Court Opinion

ID: 9651306
Source: CourtListenerOpinion
Date Created: 2023-08-23 16:13:09.231434+00
Date Added: 2024-06-11T13:27:50.314883
License: Public Domain

HOLMES, Circuit Judge
(dissenting in part).
I think that Section 23(h) was not intended to liberalize the allowance of deductions on account of wagering losses as theretofore made under Section 23(e). On the contrary, it was intended to constitute an additional restriction upon their allowance under said subdivision (e) as that subdivision formerly had been construed, namely, as allowing deductions on account of such losses in full, but only if incurred in the taxpayer’s trade or business or in transactions entered into for profit.1
*856The taxpayer does not contend that he was engaged in gambling as a trade or business. In 1941, he engaged in only three wagering transactions. One involved a bet on a football game and another on a horse race; both of which he won, resulting in an aggregate gain of $2,140, which the Commissioner included in his gross income. The third resulted in a loss of $3,000, but the character of this transaction was not shown. As to whether it was entered into for profit, the Tax Court, in its opinion, stated that the record contained no evidence upon that point, and that it must accordingly be disposed of in conformity with the burden of proof, which in this.instance rested upon the taxpayer.2
Section 22(a) clearly requires that gains from gambling transactions be included in gross income, not that only'the excess of gains over losses be so included; and Section 23(e) and (h) permit their deduction only to the extent that the transactions in which they were sustained were entered into for profit. There is no warrant for the conclusion that only net gambling losses are envisaged thereby. Since it clearly appears that the taxpayer was not engaged in gambling as a business and that the transactions here involved were isolated ones, there is no basis for saying that these transactions were so closely related as to warrant the conclusion that they constituted a single transaction in which the net result might be said to represent the gain or loss. The Tax Court held otherwise; whether its ruling be regarded as a finding of fact, a conclusion of law, or a mixed finding of fact and law, its decision in disallowing the deduction for wagering losses, the character of which was not shown, should not be disturbed. I dissent from the reversal of the Tax Court’s decision as to wagering losses, but concur in the remainder of the majority opinion.

 “This view is further substantiated by the testimony of I>r. IVTagill given at hearings, originally confidential, held by the Finance Committee of the Senate on March 6, 1934, entitled, Hearings before the Committee on Finance, United States Senate, 73d Cong., 2d Sess., on II. It, 7835, An Act to Provide Revenue, -Equal*856ize Taxation, and for Other Purposes, Part 1, March 6, 1934 (Unrevised 1934), pp. 32-33, where Dr. Magill, so far as material here, testified as follows:
“Dr. Magill. The next paragraph (g), is a new provision, which is self-explanatory, that losses from wagering transactions are to be allowed only to the extent of gains from such transactions.
% # # # ¿¡t £ :**
“The Chairman. Explain that paragraph.
“Dr. Magill. * * * The line which the Treasury draws, is, I believe, whether or not the particular gambling transaction was legal in the State in which it occurred; and they have gone into a good deal of dissertation as to whether it is legal gambling.
* * * - * * . * *
“Senator Reed. Also, haven’t they discussed the question of whether that is the taxpayer’s regular business?
“Dr. Magill. You wouldn’t need to in this connection, because he could get the deduction as a loss, if the transaction was entered into for a profit, in the event that the transaction was legal. (Italics supplied.)” Note 5, p. 16 of respondent’s brief.

 Beaumont v. Helvering, Commissioner, 25 B.T.A. 474, affirmed 63 App.D.C. 387, 73 F.2d 110, certiorari denied, 294-U.S. 715, 55 S.Ct. 512, 79 L.Ed. 1248. This case was cited with approval in Helvering v. National Grocery Co., 304 U.S. 282, 289, note 5, 58 S.Ct. 932, 82 L.Ed. 1346, upon the deductibility of losses under 23(e) being made to depend upon whether the taxpayer’s motive was. primarily for profit.