TJLR Online

by Christina Hebert

Federal and state legislation and court decisions, perhaps understandably, until recently have not been noticeably favorable to gambling endeavors and even have been reluctant to treat gambling on a parity with more “legitimate” means of making a living.[1]




Sweat slowly drips down the side of the man’s face.  The air is uncomfortably stale with the smell of cigars and sweat.  As he looks down at his cards he swallows.  He is in over his head; taking on one of the mob’s men in this floating game of poker might not have been one of his best decisions.  Fast forward fifty years to the sight of sweat slowly trickling down the face of a man sitting calmly with his eyes concealed by sunglasses.  He glances at the other players around the table, while the bright glare from television lights causes everyone at the table to sweat.  But now, the hands of the players are broadcast on live TV as the flop is revealed.[2]


Professional gamblers are no longer viewed in a negative light by society.  What was once relegated to back alleys in unseemly locations and associated with organized crime is now enjoyed by millions of Americans on television.  Today, professional gamblers are admired by a large segment of the public for their skill in games of chance.  In light of this shift towards accepting professional gambling, the legislative treatment of professional gamblers must be reviewed.  Such review is called for because conditions providing a rational basis for unequal legislative treatment of professional gamblers have changed.


A remnant from the days of mobsters and back alleys has remained within the Internal Revenue Code (IRC).  Title 26 U.S.C. § 165(d) limits the reporting of gambling losses to gambling winnings for that year.[3]  In all other professional ventures beyond the gambling profession, businesses are allowed to fully report their business losses and apply excess losses from one year to the next, which can reduce the amount of reported income in subsequent years thereby benefitting the business financially.[4]


In modern society, professional gamblers should receive the same tax treatment as other professional businesses.  With current technology, it is possible to gather information that can be used to ensure compliance with tax reporting requirements.  By repealing § 165(d) and replacing it with an information process, Congress can effectively address other concerns that surround gambling, such as tax evasion through unreported winnings.  Additionally, tracking information may be a viable remedy for this concern.  This Note proposes that societal conditions pertaining to professional gamblers in the past are outdated and result in inequitable tax treatment for these professional businesses.


This Note introduces the concept of a Professional Gaming Information Form (PGIF) as a solution to resolve the dated concerns raised by Congress and the courts regarding tax treatment of professional gambling.  A PGIF is a modern solution to address unreported winnings and other potential abuses associated with professional gambling.[5]  Part I of this Note presents the history of gaming in the United States, the statutory scheme that has developed to address wagering,[6] and court decisions that have applied the relevant law.  Part II states the need for Congressional action and presents using a PGIF as a viable solution.  This Note concludes that Congressional action is necessary and the implementation of a PGIF will further Congressional and societal goals.




The perception of gambling in the United States has transformed in the past century.[7]  Tracing the history, composition, and societal perception is helpful to understanding the role that § 165(d) plays.  For instance, gambling has been a part of American society since the first pilgrim stepped off the Mayflower and began playing cards.[8]  The games played, both then and now, fall along a spectrum ranging from pure chance to pure skill.[9]  The connection gambling once had with organized crime is also pertinent to the role of § 165(d).  As the criminal element was driven from the forefront of gambling activities, the American public’s perception of gambling has largely changed.[10]  Without the criminal element as a deterrent, public attention has shifted towards revering individuals who gamble as gaming stars and, in turn, raising revenue.


A.  The Perception of Gambling in the U.S. Has Evolved in the Past Century


The story of gambling in America is colorful.  Gambling came to America with the first settlers.[11]  Beginning as early as the 1600s, society held an ambivalent view of gambling.[12]  During that time, states would enact laws prohibiting gambling or gambling equipment, while law enforcement and the public would look the other way.[13]  Further, the federal government was unclear in its definition of gambling, as some forms were prohibited and not others.[14]  This continued until the 18th Amendment, otherwise known as Prohibition, came and went, thereby setting the stage for mobsters to take control of the industry.[15]  Over time, corporatization and regulations have caused oversight of the gambling industry to change hands again by becoming a source of revenue for the states and federal government.[16]  Today, gambling is largely accepted by the American public.[17]


1.  The History and Definition of Gambling


Gambling permeates the history of the United States.[18]  Card playing was a favorite pastime of the Puritan settlers of Massachusetts Bay.[19]  Shortly thereafter, horse racing became a popular activity.[20]  By 1700, there were at least twelve well-known race tracks in northern Virginia.[21]  At that time, the judicial system was frequently used by winners when losers refused to pay; the courts would investigate and the juries would decide the winnings.[22]  By the mid-nineteenth century, the culture of Washington, D.C. was dominated by gambling.[23]  Lobbyists frequented gambling establishments, not to play, but to provide loans to congressmen when they needed to continue a game.[24]  Debts would later be forgiven in exchange for favorable votes.[25]  However, this pro-gambling spirit did not last.  By the end of the nineteenth century, most states criminalized gambling.[26]  Even though states outlawed gambling and gambling supplies, players and proprietors openly continued their craft into the 1920s.[27]


One issue continues to play a role in gambling legislation: whether the game is one of chance or skill.[28]  State opinions vary on determining the correct answer as it relates to the definition of gambling.[29]  And to make matters worse, neither Congress, nor the Supreme Court have provided a definition and instead rely on the states’ definitions.[30]  At the state level, court decisions have classified gaming into three categories: lotteries, bookmaking, and predominantly skill-based “contests.”[31]  Federal laws depend on state laws to determine the legality of the activity.[32]  However, definitions vary between states, which in turn creates unequal treatment of games within each category.[33]  Likewise, the term “wagering,” for purposes of federal taxation, is also not defined in § 165(d).[34]  But, 26 U.S.C. § 4421 defines the word “wager” by using the word itself.[35]


Generally, successfully earning a profit from engaging in professional gambling, especially poker, requires skill.[36]  Skill components of poker involve estimating the odds of winning with the cards dealt to each player and the ability to bluff.[37]  Contestants bet against each other based on the composition of the cards in a player’s hand and that player’s determination of what other players are holding.[38]  The most improbable combination of cards has the highest value and the most frequent combination has the lowest value.[39]  Bluffing occurs when a player pretends to hold a set of cards with a higher value than its true value.[40]  Skill is involved in analyzing bits of information and not giving away any information through mannerisms or behavior.[41]  In this way, poker has been described as “a miniature expression of basic competitive values of the wider culture.”[42]


