(1) Is J. C.’s thinking correct? Is the answer to this question found in the Internal Revenue Code? If not, what type of authority answers this question?
2) What is the general issue to be addressed?
(3) What key words would you use to research this question?
(4) what online tax research tools would you use to answer the question?
(5) What important information would you include in a memo/letter to the “client” to communicate the results of your research?
Expert Answer
J.C. Is not correct with his stand that income earned from gambling is tax free. In fact, it is the other way around. The income earned from gambling will be taxable as gross income.
There is no specific code where such kind of case is being mentioned or discussed. In fact the following court case can be used as a guideline:
Salvin ,Arthur(1941) 43 BTA 1100
McKenna, James (1925) 1 BTA 326
Ellery E. (1944) 4TC 407
The key words to use for researching this question:- Gambling income tax, tax liability on ganbling, income tax exemption on gambling