REVISE ACCOUNTING PAPER

RESEARCH PROBLEM

(from South-Western Federal Taxation)

Issue: Are complimentary items (cash, property) received by taxpayer client Compulsive Gambler from Silver Casino gambling income which may be offset by gambling losses under I.R.C. section 165(d)?

(A Tax Court memorandum case is likely the authority needed. Of course, a court case may be the most appropriate authority when it interprets, for example, an I.R.C. section and has similar facts to the facts of the taxpayer in this Tax Research Problem. Possibly other cases, referred to by the most appropriate authority or not, may be helpful to include in the memorandum.)

Facts: Taxpayer Compulsive Gambler has a prior year’s tax return under examination by the Internal Revenue Service. As issue, is whether or not complimentary items (“comps”) from Silver Casino are gambling gains under I.R.C. section 165(d) and, thus, can be offset against gambling losses. In the year at issue, Silver Casino transferred $400,000 (fair market value) of “comps” to Compulsive Gambler.