At the time Congress enacted § 165(d)’s predecessor, 26 U.S.C. § 23(g), the repeal of Prohibition created incentives for organized crime to turn to gambling.[43]  During the 1930s, organized crime syndicates consolidated largely under control of the Italian mafia.[44]  In response, Congress formed the Senate Special Committee to Investigate Organized Crime in Interstate Commerce – the “Kefauver Committee” – by 1950.[45]  The Kefauver Committee was charged with obtaining information regarding the ties between organized crime, gambling, and corruption of politicians and law enforcement and bringing that information to national attention.[46]  Coincidentally, the Kefauver hearings were televised when many Americans were purchasing their first television sets.[47]  The Kefauver Committee hearings became a TV “spectacular,” thus shaping the American public’s perception of organized crime and its ties to gambling.[48]


In addition to televised hearings involving mobsters, Las Vegas was making a name for itself in attracting well-known gangsters.[49]  In 1946, Benjamin “Bugsy” Siegel opened the Flamingo in Las Vegas.[50]  Over the next ten years, famous Las Vegas strip hotels opened with backing from the mafia.[51]  Despite the mafia’s initial control of Las Vegas and gambling, it was not permanent.[52]


2.  A Shift in American Perception and Proliferation of Gambling in the Twenty-First Century


The American public’s perception of gambling began to shift near the turn of the twenty-first century.[53]  “[In 1996] over 60% of American adults gambled . . . on some activity.” [54]  In contrast, in 1974, while 61% of American adults participated in some form of gambling, only 7% gambled exclusively at legal establishments.[55]  Additionally, in 1974, polls showed a majority of American adults did not welcome the spread of legalized casino gambling.[56]  Just over two decades later, perception has flipped and today more than “80% [of American adults] say that gambling is legitimate and casinos are okay.”[57]  Not only did public perception of gambling change, but the proliferation of gambling dramatically increased as well.[58]  “From 1974 to 1994 . . . the amount of money Americans legally wagered [rose] 2,800 percent, from $17 million to $482 billion.”[59]  As of September 2013, the U.S. gambling industry consisted of “about 500 casinos, about 450 Indian casinos and lotteries in about 40 states with combined annual revenue of $85 billion.”[60]


Las Vegas provides an illustrative example of the shift in public perception and the proliferation of gambling.  As previously mentioned, resort casinos in Las Vegas originally opened with the backing of organized crime.[61]  Organized crime figures continued to build on the Las Vegas strip throughout the 1950s and into the 1960s.[62]  However, in 1966, the business magnate, Howard Hughes, entered the picture.[63]  With a goal of glamorizing the city, Hughes purchased six Las Vegas casinos, which represented one quarter of the city’s gambling business.[64]  In the following decade, corporations purchased and developed casino resorts, which drove out the organized crime element.[65]  Additionally, through regulation, Nevada’s Gaming Control Board contributed to the eradication of organized crime in Las Vegas.[66]  By the 1990s, family fun was the theme of Las Vegas when Excalibur, the world’s largest resort, opened.[67]  After the turn of the twenty-first century, Las Vegas shifted its theme to “luxury.”[68]  In 2012, more than thirty-nine million people visited Las Vegas producing over six billion dollars in gambling revenue.[69]


Beyond Las Vegas, gambling enthusiasts have other outlets for expressing their interest.  High earning poker players can now be tracked online.[70]  Fans can follow their favorite poker players on television shows, such as the World Series of Poker.[71]  Professional poker players can also get sponsorships.[72]  Even more accessible than television shows are online gambling web series that follow professional poker teams.[73]  From online gambling series to popular television shows, professional gamblers have opportunities to demonstrate their skill for their own benefit and for the entertainment of the American public.


In addition to providing entertainment, gambling raises revenue for the states.[74]  According to the American Gaming Association, states made more than $8.6 billion from commercial casinos in 2012.[75]  In that same year, lottery sales across all states totaled $69 billion with profits of $19 billion.[76]  Moreover, the gambling industry has been credited with increasing jobs and wages, [77] which in turn bolsters state economies.


B.  A Specific Statutory Scheme for the Treatment of Gambling Profit and Loss Has Developed


Article I, Section 8, Clause 1, of the Constitution states, “[t]he Congress shall have power to lay and collect Taxes . . . to pay the debts and provide for the common defence [sic] and general welfare of the United States.”[78]  The essential feature of Congress’ power to tax is raising revenue.[79]  The words “general welfare,” included in the clause, limit the taxing power: imposition of taxes must be for the general welfare.[80]  With its goal aimed at raising revenue, Congress is given vast discretion to determine what constitutes general welfare.[81]


Further deference was given to Congress in 1913 with the adoption of the 16th Amendment.[82]  The 16th Amendment exempted Congress’ tax on income from the regulation of apportionment.[83]  Without the restriction of apportionment, Congress is free to “levy and collect taxes on income from whatever source derived.”[84]


1.  General Statutory Provisions


The federal statutory scheme for income taxes is found in Title 26 of the United States Code (USC), otherwise known as the Internal Revenue Code (IRC).[85]  While the IRC does not provide a definition of tax, Black’s Law Dictionary defines tax as, “[a] charge, usu[ually] monetary, imposed by the government on persons, entities, transactions, or property to yield public revenue.”[86]  Income taxes are imposed on taxable income.[87]  Section 63 of the IRC defines taxable income as gross income offset by deductions.[88]  Income derived from gambling is taxable income.[89]  Deductions are expenses and other items that are allowed to offset gross income under the IRC.[90]  Allowable deductions are “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.”[91]  For the professional gambler, this would include lodging, meals, and travel expenses.


Individuals not engaged in a trade or business are “allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year for the production or collection of income.”[92]  One of the differences, however, between § 212 and § 162 is the treatment of losses in excess of profits.  Losses reported under § 212 are “allowed only to the extent that the aggregate of such deductions exceeds [two] percent of adjusted gross income.”[93]  Whereas losses reported as a trade or business loss are not capped, except for professional gamblers.[94]  An exception is inserted for the professional gambler, limiting gambling losses to the amount of any gambling winnings.[95]


The law recognizes a recreational gambler and a professional gambler for tax purposes.  A recreational gambler can be engaging in the activity for entertainment or for profit.  In contrast, a professional gambler is always seeking a profit because gambling is their business. The importance of professional recognition is in the treatment of expenses.  Expenses incurred in a business are generally allowed to be fully reported.[96]  Recreational gamblers may not report incurred expenses.[97]  For example, a recreational gambler cannot deduct meals or lodging. Gamblers not meeting the definition of professional, but participate in the activity for the production of income, are limited to reporting their expenses as itemized deduction.[98]


The recognition of gambling as a profession is a recent phenomenon.[99]  Prior to the Supreme Court’s recognition of the profession, there was divergent treatment of professional gamblers.[100]  Some courts would recognize the professional as being in a business, yet others would not.[101]  Historically, it was hit or miss whether the courts would recognize gambling as a profession.  The Supreme Court, in Commissioner v. Groetzinger, accomplished two things for professional gamblers.  First, the Supreme Court recognized gambling as a professional.  Second, Groetzinger also established the criteria for recognizing whether a gambler was engaged in wagering recreationally or professionally.[102]


