Offutt v. Comm'r of Internal Revenue
| Decision Date | 31 May 1951 |
| Docket Number | Docket No. 21436. |
| Citation | 16 T.C. 1214 |
| Parties | ROY T. OFFUTT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
George Bouchard, Esq., for the petitioner.
A. J. Hurley, Esq., for the respondent.
Wagering losses in excess of wagering gains held not available to offset other income nor to create net operating loss carry-overs or carry-backs, notwithstanding legality and regularity of petitioner's wagering business. Section 23(h), Internal Revenue Code.
Petitioner seeks redetermination of deficiencies in income tax for 1946 and 1947 of $679.66 and $61, respectively, and claims overpayment of income tax for 1946 in the amount of $7,032.23. The controversy involves wagering losses which exceed wagering gains, and the issues are whether a net annual wagering loss may offset income of the same year from other sources and whether it may be taken into account in computing net operating loss carry-overs and carry-backs.
Petitioner filed his returns for 1946 and 1947 with the collector of internal revenue at Baltimore, Maryland.
During the years 1944 to 1947, inclusive, and for many years prior thereto, petitioner's principal occupation and source of income was bookmaking and betting on horse races. His activity consisted, in large part, of ‘handicapping‘ horses in each race, that is, estimating their chances, and ‘making future book,‘ that is, setting up a list of the horses in each race with the odds which he would be willing to accept. He printed and circulated such books among his customers, and he accepted wagers as early as two months before each race. His expenditures included mailing, printing and stenographic expenses. In addition he placed his own bets personally at race tracks. He maintained books and records of his operations. His activities revolved about horse races in California and Mexico. During the years in question, betting under the pari-mutuel system was legal in California but bookmaking was illegal in that state. During that period all of petitioner's bookmaking was carried on in Nevada and Mexico.
In the years 1944 and 1945, petitioner sustained gambling losses in excess of gambling gains in the amounts of $325.86 and $711, respectively. Petitioner's 1946 tax return reported salary from a race track of $5,750, interest income of $440.64, income from farm properties of $768.90, and net profit from bookmaking and betting business of $35,405.81 after the deduction of $1,036.86 for net operating loss carry-overs from 1944 and 1945. His 1947 return showed interest income of $501.18, income from farm properties of $409.93, loss from bookmaking and betting business of $12,180.10, and a total net loss for the year of$11,268.99. Subsequently petitioner filed an amended 1946 return, and a claim for refund of income tax for 1946 in the amount of $7,032.23, based upon an alleged net operating loss carry-back of $11,268.99 from 1947.
Respondent's notice of deficiency disallowed the claimed net operating loss carry-overs and carry-back as to the year 1946, and disallowed the deduction of 1947 wagering losses against gross income of $911.11 from non-gambling sources during the same year.
It would be easy to extend the scope of this controversy to take in a wide range of subject matter. As presented, however, it is narrowly limited and we propose to restrict our consideration accordingly.
The single issue with which we are required to deal is in essence whether a professional gambler may deduct gambling losses exceeding gambling gains, although concededly another taxpayer not regularly engaged in gambling as a business, but undertaking gambling ventures for profit, could not do so.
We are not here confronted with the problem of whether the specific provision as to gambling losses1 is exclusive, cf. Humphrey v. Commissioner (C.A. 5), 162...
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...(1948); Jennings v. Commissioner 40-1 USTC ¶ 9385, 110 F. 2d 945 (5th Cir. 1940), cert. denied 311 U.S. 704 (1940); Offutt v. Commissioner Dec. 18,325, 16 T.C. 1214 (1951); Joseph v. Commissioner Dec. 11,614, 43 B.T.A. 273 The Commissioner also determined that Sam and Louise had unreported ......
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