Question & Answer: J. C. has been a professional gambler for many years. He loves this line of work and believes…..

J. C. has been a professional gambler for many years. He loves this line of work and believes the income is tax-free.

(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

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

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