In 1978, Groetzinger engaged in pari-mutuel wagering for 60 to 80 hours a week.[103]  He spent $72,032 in bets and won $70,000, resulting in a $2,032 loss for the year.[104]  The IRS assessed him a deficiency for failing to report this gambling activity.[105]  In assessing the amount owed, the IRS determined the bets paid were not attributable to a trade or business.[106]  The Supreme Court held that the IRS erred and that Groetzinger was in the business of gambling.[107]  Precedent provided little guidance for the Court in defining what it means to wager as a trade or business.  The Court held that a venture in which a taxpayer is engaged in a full time activity for their livelihood is regarded as a business.[108]  The Court ruled that because Groetzinger devoted his full time to gambling, and intended it to be his livelihood, gambling was his business.[109]  The Court further held that the professional status of a gambler is to be decided on a case-by-case basis.[110] While the recognition of gambling as a profession was important, there still remains historical bias against the professional gambler.  The evolution of § 165(d) provides insight into this bias.


Section 214 of the 1918 IRC originally recognized the deduction of all losses associated with wagering.[111]  By allowing the full extent of losses beyond winnings, whether derived from legal or illegal wagering, a taxpayer could show a considerable loss for wagering activities.[112]  In 1919, a tax court case interpreted § 214 to apply to losses incurred in legal transactions only.[113] Only losses incurred in legal transactions could be reported.[114]  As a result, taxpayers that engaged in wagering determined to be illegal could not use their excess losses in future years, but were still required to report their winnings as income.


However, the 1934 Tax Act replaced § 214 with § 23(e).[115]  Section 23(e) limited losses from individuals to losses incurred in a trade, business, or transactions entered into for profit.[116]  A further limitation was also introduced.  Section 23(g), predecessor for § 165(d), limited wagering losses to the extent of gains from such transactions.[117]  The House of Representatives explained the rationale behind the statute as follows:


Existing law does not limit the deduction of losses from gambling transactions where such transactions are legal. Under the interpretation of the courts, illegal gambling losses can only be taken to the extent of the gains on such transactions. A similar limitation on losses from legalized gambling is provided for in the bill. Under the present law many taxpayers take deductions for gambling losses but fail to report gambling gains. This limitation will force taxpayers to report their gambling gains if they desire to deduct their gambling losses.[118]


The purported purpose behind the IRC of 1934 was to “increase revenue by preventing tax avoidance.”[119]  Prior to the IRC, if wagering was legal, then losses could be reported in excess of gains, just as for any other business.  However, with this regulation, Congress acted to stop legal losses in an effort to prevent taxpayers from improperly reporting gains.  Congress’ rationale behind this action was that if a taxpayer was limited to taking their losses to the extent of their gains, it would encourage taxpayers to properly report their gains to take their losses.[120]  From this regulation emerged the disparate treatment for professional gamblers from all other professionals.[121]


The United States Tax Court, in Mayo v. Commissioner, distinguished deductions that fall under § 165 by stating that expenses are not losses and may be deducted from income regardless of wagering gains.[122]  In Mayo, the petitioner, a professional gambler, reported a net loss from his business on his tax return.[123]  Mayo claimed both wagering expenses and other expenses incurred through the course of his business.[124]  The IRS issued a notice of deficiency and disallowed total expenses in excess of gross receipts from gambling.[125]  The court reversed in part, allowing Mayo to fully deduct the costs of conducting his gambling business (other than the costs of wagers).[126]  The court interpreted § 165(d) narrowly by confining the gains and losses from wagers to the direct product of the wager.[127]  The court further held that the ordinary meaning of the language limits the statute to the direct placement of the wager and the resulting gain.[128]  All other expenses, including travel expenses and room and board, are outside the scope of the statute.[129]


The practical effect of Mayo is that the professional gambler may report all expenses incurred in the operation of his gambling occupation.[130]  For example, suppose a professional gambler spends $2,000 on lodging and $620 on travel expenses, but loses $15,000 in wagers.  This taxpayer may record the amount of $2,620, for lodging and travel expenses, as business expenses.[131]  That amount is then subtracted from gross income to arrive at taxable income for the year.[132]  The $15,000 lost on wagers, however,  is limited to the amount of winnings the taxpayer had for the year.[133]  If the taxpayer was not a professional gambler, but a casual gambler, the tax treatment is different.  All the expenses incurred in gambling are limited to total gambling winnings for the year to be reported as an itemized deduction.[134]


2.  Reporting Requirements of Legal Gambling


The Internal Revenue Service (IRS) uses various reporting forms to assist in its collections process.[135]  Gambling establishments are required to file form W2-G if winnings meet specified thresholds.[136]  One copy is sent to the IRS and another copy to the taxpayer.[137]  Non-cash payments are also reported on this form if subject to tax withholding.[138]  Prizes won not involving a “wager” are reported on form 1099-MISC.[139]  Because not all gambling sessions result in an issuance of a W2-G, the IRS requires professional gamblers to maintain a log of all gambling activity under Revenue Procedure 77-29.[140]


In addition to taxpayers’ responsibility for payment of taxes, gambling establishments and individual gamblers are subject to the IRC’s reporting obligations.[141]  Gambling establishments are subject to withholding requirements, third-party information reporting, excise tax registration, and monitoring.[142]  Generally, withholding requirements are triggered if proceeds exceed $5,000 and are at least 300 times the amount wagered.[143]  The Secretary of the Treasury is authorized to require supplemental information on excise tax registration to enforce wagering provisions.[144] I feel like there should be a conclusion and transition here. It just ends on this fact.


