TAX COURT OPINION

Case: Annie Johnson
Docket Number: 3068-10S
Judge: Colvin
Opinion Type: bench
Filed: 12/06/2010
Pages: 5

UNITED STATES TAX COURT WASHINGTON, DC 20217 ANNIE JOHNSON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) O R D E R: Docket |No. 3068 -10S. Pursuant to Rule 152 (b) , Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall ti-ansmit herewith to petitioner and to respondent a copy of the pagea of the transcript of the trial in,the above case before Judge Joseph Robert Goeke at Philadelphia, Pennsylvania, on November 15, 2010, containing his oral findingsrof fact and opinion rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, a decision will be entered under Rule 155. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. December 6, 2010 SERVED NC - 9 2010 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 Bench Opinion by Judge Joseph Robert Goeke Annie Johnson v. Commissioner Docket No. 3068-10S November 15, 2010 THE COURT:- The Court has decided to render oral findings of fact and opinïon in this case, and the following represents the Court's oral finding of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. This case was heard pursuant to the provisions of Section 7463 of the Internal Revenue Code in effect at the time the petition was filed. Pursuant to Section 7463(b), the decision to be entered is not reviewable by any other court and, as stated previously, this opinion shall not be treated as precedent for any other case. This opinion is rendered pursuant to Rule 152 of the Tax Court Rule of Practice and Procedure, and rule reference herein after in this bench opinion rule references will be to the Tax Court Rules of Practice and Procedure. Section refefences, unless otherwise stated, are to the Internal Revenue Code. This case is before the Coutt based upon Respondent's deficiency jurisdiction. Petitioner filed a timely petition seeking a re-determination of Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 her tax liability for the year 2007 after Respondent issued a notice of deficiency for 2007, asserting a deficiency in income tax of $2,080. At trial there were three issues for determination. All three-involved amounts of unreported income. Petitioner's "testimony at trial raised a fourth issue as we will explain. The third item of income Respondent asserted at trial was the receipt of $7,500 in state lottery winnings from the Pennsylvania State Lottery. Petitioner testified that in addition to those winnings she had significant gambling losses in 2007. This raises a fourth issue about whether Petitioner should be entitled to an itemized deduction computation, including these lottery losses in 2007 to determine if this would reduce# her tax liability. Petitioner was a resident of Pennsylvania when she filed her petition in this case. She does not dispute the fact that she received pension income in the amount of $15,124 in 2007, and income from social security in the amount of $20,262 in 2007, nor does she dispute the fact that she had Pennsylvania State Lottery winnings in the amount of $7,500 in 2007. She testified that at the time she received Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 the lottery winnings she was told that as a person over the age of 75 she would not have to pay income tax on the winnings. We believe this was a misunderstanding and the reference in question was to income tax from the State.of Pennsylvania, but in any event there is no exemption for ah individual citizen from federal income tax on state lottery winnings. However, under Section 1.165-10 of the Treasury Regulations losses associated with state lotteries and other gambling activities are allowable to the extent of gambling winnings, and so to the extent that Petitioner had gambling winnings in 2007 it is appropriate to consider whether she had any offsetting losses which might bè taken as -an itemized deduction. Petitioner would not be entitled to take deductions against the gross gambling income as an adjustment in determining adjusted gross income because she was not engaged in gambling as a trade or bus ine s s . She testified credibly that she had gambling losses of approximately $4,500 in 2007 associated with the state lottery, and an additional amount of gambling losses in the amount of.$500 associateÁwith a trip that she took to Las Vegas. We find thif'fact that Petitioner had gambling losses in 2007 in the Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 6 amount of $5, 000 which could be used as an itemized deduction to offset the income asserted by Respondent in the notice of deficiency. Such a determination will have to be made in a separate computation which would result in a Rule 155 computation. Petitioner does not disputeithe fact that the other amounts of income she -received in 2007, apart from the gambling income, should be included in her taxable income for 2007. Having determined that Petitioner did have gambling income which she has admitted to and that it is taxable for federal income tax purposes, we have resolved all the issues in the- case as explained previously, and as also stated previously, a Rule 155 computation will be necessary. This concludes the Court's oral findings of fact an opinion in this case. (Whereupon, at 1:51 p.m., the bench opinion in the above-entitled matter was concluded.) // // // / // Heritage Reporting Corporation (202) 628-4888