the Mile High Kennel Club are conducted in cash, i.e., the bettor pays cash for bets made at the race track at a race, and if he wins he is paid by the Mile High Kennel Club in cash. There are no receipts for expenditures for betting other than the betting tickets purchased.
Petitioners kept records of their gambling wins and losses at the dog track on the backs of the daily programs. These programs were destroyed some time during 1951, and there are no records of wins and losses for the year 1949.
For purposes of this hearing, respondent concedes that during the year 1949 petitioner, Robert V. Johnston, incurred gambling losses to the extent of his gambling winnings including the wins represented by the check for $950 referred to above.
In the event that this Court determines that (1) petitioners sustained gambling losses and (2) that the gambling losses are deductible only in lieu of the optional standard deduction and (3) that the petitioners may now elect to itemize their actual deductions, petitioners and respondent agree that the following are the actual deductions for this purpose other than any gambling losses sustained :
+--------------------------------------------------------------+
¦Contributions ¦$40.50¦
+-------------------------------------------------------+------¦
¦Interest ¦40.00 ¦
+-------------------------------------------------------+------¦
¦Taxes ¦121.25¦
+-------------------------------------------------------+------¦
¦Medical expenses (before deduction 5% of adjusted gross¦ ¦
+-------------------------------------------------------+------¦
¦income) ¦438.65¦
+--------------------------------------------------------------+
In this case we have complete agreement as to the facts. Petitioner had gambling winnings of $950 for the taxable year 1949. He had gambling losses in at least the same amount for the same period. Petitioner did not report his winnings nor did he claim deduction of his gambling losses. He elected to take the standard deduction. Respondent on audit added the gambling gain of $950 to petitioner's gross income, but since petitioner elected ‘irrevocably’ (section 23 (aa)(3)(C)1 to take the standard deduction, respondent held and here contends that petitioner may not now revoke his action as elected and itemize his deductions so as to claim the gambling losses. Nor may he deduct the gambling losses from the gambling gains as ordinary and necessary expenses of earning income.
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