C  Case Law Illustrates Historical Bias and Slow Changes


Taxpayers have challenged the statute limiting reporting of professional gambling losses since its enactment.  Although some taxpayers are simply attempting to avoid taxes, there have been legitimate, yet unsuccessful constitutional challenges to § 165(d).[145]  Petitioners charge that § 165(d) violates equal protection and relies on historical bias.[146]  However, tax classifications are only required to pass rational basis review to be constitutional.[147]  To pass rational basis scrutiny, “[a] classification which does not involve . . .  fundamental rights . . . requires only that the classification reasonably further a legitimate governmental purpose, objective, or interest.”[148] The interest, as stated by the 73rd Congress, is raising revenue by preventing tax avoidance.[149]


In 1951, the United States Court of Claims decided Skeeles v. United States, which remains important for tax courts today.[150]  Anne C. Skeeles brought two cases before the court, seeking a refund for a claimed overpayment of income taxes.[151]  One case was brought on behalf of her dead husband and the other case was brought on behalf of herself.[152]  Skeeles argued that because her husband was gambling for profit, the deduction for business losses should be applied and not limited to gambling winnings.[153]  The profit motive was evidenced by the fact that gambling was their only income between 1940 and 1942.[154]  The court disagreed and ruled that the specificity of IRC 23(g) limited the general provision.[155]  The court reasoned that more specific language limits general language and Skeeles’ two cases were dismissed.[156]  Although Groetzinger recognized the profession of gambling decades later, it did not overturn Skeeles, which upheld the limitation of reporting gambling losses to gambling winnings.[157]


Skeeles is also notable for its exposition on society’s view of gambling at that time.  The court’s disdain for the professional gambler was exemplified in the statement that disregarded the taxpayer’s argument for the distinction between the professional and non-professional by stating, “the professional who undertakes, without work, to wring a living from the wages of others.”[158]  In addition, the court also emphasized its distain by expounding on the relationship between professional gambling and organized crime.[159]  “The profits of big-time, highly organized gambling are so great that sometimes public officials are bribed, and the element of chance taking deteriorates into weapon-controlled racketeering. . . .”[160]  The court’s exposition on the relationship between crime and gambling is still referred to today as an explanation for § 165(d)’s gambling loss limitation.[161]


Decades later, the plaintiffs in Orr v. Commissioner argued there was a violation of equal protection by distinguishing professional gambling from other types of businesses.[162]  In Orr, a married couple petitioned for redetermination because the IRS assessed deficiencies resulting from the Orrs’ reporting of gambling losses.[163]  The Orrs questioned the justification for the disparate treatment of professional gambling by the IRS.[164]  The court responded that § 165(d) is “supported by its history, the plain language of the Code, and . . . judicial precedent.”[165]   The tax court relied on the holding of Skeeles v. United States by concluding that as long as there was a rational basis, disparate treatment is allowed.[166]  The court did not clarify what the rational basis was, instead the court cited to the exposition of gambling’s history in Skeeles v. United States.[167]


Although the court in Orr recognized the traditional justification for disparate treatment of professional gambling, another recent decision reflects the growing recognition that the protection of morals and the risk of unreported income may not provide a rational basis for such treatment.  In Tschetschot v. Commissioner, the Tschetshots brought a petition before the United States Tax Court after being assessed deficiencies by the IRS for reporting gambling losses in excess of gambling winnings.[168]   The Tschetshots argued that it was a violation of equal protection to treat professional gambling, specifically tournament poker, differently from other tournament sports.[169]   The court responded, “Congress made a policy decision to treat businesses based on wagering activities differently.  In the absence of Congressional action, we are not free to correct any perceived unfairness stemming from a rationally based policy choice.”[170]   The court noted that although the moral climate and substantiation concerns have changed, the tax courts are powerless to change the law.[171]




There is a need for Congressional action and this note proposes a solution for meeting Congressional concerns.  Under rational basis review, courts will not overturn § 165(d) leaving little recourse for the taxpayer seeking equal treatment.  Therefore, it is left to Congress to address ways to meet societal concerns for tax revenue while staying consistent with modern social mores.


A.  Congress Must Repeal § 165(d)


Congress must repeal § 165(d) because the social mores that were present when § 165(d) was established are no longer applicable.  Gambling is no longer controlled by organized crime.[172]  Congress’ use of the statute to control illegal activity is no longer based on current conditions.[173]  Conditions have changed; illegal gambling establishments and mob-run casinos that once dominated the gambling industry are no longer present today.[174] Las Vegas has transformed into a place for entertainment and family vacations.[175]   Some bus tours now even encompass trips from Disneyland to Las Vegas.[176]  States and corporations now dominate the gambling industry.[177]  The replacement of mobsters with Fortune 500 companies signals that the time has come for Congress to recognize times have changed.[178]  The conditions upon which § 165(d) was enacted no longer exist.


That is not to say that organized crime has been completely eradicated from gambling activity.  Organized crime still has ties to gambling activities, including sports betting.[179]  However, other methods for regulating industries do not treat legitimate professionals disparately.  An example of an industry riddled with crime, but regulated without discriminatory tax treatment, is the automobile repair industry.[180]  An auto repair shop can be a front for a chop shop.[181]  Chop shops are comprised of a network of car thieves and automobile mechanics that use auto repair shop facilities to transform and transport stolen cars for customers.[182] However, not all auto repair shops are used for illicit purposes.  Similarly, there may be some gamblers who participate in illegal gambling activity, but there are others who participate solely in legal gambling.  Auto repair shops and mechanics are not subject to discriminatory tax treatment that limit their ability to report losses.[183]  Professional gamblers even more so than automobile repair shops, deserve equal treatment under the law.


A transformation has occurred, both in the shift away from predominantly illegal gambling activity and the public’s perception, which Congress should recognize.[184]  For a majority of Americans, gambling is a legitimate activity.[185]  Many consider professional gambling, especially poker, a legitimate sport.[186]  People watch poker games on television and the internet, and are captivated by the skill with which the players calculate their odds and outsmart their opponents.  Congress should recognize this shift and align tax treatment of professional gamblers with the public’s perception.

The treatment of professional gamblers is not well-aligned with societal goals, such as public revenue and the freedom to choose one’s profession.[187]  Public revenue is an important goal, especially in light of the current economic downturn.[188]  Gambling produces public revenue without increasing taxation.[189]  Lotteries and casinos bring in millions of dollars in tax revenue.[190]  Though some of the tax revenue is derived from those who participate in gambling as entertainment, there are others who actively pursue the activity for income.


As for freedom of choice in profession, Markus Rüssli, an attorney specializing in Constitutional law, argues that the opportunity to choose one’s profession is one of the most important liberties a society can provide its citizens.[191]  Allowing an individual to choose professional gambler as an occupation without penalizing this choice should be protected in a free society.  Professional gambling is legitimate in the eyes of the public, and should be in Congress’ eyes as well.


Congressional action is needed because taxpayers have little recourse in the courts.  Taxpayers continue to implore the courts to remedy the unequal tax treatment forced on professional gamblers.  But under rational basis, the courts will not eliminate § 165(d).  Rational basis requires the courts to uphold a statute as long as any conceivable set of facts exists to support the statute.[192]  An indirect purpose of § 165(d), by its placement in the IRC, is raising revenue.  The courts give Congress great deference on statutes that fall under the Taxing Clause.[193]  As long as the statute does not explicitly state a purpose discriminating against a protected class, the courts will not rule a statute unconstitutional.[194]


The classification of gambler, or professional gambler, as stated in the statute, is not protected.  The lack of protection means that courts will review statutes affecting these classifications, including § 165(d), under rational basis.  Even though the Congressional record states the purpose of the statute was to end tax reporting abuses, this is not enough for the courts to act.  Even though inherently unfair, tax courts continue to rely on precedent based on outdated social perception and ties to organized crime, and the Supreme Court will not overturn the law.


