Mark Weil Case Study

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Facts
Mark Weil, our client, has been a professional gambler since an undetermined period of time until today. Mr. Weil chose this profession not just because he enjoys to gambling, but also because he believes his gambling winning are tax-exempt. During an undetermined amount of time, Mr. Weil has omitted the income corresponding to his gambling winnings from the gross income on his tax returns.
Issue and Conclusion 1 Is Mr. Weil supposed to include his gambling winnings in his gross income?
Yes, Mr. Weil must include a portion or all his gambling winnings as part of gross income.
Analysis 1
Under Reg. 1.61-1 referring to gross income definition, Mr. Weil must include any type gambling winning in the gross income of the year it was earned for taxation purposes. According to Reg.44.4421-1 gambling income includes but is not limited to …show more content…

Weil is not able to prove his profit goal, his gambling activities will be consider a hobby under Reg. 183(c). As a result, under Sec. 165(d), Mr. Weil is allowed to take a deduction based on his gambling losses as a miscellaneous itemized deduction. The rule of the 2 percent floor of the adjusted gross income stated on LTR 200136004 (PLR) will not apply to this type of losses, but the maximum amount of the deduction allowed will be limited to the extent of the gambling winnings earned during the taxable year. Any remainder gambling winning will be fully taxable as part of the gross income. Under IRS Publication 529 [2013], gambling winnings must be totally reported as other income even though the amount of losses equals the total winnings. In addition, Under Reg. 1.6001-1(a)(e), Mr. Weil is required to keep on his records all support of all supporting documents of gambling losses such as losing tickets, and receipts on order to provide appropriate substantiation in the case of an IRS audit. Otherwise, gambling losses deduction will be disallowed. Gregory Alberico, 70 TCM 1320(1995), T.C. Memo

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