Issues: Because the Merciers stipulated to having received $19,612 in gambling winnings for tax year 2019, the issue was not whether they received it. They also stated they believed their rights as taxpayers were violated because the IRS had failed to keep them informed and the Taxpayer Advocate Service was unavailable to help them with their case due to the COVID-19 pandemic. Thereafter, the couple tried to offset their gambling losses against gambling winnings on Schedule C, Profit or Loss From Business (Sole Proprietorship).Īt trial, the Merciers expressed their disagreement with the “unfair” law governing deductibility of gambling losses.

The IRS issued a notice of deficiency for tax year 2019 related in part to unreported income from the Merciers’ gambling winnings. She therefore decided to claim the standard deduction and not report the gambling winnings.

Believing that gambling winnings were not taxable for taxpayers with a net gambling loss such as themselves, Susan Mercier thought the increased tax amount was an error. Individual Income Tax Return. She originally included their gambling winnings from Forms W-2G, Certain Gambling Winnings, in gross income and claimed a corresponding deduction for their gambling losses on Schedule A, Itemized Deductions. However, the total tax increased because their itemized deductions were less than the standard deduction. Susan Mercier prepared the couple’s 2019 Form 1040, U.S. The Merciers always used their player cards, and they gambled exclusively on days when the casino featured extra points, free play, or some other player advantage. Such records purportedly documented gambling activity any time a player card was used. The couple did not keep written records of their gambling activity, relying instead on the casinos’ electronic records.

Citing their extensive knowledge of video poker, the Merciers considered themselves professional gamblers. Statistical information about the game gave them a strategy they employed when playing. The couple played only video poker, a game they knew well and believed offered the best odds of winning. The Merciers gambled at several Nevada casinos during the year. A married couple could not deduct their gambling losses because evidence, including their prior tax treatment of the activity, indicated they were casual rather than professional gamblers, the Tax Court held.įacts: In 2019, Susan Mercier worked as an accountant at a Nevada charter school, and her husband, James Mercier, owned and operated an appliance repair business.

Gambling losses income tax