The Supreme Court has reinforced its deferential treatment of Congressional taxing authority.[195]   The Supreme Court gives great deference to the acts of Congress.[196]  The Court has stated it will not make policy judgments, instead leaving policy decisions to Congress.[197]  Determining whether a statute is based on a dated premise that is economically unfair is policy driven.  Therefore, Congressional action is needed to rectify the situation for legitimate professionals seeking to profit in the business of gambling.


B.  Advancements in Technology Pave the Road for Congressional Action


Congress has an opportunity to use advances in technology to effectuate equal treatment for professional gamblers.  Casinos use tracking systems to determine the patterns of a gambler’s activity.[198]  RFID chips embedded in casino chips track how much a person spends and how it is spent.[199]   Casinos have used player cards for more than a decade to track individual gambling habits.[200]   As such, casinos have led the way in tracking technology innovation.[201]  Casinos and gamblers also benefit from this tracking technology.  Other gambling establishments can benefit from this technology as well by increasing revenue through strategically promoting games and providing security benefits.[202]  Gamblers benefit by earning comps based on their betting habits.  Congress now has the ability to utilize technology to further societal goals.


C.  Introduction of the Professional Gambler Information Form


 Congress must repeal § 165(d) and replace it with the Professional Gambler Information Form (PGIF).  The proposed PGIF will operate much like the current W2-G.  If gamblers want to qualify for professional status, they will sign up for a PGIF with the gambling establishment because most gambling establishments, especially casinos, have the technology to track the required information.  The same information that is provided to get a W2-G will be required with the PGIF: name, address, and social security number.[203]  In addition to identification information, the accumulation of total wins and losses will also be provided.  At the end of the year the gambling establishment will send a copy of the PGIF to the IRS and to the professional gambler.[204]  The PGIF will then send tax information to the IRS without treating the professional gambler any differently than other professionals.[205]


Requiring additional information from gambling establishments may cause some concern about a casino becoming a government actor.  However, as much as casinos are currently required to report gambling winnings, requiring losses to be reported as well is not a significant extension beyond the current practice.[206]  Additionally, regulations over other industries, such as auto body shops, require tracking of individual transactions.[207]  Though the gambling establishment may be collecting information that benefits the government, there is ample precedent for this type of regulation.


The PGIF will implement additional reporting burdens on some gambling establishments.  Although currently winnings must be reported to the IRS, losses are not.[208]  There are incentives, however, for gambling establishments to track losses.  Professional gamblers will be more likely to frequent gambling establishments that offer tracking services, as the gambler can rely on this information at tax time.[209]  Although this incentive is not without burden, the benefit to the professional gambler and the gambling establishment outweighs the burden.


The PGIF will be useful to the IRS and the professional gambler in other ways.  PGIF can eliminate the subjective standard for determining professional status by replacing it with an objective measurement.[210]  Tax courts are currently tasked with determining the professional status of a gambler.[211]  By having an objective baseline to determine whether the activity is income-producing, less litigation need occur to determine professional status.  As with other businesses that fail to show income, the IRS can categorize non-income producing activity as a hobby.[212]  Delineating a clear line to determine professional status may cause some concern of unfairness.  However, subjecting professional gamblers to the same concerns of other professions creates a level playing field.


Also, many gambling professionals are burdened with reporting requirements by having to track each individual bet on self-created spreadsheets.[213]  The PGIF will provide a more accurate reporting mechanism for the taxpayer and the IRS.  Through technology used by gambling establishments for accounting and other regulation compliance, losses will be tracked more accurately.  By implementing this proposal, the gambler benefits from a reduction in tedious record-keeping and the IRS benefits from more accurate records.




Gambling has undergone a transformation in both social and legal acceptance.  Society views gambling as a legitimate past time, celebrates the professional gambler, and frequents casinos more than ever before.  The Supreme Court has given legitimate professional recognition to the gambler who pursues it as a business,[214] yet Congress has failed to keep up with these changes.  Advancements in technology, much through casino innovations, can be harnessed to benefit both the IRS and the professional gambler.


The tax avoidance concern that led Congress to enact § 165(d) can now easily be satisfied with the PGIF.  By focusing on accuracy in reporting winnings and losses, the PGIF will give the IRS the tool it needs to ensure tax compliance.  The PGIF will also alleviate the substantiation burden from the gambler, freeing the professional to focus on the primary goal of producing income.  Congress has the power to provide for a more efficient, just, and fair treatment of the professional gambler. It is now up to us, as Congress’s constituents to call for that action.

[1] Comm’r v. Groetzinger, 480 U.S. 23, 32 (1987).

[2] A flop is three cards dealt by the dealer face-up in a poker game.  These cards are available to the players still in the game.  During televised games, the screen shows each player’s hand and how the face-up cards make up a better hand.  See generally Texas Hold’em Poker,, (last visited Oct. 3, 2013).

[3] 26 U.S.C. § 165(d) (2012).

[4] See generally id. § 165(a) (providing the general framework for deductible business losses).

[5] It should be noted that all areas of tax are subject to abuses such as fraudulent reporting. See e.g., Mayo v. Comm’r, 136 T.C. 81, 87 (2011) (“[T]he confinement of gambling-loss deductions to the amount of gambling gains . . . closed the door on suspected abuses.” (quoting Comm’r v. Groetzinger, 480 U.S. 23, 32 (1987))).

[6] Wagering is the language used in § 165(d).

[7] See generally Stephen A. Zorn, The Federal Income Tax Treatment of Gambling: Fairness or Obsolete Moralism?, 49 Tax Law. 1, 1 (1995) (tracing the history of gambling from a barely tolerated vice to a major source of financial support for states).

[8] David G. Schwartz, Roll the Bones: The History of Gambling 140 (Gotham Books hardcover ed., 2006).

[9] See generally Steven D. Levitt et al., Article, Is Texas Hold’Em a Game of Chance? A Legal and Economic Analysis, 101 Geo. L.J. 581, 589 (2013) (describing the spectrum that games follow from lotteries that are pure chance to games of pure skill).

[10] A survey conducted by the American Gaming Association in 2013 found 76.1 million Americans visited casinos in 2012, 34% of the total American population of 223.7 million (based on 2011 census).  See generally Andrew L. Smith, AGA State of the States Survey 2013, Nat’l Council of Legislators from Gaming States (June 7, 2013), available at  From a national poll of 800 calls, 47% voiced agreement to the question, “perfectly acceptable for anyone.”  Id.

