First, we must determine if Ray is a casual or professional gambler. In Commissioner v. Groetzinger, 480 U. S. 23 (1987), the Supreme Court ruled that this distinction is dependent on the facts of each individual case. However, the opinion did conclude that if gambling activity is regularly pursued full time and the primary objective is to make a living, that the activity should be treated as a trade or business.
Reg. § 1.183-2(b) lists a non-exhaustive list of factors that are typically involved in a profit seeking activity. Ray keeps accurate and detailed records as a business should. Ray also devotes a substantial amount of time studying and expanding his expertise. He spends more than 60 hours a week devoted to the gambling activity. The time that he devotes and the fact that he does not have another job to support himself supports the conclusion that Ray is a professional gambler.
In Daugherty v. Commissioner, 78 T.C. 623 (1982), this determination must be annually considered. The fact that Ray meets the requirements for this tax year does not guarantee anything about future tax years. In fact, as in Daugherty, if Ray continues to report a loss, his profit motivation will be called into question. IRC §183(d) specifies that if income exceeds deductions for three out of five consecutive …show more content…
This applies to losses from wagering transactions in §165(d). Winnings from wagering transactions can be offset by losses from wagering transactions, but wagering losses cannot exceed wagering winnings. The distinction of “wagering transactions” is important; since §165(d) specifies “wagering transactions”, this section does not limit losses related to gambling as a business activity. Ray has gambling losses ($113,000) in excess of his gambling income ($100,000). He can use the gambling losses to offset his income to $0, but cannot carry the additional loss forward or