And a CPA gambler at that! Horrors! In any case, here comes Shiraz N. Lakhani, et al v. Commissioner — a case which went all the way up to the Ninth Circus Court of Appeals, which concluded that old Shiraz was all wet in claiming some gambling losses arising from a bunch of bets he placed on the ponies.
For each of the years 2005, 2006, 2008 and 2009, his net wagering losses exceeded his accounting practice income. Further, in 2007, when he reported net wagering gains, he claimed loss carryover deductions from the prior loss years.
In court, Shiraz argued that professional gamblers should be allowed the same protection as any other profession when the activity is legal and conducted as a profession. In a lawful and democratic society, Congress enacted this law (Internal Revenue Code section 165(d) which limits the deductions of a gambler to the amount of his gains) many decades ago, only because at that time, “gambling was taboo.”
Now gambling is legal and this law is unjust, he opined. The intention of the law, per Shiraz was not to penalize any profession but to prevent abuse when it was conducted as a recreation, and therefore Section 165(d) should be considered unconstitutional and struck down.
Nice try, said the Court — but no dice — or no horses, or something like that. Quoting the House Committee Reports from all the way back to 1934, the Court concluded there always has been some justifiable logic for treating professional gambling losses differently from other business related losses. So, pay up, Shiraz!
And speaking of “paying up,” check out the recently published “General Explanations of the Administration’s Fiscal Year 2015 Revenue Proposals” for more of the latest and greatest from Obama, in the never-ending push to clip all of you “rich people” out there. F’rinstance:
• Modify the like-kind exchange rules for real property — Obama says, “There is little justification for allowing deferral of the capital gain on the exchange of real property….Further, the ability to exchange unimproved real estate for improved real estate encourages ‘permanent deferral’ by allowing taxpayers to continue the cycle of tax deferred exchanges.” The proposal? Limit the amount of capital gain deferred under IRC Section 1031 from the exchange of real property to $1 million.
• Implement the “Buffett Rule” by imposing a new “fair share tax” — Obama says, “Deductions can significantly reduce tax liability for high-income taxpayers. For example, under current law, over 10 percent of itemized deductions would accrue to the top 0.1 percent of families in 2014. Higher-income families also face lower payroll tax rates than do middle income families. The proposed cure? Impose a new minimum tax, called the Fair Share Tax (FST) on high-income taxpayers. The tentative FST equals 30 percent of AGI less a credit for charitable contributions. Nice.
• Restore the estate, gift and generation-skipping transfer tax parameters in effect in 2009 — Obama says, “We need an estate tax law that is fair and raises an appropriate amount of revenue.” Proposal — starting in 2018, tax all estates above $3.5 million (current floor is over $5 million) and tax gifts in excess of $1 million.
Read the rest of the “General Explanations…” for yourself and weep!
CONSULT YOUR TAX ADVISER — This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation. Jeff Quinn is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He welcomes comments at email@example.com.