[11] Schwartz, supra note 8, at 138.

[12] Rufus King, Gambling and Organized Crime 71 (1969).

[13] Id. at 29.

[14] See Paul S. Deland, The Facilitation of Gambling, 269 Annals Am. Acad. Pol. & Soc. Sci. 21, 21 (1950).

[15] King, supra note 12, at 25.

[16] See David G. Schwartz, Suburban Xanadu: The Casino Resort on the Las Vegas Strip, 1945-1978, 10 (2000) (unpublished Ph.D. dissertation, UCLA) microformed on UMI No. 9957836 (Bell & Howell Info. & Learning Co.); see also Brian Lehman, Study Reveals Positive Economic and Societal Benefits of Casino Gambling in New Jurisdictions, Am. Gaming Ass’n (May 7, 1997)

[17] See supra note 10.

[18] Schwartz, supra note 8, at 135.

[19] Id. at 140.

[20] Id. at 139.

[21] Id.

[22] Id.

[23] Id. at 156.

[24] Id. at 157.

[25] Id.

[26] Frederick W. Preston et al., Gambling as Stigmatized Behavior: Regional Relabeling and the Law, 556 Annals Am. Acad. Pol. & Soc. Sci. 186, 188 (1998).

[27] Schwartz, supra note 8, at 263.

[28] Levitt, supra note 9, at 588; see George Remennik, Notes, Mrs. Tschetschot’s Busted Hand, Poker and Taxes: The Inconsistent Application of Tax Laws on a Game of Skill, 8 Cardozo Pub. L. Pol’y & Ethics J. 485, 487 (2010) (explaining other professional activities involving elements of skill, i.e., golf, benefit from professional recognition through tax deductions).

[29] See Levitt, supra note 9, at 589 (describing the varying states’ use of different language in employing skill versus chance in gambling statutes).

[30] See United States v. DiCristina, 726 F.3d 92, 102 (2nd Cir. 2013) (holding the question of skill or chance is irrelevant under the Illegal Gambling Business Act).

[31] Lotteries are defined as chance games where for consideration a prize may be won. See Anthony N. Cabot & Louis V. Csoka, Symposium, The Games People Play: Is It Time for a New Legal Approach to Prize Games?, 4 Nev. L.J. 197, 200 (2004).  Games of chance include slot machines, roulette tables, craps, and the like.  Id.  Bookmaking is the game of risking something of value on the outcome of an uncertain event; this category includes sports wagering and pari-mutuel wagering (otherwise known as horse-racing).  Id.  Contests are predominately skill-based; this category includes poker and backgammon.  Id. at 202.

[32] Levitt, supra note 9, at 583.

[33] Though poker is a game of skill, its legal treatment varies from that of chess.  See generally Cabot & Csoka, supra note 31.  Similarly, pari-mutuel wagering is treated differently than bookmaking.  Id.

[34] See 26 U.S.C. § 165(d) (2012) (“Wagering losses.--Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions[.]”).

[35] See id. § 4421 (defining wager as “any wager with respect to a sports event or a contest placed with a person engaged in the business of accepting such wagers . . . any wager placed in a wagering pool with respect to a sports event or a contest, if such pool is conducted for profit, and . . . any wager placed in a lottery conducted for profit.”).

[36] Robert D. Herman, Gamblers and Gambling: Motives, Institutions, and Controls 14 (1976).

[37] Id. at 12.

[38] Id.

[39] Id.

[40] Id.

[41] Id. at 13.

[42] Id.

[43] See generally Dec 5, 1933: Prohibition Ends,, (last visited Oct. 13, 2013) (discussing how Prohibition, which ended in 1933, enabled large scale bootleggers to build criminal empires); Robert K. Woetzel, An Overview of Organized Crime: Mores versus Morality, 347 Annals Am. Acad. Pol. & Soc. Sci. 1, 4 (1963).

[44] Nora V. Demleitner, Organized Crime and Prohibition: What Difference Does Legalization Make?, 15 Whittier L. Rev. 613, 627 (1994).

[45] James B. Jacobs & Elizabeth A. Mullin, Congress’ Role in the Defeat of Organized Crime, 39 Crim. L. Bull., no. 3, art. 1, 2003.

[46] Id.

[47] Kefauver Crime Committee Launched, U.S. Senate, (last visited Nov. 11, 2013).

[48] Thomas Doherty, Frank Costello’s Hands: Film, Television and the Kefauver Crime Hearings, 10 Film History 359, 359 (1998).

[49] See King, supra note 12, at 121.

[50] Id.

[51] See generally id. at 122 (associating names such as Frank Costello, Italian gangster and crime boss, with the Tropicana).

[52] See James B. Jacobs & Lauryn P. Gouldin, Cosa Nostra: The Final Chapter?, 25 Crime & Just. 129, 150 (1999) (describing how control over Las Vegas shifted to Fortune 500 companies). See generally Jacobs & Mullin, supra note 45(stating drug trafficking took over as the mob’s main source of income).

[53] K. Alexa Koenig, Prohibition’s Pending Demise: Internet Gambling & United States Policy, 10 U. Pitt. J. Tech. L. & Pol’y 3 (2009).

[54] Facts About Las Vegas,, (last visited Oct. 13, 2013).

[55] G. Robert Blakey & Harold A. Kurland, The Development of the Federal Law of Gambling, 63 Cornell L. Rev. 923, 925 n.2 (1978).

[56] Id.

[57] Smith, supra note 10.

[58] Koenig, supra note 53.

[59] Facts About Las Vegas, supra note 54; see also Revenue, Casino Checker, (last visited Nov. 23, 2013) (explaining the difference between a wager (the amount bet) and gambling revenue (the amount wagered minus the winning returned to players)).

[60] First Research, Full Industry Profile: Gambling 1 (2013), available at Mergent.

[61] King, supra note 12, at 121.

[62] Schwartz, supra note 16, at 3.

[63] Id. at 10.

[64] Id.

[65] See id. at 3 (explaining that the growing costs of construction and operation of casinos were partly responsible for driving out organized crime).

[66] See id. at 314 (explaining the use of the Black Book (listing mobsters) by casinos).

[67] Pete Earley, Super Casino: Inside the “new” Las Vegas 27 (2001); Las Vegas, History, Frommer’s, (last visited Oct. 28, 2013).

[68] See Earley, supra note 67, at 23 (describing the grandiosity of Bellagio’s art, fountains, and chandeliers); see also Las Vegas, History supra note 67(listing the expansion of Caesar’s Palace, Bellagio, and The Venetian, as well as and the opening of Steve Wynn’s Encore).

[69] Las Vegas Stats & Facts, Las Vegas Convention & Visitors Auth., (last visited Oct. 28, 2013).

