procedural matter how they're going to work you're both going to handle have the rebuttal time or one of us or mr want to will be handling the rebuttal ok well this case presents an issue of first impression within the circuit the issue being whether in parimutu ordinary necessary business expenses so long as the racetracks take out is not found to be boss from wagering transactions for him to reconcile your position with the niche case the reasoning  how can the takeout this court dealt with the issue of whether shoals which were constructed on behalf of the casino fell under losses from wagering transactions in that case the shows were employed by the casino and so they were needs to take the money to pay the expenses in the distribution so that's for the day card comes from in the shell situation in order to make the game work you had to have these people there and nobody would play in both cases though they were expenses that the racetrack or any other game the only situation might have what's the difference i know technically they're doing different things but what's the difference logically my understanding from the oh a wager if it's from the money that is wagered your honor our position is that it's not part of the wager because it is not it's a fixed event every time m places that a racetrack he is required to pay fifteen percent for a conventional bat sixteen point seven five percent for an exotic that and so that is that is separate from the actual  one hundred dollars the subject to a twenty percent take out that twenty dollars is not ever paid back to the winning betters it is collected by the track for use of to pay for their operating how is that any if it's a commercial transaction i was there as a tourist but if it's a commercial transaction isn't that part of the expenses connected to gambling yes your honor and under mayo those expenses are deductible wagering just for some background the house is not a participant in the event and the house takes the takes the take out irrespective the outcome of the bet and so this court in a one thousand nine hundred five decision united states dealt with whether professional poker players contractual share of the takeout take off was a gain from wagering transactions this court held that it was not a gain from wagering transactions because it was not the direct result of the of the wager entered into by the professional poker player or the casino rather the take off in the in poker was the fee the casino charges players for use of the casinos facilities  entered into a contract with the golden nugget casino to play in poker games and he was he was able to earn some of the take off revenue that the casino earned as part of playing in these poker games well that's a different issue is it not than the one you brought us you're talking about the deductibility of the take out the other has more of an income factor to it yes your honor but first symmetry we're trying to say that if the take off in poker in boyd was not a gain for the casino but rather a fee the casino charge for facilitating the wagering activity for an individual better that same fear would not be a los transactions so  because the take out is separate from the direct cost of the wager and not as a similar as a transaction fee this court should find that the takeout falls outside of section one sixty five do you think you our case if i may i'd like to begin with the recent and temporary amendment to section one sixty five dollars in december congress elected to for the first time define what losses from wage and transactions within the section one sixty five the means and their congress elected to foreclose the definition and include those costs which may you had held were incidental to a gambling expense and now as a last chance currently that only a fax it only yes your honor and we also contacted the commissioner to notify because this took place in december right after principal resource admitted so we figured out this was the best approach to do so confess i didn't see it  congress in this instance limited losses from wagering transactions to include all costs associated with the wager so were mayo held that a cost incidental to wagering expense was not limited by one sixty five d the new amendment makes effectively over rules male and any costs incidental or to a wager is now limited by one sixty five now it's important to know that that amendment is there is to deploy a limitation to the amendment would be would would effect to adversely if it were to apply that's correct if and so your argument is that congress must have recognized that you were right therefore decide to do something that would  fact the congress didn't elect to make this a clarifying amendment and the fact that this is a temporary amendment is interesting because it changes the law but it only does so for ten years understand but what i'm trying to understand is conny both agree that if this court were to agree with us and decide that the take up percentage that a track retains when mr one county enters in a bet is not limited by one six one sixty five d then the proper course of action is for this court to remand i'm pages eighty seven of the record the tax judge instructed the parties and communicate to the parties that there is no dispute that a takeout accessed the fact of what percentage applied to mr long con it could have been easily be determined and concession by the commission they may have had a chat outside and