[70] See generally All Time Top Money Winners,, (last visited Oct. 28, 2013) (tracking poker players around the world).

[71] See World Series of Poker, (last visited Oct. 28, 2013).

[72] See Team PokerStars,, (last visited Oct. 28, 2013).

[73] See PokerTube, (last visited Oct. 28, 2013).

[74] See generally Valerie Strauss, Mega Millions: Do Lotteries Really Benefit Public Schools?, Wash. Post (Mar. 30, 2012, 11:46 AM), (finding lotteries raise billions in tax revenue; in California alone, lottery donations equaled $24 billion between 1985 and 2012).

[75] Tax Payments – Commercial Casinos, American Gaming Association, (last visited Oct. 13, 2013).

[76] Elle Hull & Jennifer Burnett, State Lotteries, Knowledge Center The Council of State Governments, (June 17, 2013, 3:32 PM),

[77] Lehman, supra note 16.

[78] U.S. Const. art. I, § 8, cl. 1.

[79] Nat’l Fed’n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566, 2594 (2012).

[80] United States v. Butler, 297 U.S. 1, 66 (1936).

[81] Abney v. Campbell, 206 F.2d 836, 840 (5th Cir. 1953); see also Sebelius, 132 S. Ct. at 2594.

[82] See U.S. Const. amend. XVI  (stating “Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration).

[83] Brushaber v. Union Pac. R. Co., 240 U.S. 1, 18-20 (1916); see also Calvin H. Johnson, Apportionment of Direct Taxes: The Foul-Up in the Core of the Constitution, 7 Wm. & Mary Bill Rts. J. 1, 1 (defining apportionment as the division of direct taxes among the states based on population).

[84] Charczuk v. C.I.R. 771 F.2d 471, 473 (10th Cir. 1985).

[85] I.R.C., 26 U.S.C. §§ 1-9834 (2012).

[86] Black’s Law Dictionary 1594 (9th ed. 2009).

[87] 26 U.S.C. § 1.

[88] Id. § 63.

[89] Id. § 61; LaPlante v. C.I.R., 98 T.C.M. (CCH) 305, at *3 (2009).

[90] 26 U.S.C. § 63(c)-(d).

[91] Id. § 162.

[92] Id. § 212.

[93] Id. § 67(a).

[94] See id. § 165(c) (“In the case of an individual, the deduction under subsection (a) shall be limited to (1) losses incurred in a trade or business; (2) losses incurred in any transaction entered into for profit, though not connected with a trade or business . . . .).

[95] See id. § 165(d) (“Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions.”).

[96] Id. § 162.

[97] Id. § 183.

[98] Id. § 212; see § 67 (requiring aggregate of itemized deductions reach 2% of adjusted gross income before being deducted).

[99] See generally Comm’r v. Groetzinger, 480 U.S. 23, 35 (1987) (recognizing that a full-time gambler was engaged in a trade or business for purposes of IRC).

[100] Larry J. Brant, The Evolution of the Phrase ‘Trade or Business’. Flint v. Stone Tracy Company to Commissioenr v. Groetzinger – An Analysis with Respect to the Full-Time Gambler and the Investor, 23 Gonz. L. Rev. 513, 517 (1988).

[101] Id.

[102] Groetzinger, 480 U.S. at 35.

[103] Id. at 24.

[104] Id.            

[105] See id. at 25 (stating that the total assessed deficiency was $2,522).

[106] Id.

[107] Id. at 23.

[108] Id. at 33.

[109] Id.

[110] Id. at 36.

[111] 26 U.S.C. § 214 (1918) (current version at 26 U.S.C. § 165 (2012)).

[112] H.R. Rep. No. 65-767, at 10 (1918).

[113] Appeal of Frey 1 B.T.A. 338, 341 (1925).

[114] Id.

[115] 26 U.S.C. § 23(e) (1934) (current version at 26 U.S.C. § 165(c) (2012)).

[116] Id.

[117] Id. § 23(g) (current version at § 165(d)).

[118] H.R. Rep. No. 73-704, at 22 (1934).

[119] Id. at 1.

[120] Id. at 22.

[121] Zorn, supra note 7, at 3.

[122] See Mayo v. Comm’r, 136 T.C. 81, 97 (2011) (recognizing the difference between a wager and expenses incurred in a trade or business).

[123] Id. at 84.

[124] Id. at 83.

[125] Id. at 82.

[126] Id. at 97.

[127] Id. at 94.

[128] Id.

[129] Id.

[130] Id. at 97.

[131] Id.

[132] 26 U.S.C. § 63(a) (2012).

[133] Id. § 165(d).

[134] Merkin v. Comm’r., 95 T.C.M. (CCH) 1576, at *3 (2008).

[135] Third Party Reporting Information Center - Information Documents, IRS.Gov, (last updated Sept. 4, 2013).

[136] T.D. 7492, 1977-2 C.B. 463; I.R.S. Instructions for Forms W-2G and 5754 (2013).

[137] I.R.S. Instructions for Forms W-2G and 5754 (2013).

[138] Id.

[139] I.R.S. Instructions for Form 1099-MISC (2013).

[140] Todd Haushalter, Taxing Matters: How the US Tax Code Affects Gamblers 20 (Dec. 1, 2010) (unpublished M.S. thesis, University of Nevada, Las Vegas) (on file with University Libraries, University of Nevada, Las Vegas).

[141] Staff of H.R. Comm. on Taxation, 111th Cong., Rep. on Federal Tax Laws and Reporting Requirements Relating to Gambling in the United States 12 (Comm. Print 2010) [hereinafter Rep. on Federal Tax Laws].

[142] Id. at 13.

[143] Id. at 12.

[144] Id. at 15.

[145] See Wei-Chih Chiang & Karen Pierce, Professional Gamblers Allowed Full Deductibility of Business Expenses, Practical Tax Strategies, June 2011, at 257, 258.

[146] Id.

[147] Valenti v. Comm’r, 68 T.C.M. (CCH) 838, at *4 (1994).

[148] 16B C.J.S. Constitutional Law §1120 (2005).

[149] H.R. Rep. No. 73-704, at 1 (1934).

[150] Skeeles v. United States, 95 F. Supp. 242 (Ct. Cl. 1951); see Mayo v. Comm’r, 136 T.C. 81, 89 (2011) (using Skeeles as support for rational basis); see also Valenti v. Comm’r, 68 T.C.M. at *4 (using Skeeles as support for rational basis).

[151] Skeeles, 95 F. Supp. at 244.

[152] Id.

[153] Id. at 245.

[154] Id.

[155] Id. at 247.

[156] Id.

[157] Comm’r v. Groetzinger, 480 U.S. 23, 33 (1987).

[158] Skeeles, 95 F. Supp. at 243.

[159] Id.

[160] Id.

[161] See supra text accompanying note 150.

[162] Orr v. Comm’r., T.C. Summ. Op. 2010-55, *10.

[163] Id. at *1.

[164] Id. at *10.

[165] Id.

[166] Id.

[167] Id. (citing Skeeles v. United States, 95 F. Supp. 242 (Ct. Cl. 1951)).

[168] Tschetschot v. Comm’r., 93 T.C.M. (CCH) 914, at *1 (2007).

[169] Id. at *3.

[170] Id.

[171] Id. at *5.

[172] Jeremy Margolis, Casinos and Crime: An Analysis of the Evidence 2 (1997).

[173] Supra note Part I.A.2.

[174] Memorandum from Douglas Seay, Dir. of Policy for Nat’l Gambling Impact Study Comm’n On-Site Meeting in Biloxi, Mississippi & New Orleans, Louisiana 9 (Sept. 10-11, 1998) available at

[175] Mike Roberts, The National Gambling Debate: Two Defining Issues,18 Whittier L. Rev. 579, 594 (Spring 1997).

[176] See Disneyland/California Adventure Tours, Discover Tour (last visited Nov. 11, 2013), for an example of tours including Disneyland to Las Vegas.

[177] Roberts, supra note 175, at 594.

[178] Supra note Part I.A.2.

[179] John Warrant Kindt & Thomas Asmar, Article, College and Amateur Sports Gambling: Gambling Away Our Youth?,8 Vill. Sports & Ent. L.J. 221, 240-41 (2002).

[180] F. Georgann Wing, Putting the Brakes on Carjacking or Accelerating It? The Anti Car Theft Car Act of 1992, 28 U. Rich. L. Rev. 385, 399 (1994).  See generally Retail Industry ATG, IRS.Gov (Jan. 18, 2013),

[181] See Wing, supra note 180, at 399 n.99 (describing how auto repair shops place an order for a part with thieves and the stolen vehicle is brought back to the shop for dismantling).

[182] Peter Finn & Maria O’Brien Hylton, U.S. Dept. of Justice, Using Civil Remedies for Criminal Behavior: Rationale, Case Studies, and Constitutional Issues 34 (1994).Peter Finn & Maria O’Brien Hylton, Using Civil Remedies for Criminal Behavior: Rationale, Case Studies, and Constitutional Issues 34 (1994).

[183] Tax treatment of an auto repair shop is governed under 26 U.S.C. § 1 and § 11.  Regulation of the industry is covered by statutes, such as Cal. Bus. & Prof. §§ 9880-9889.68 (1999).

[184] Supra note Part I.A.2.

[185] Id.

[186] Arthur Stovall, Tournament Poker: An Emotional Contact Sport 4 (2013).

[187] See Zorn, supra note 7, 3-4 (stating the economic benefits derived from gambling suggests the time has come for change).

[188] United Nations, World Economic Situation and Prospects 2009 125 (2009).

[189] Eric B. Becker, Notes, Slots in the City: A Critical Look at the Balance of Decision-Making Power in Gaming Legislation, 35 Fordham Urb. L.J. 1033, 1050 n.129 (2008).

[190] Strauss, supra note 74.

[191] Markus Rüssli, Constitutional Protection of Economic Liberties in Switzerland and the United States, 18 Tul. Eur. & Civ. L.F. 39, 58 (2003).

[192] Taylor v. Rancho Santa Barbara, 206 F.3d 932, 935 (9th Cir. 2000).

[193] See Stephen Burroughs, Article, Heads I Win, Tails You Lose: When Chevron Deference to Retroactive IRS Regulations Changes the Rules of the Game, 7 Charleston L. Rev. 411, 413 (explaining interpretations of Tax Code regulations are accorded great deference).

[194] The five requirements for a tax statute to pass constitutional muster are: (1) for the general welfare; (2) uniformity; (3) apportionment for direct taxes; (4) it raises revenue; and (5) it does not violate Constitutional individual rights.  See Rebecca L. McCullough, Note, What is All the Fuss About?: The United States Congress May Impose a Tax, 22 S. Cal. Interdisc. L.J. 729, 747 (2013).

[195] Id. at 749 n.103.

[196] See Nat’l Fed’n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566, 2579 (2012) (stating the Court has a “general reticence to invalidate the acts of the Nation's elected leaders.”).

[197] Id.

[198] I.R.S. Treas. Dir. LMSB-04-0706-009 (Aug. 7, 2006).

[199] Aaron Saenz, $1.5M Robbery of Bellagio Casino Foiled Thanks to RFID Chips,, (Feb. 12, 2011 2:04 PM) see also V. Daniel Hunt et al., RFID A Guide to Radio Frequency Identification xi (defining RFID as radio frequency identification, “a wireless communication technology that enables users to uniquely identify tagged objects or people.”).

[200] Michael Kaplan, How Vegas Security Drives Surveillance Tech Everywhere, Popular Mechanics, (Jan. 1, 2010 9:00 PM)

[201] Chang-tseh Hsieh & Michael D. Barnes, Customer Relationship Management: How Casinos are Taking Advantage of Technology to Improve and Retain Customer Relations 498 (2006) available at

[202] Kaplan, supra note 200.

[203]  T.D. 7457, 1977-1 C.B. 369, amended by T.D. 7492, 1977-2 C.B. 463.

[204] See I.R.S. Instructions for Forms W-2G and 5754 (2013) (requiring a copy of the W-2G to be provided to the taxpayer and IRS).

[205] The PGIF will be similar to 1099 and W-2 forms which currently are utilized by businesses to report wages and other payments to the IRS.  See generally 2014 Instructions for Form 1099-MISC; 2013 General Instructions for Forms W-2 and W-3.

[206] See Wynn Las Vegas, LLC, Annual Report (Form 10-K), at 44 (Mar. 1, 2013) (stating current accounting practice is to net each gambling winning against the wager).

[207] N.Y. Veh. & Traf. § 398-d (2001).

[208] I.R.S. Instructions for Forms W-2G and 5754, supra note 204.

[209] See Rev. Proc. 77-29, 1977-2 C.B. 538 (requiring extensive substantiation records).

[210] See Comm’r v. Groetzinger, 480 U.S. 23, 36 (1987) (requiring a case-by-case analysis of whether a taxpayer meets the requirements of professional status).

[211] See supra note Part I.C. (including Tschechots and Orrs as examples of tax courts determining professional status).

[212] Treas. Reg. § 1.183–2 (1972).

[213] See Rev. Proc. 77-29, supra note 209(requiring an accurate diary or similar record).

[214] Groetzinger, 480 U.S. at 36.



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