talked about it in your council must have thought that's what was going to happen but it didn't happen right it didn't happen and the fact that mr one county was a pro se client and on the record he indicates during that conversation an exchange with the judge that he had all the information necessary to a right to take up percentage so he had some reliance on the statement and when he attempts to communicate with the commissioner that reliance is retracted in the commissioner then on post trial briefings  challenging mr one county's position by asserting that he never provided any factual i don't let's assume for a minute that he had the mitchell on county was permitted to provide this information it doesn't really help though does it if the tax court interprets the law in the way that he did it's almost irrelevant because whatever it is however much it is he can't deduct it right that's correct your honor however the fact that mr again mr one kind of being a pro se client and the mr on conny was at least attempting to bring in this evidence as best as he could and that was for clothes from the opera from that opportunity and that barry use against him imposed over have said you didn't understand what i was saying i'm saying assume for a moment that he had been permitted to bring in the evidence whatever it might have been if the tax court interpreted the law as it did then it would be irrelevant because it would not be admissible in any event because you can't deduct whatever it's about right that's good morning your honor my name is i've been to jail and i represent the commissioner of internal revenue one hundred dollars to win on a horse if that horse wins he gets his entire one hundred dollars back plus a payout if that horse loses he loses the entire hundred dollars that's true no matter the take out his fifteen percent or seventeen percent no matter if the race track forgets to apply the take up percentage or miscalculates it or doesn't follow the law or because of an overwhelming favorite won there was no takeout whatever the take out is in that scenario well it isn't that it isn't in one respect which is that if you doing this with a group of friends you had a having a party for the kentucky derby and a bunch of people come over and you throw money into  and all the money gets paid out but if there is a house or in this case the track not all the money gets paid out it is at least conceptually not entirely unlike the ochre room where you have to pay a fee for painting and the fee gets before at least this recent amendment which i confess i also was unaware of it's treated differently for tax purposes doesn't it well so you've got to pay us a fee of fifty dollars pre mayo and and post amendment that would not that would still be a gambling loss right after mayo which was decided in two thousand and eleven the i r s acquiesced in two thousand and twelve if we follow the tax court's decision in mayo which the i r s is said it's not going to argue against anymore th separate transaction in the form of a fee my if it otherwise satisfies the duct ability requirements be treated as a separate expense of a professional gambler and that would only be true in the case of professional gambler than the money understand the hypothetical with a hypothetical if the fee is paid before you  in that case there's two transactions you went to the track and you paid say an entry fee to get into the track ten dollar ticket to enter then you make a wager hundred dollars on a horse to win two transactions occurred one was the entry fee there was no chance of recovery nothing to be gained or lost and the second was the wager the wager itself is limited by one sixty five d no matter the state of the law gambler and it would be something like you know buying a brochure or his travel costs to get to that you know you get the feedback if you win  expenses and so forth i was trying to simplify correct mayo talked about things like you actually i think one of the items in mail was intrigue fees so if you're right so those those injury fees and mayo here the taxpayer has made a wager in my example one hundred dollars wager on a horse to win even the california code defines that as the wager the california even out of the california code the wager is the hundred dollar bet mr le colony doesn't pay the take out the takeout is imposed on the truck well he painted it in the sense when he buy his argument which is a construct and that's your main point by his argument that he his winnings are depleted or diminished because the winnings are cut by the amount of the take out if you lose the loses but if he wins instead of getting back one hundred dollars he gets back to the five cars or houses taken the fifteen percent and that's inherent in every gambling transaction that house is always going to get it's take the scene oh ass to make poker through things like entry fees because otherwise the gambling is being done by the people around the table and you could have a ranger where they take out a percentage but they can also have a range where they take out by paying money to get into the door so either way you've got the house collecting what it needs to operate the structure rob it appears to have an impact and i guess i'm searching for why should it have an impact if if the service proceeds to mayo and recognizes that some of those things can be treated as expenses could the same scenario be applied in the trac well in the simple reason is we are applying the term losses from wagering transactions all right so here we have one transaction eight that is it a wagering transaction yes it's a where he has to pay to get into the casino it depends on whether he comes into that the number of people coming to the casino i guess not the amount of money it's wagered so well yeah if there's an entry fee to get into the racetrack he would be paying that whether or not he made a wager but now that he's already paid if there's a fee up front to pay before you wager it's not part of the wager right and you would treat for example the cost of getting to the racetrack like an airplane ticket or cab fare or whatever if it's a professional gambler under mayo that's to dr bill because it's nothing to do with the wager right under under we had notice of the argument that the it when they passed that they passed and i can get you the specific language but it's something to the effect that if actively may when it says that the term losses from wagering transactions include all the expenses incurred is part of that gambling activity congress passed that in in the conference report explaining that it was intended to clarify the law so congress understood that that was the law and mayo was perhaps wrongly decided it has been mail hasn't been adopted by a court of appeals either so i think that's why i'm being a little bit careful i'm not too keen on mayo especially in light of that legislative history but as it stands now the service is not change position but so far as this case is concerned me nao really high as far as this case is concerned if mr le conny could identify an expense of the type identified in mayo we would not be arguing that it was limited to buy one sixty five and your position is that this is a wagering this his his bet is a loss from a wagering transaction i think that maybe to the extent that the amendment is relevant it's you know what he's asking for is an expansion of mayo now to include some part of a wager that could might be attributable to what the track later on takes out before it does its payout but that amount is not fixed that's it the amount is not paid by mr lakhani it's not fixed at the time he places the wager it  it is based on the outcome of the case of an overwhelming favorite wins in the race the take out is going to be or less effectively the reality is since only mistral economies winnings are affected by the take out and since the amount of the winnings is reduced by the ticket hasn't he in effect already received the benefit of what he's talking about because he doesn't if it's a weave the when he doesn't have to take that into income then he wants the other side which is if you loses but if you consider only when you decide in effect it's already deducted because he doesn't get as much in women's right i think that's fair and it's also useful to point out that the way he reports  winnings is not necessarily consistent with his theory and other words so if you go in with if you make two bets to one hundred dollars bets one you double your money and the other you lose everybody would consider that wash but under missile mr connelly's theory the fifteen percent takeout if that's what it ends up being came out of at least the winning bad but by think his arguments came out of both bets so he has won something like one hundred fifteen last eighty five and then had and thirty dollars expense in the form of take you know it's not how it's not how gambling transactions are thought of by lay people i mean i sort of go with the approach of you know i need to be able to explain my case to the grocery checkout clerk or why one hundred dollars bet isn't really one hundred dollars bet it's really a fifty eighty five dollars bet and a fifteen dollars expense to go to that house you know in the to do that then also that adds needless complexity for the casual gambler who doesn't get the benefit of this professional deduction it you know it's preferential tax treatment to  the professional gambler which i'm not sure you know there's much policy reasons behind that you know sometimes the answer is just the simplest one and the the taxpayer got the right answer in this hundred dollars and the takeout is fixed at twenty percent because the takeout percentage is fixed by red brace type and type of and and location of the bet he knows the transaction he's entering to so when he enters one hundred dollars at a twenty percent takeout he's only losing eighty dollars if he were to lose and sure he may recover if i think it's missing the other twenty i knew that twenty twenty percent your honor is retained by the track that is already part of the track and it's not part of the wagering pool and it's no longer wagered and that's precisely what well you know it is part of the wagering pool because they take the money out from the pool made it could be structured in such a way is didn't wager in the first place he could go to the track and have dinner and watch the horses and do whatever else was going on business with people never do wish or he would never face this woody and that's correct but that's precisely what the what the poker player and bo faced he wouldn't of been subjected to that fee had he not sat at the table and it's injected to a seat feet take a percentage is precisely that a fee that's collected that never enters a wagering transaction and the question from my colleague thank you very much in and we also thank the government and hold the mail