Research Memo Assignment Example | Topics and Well Written Essays - 500 words

Research Memo - Assignment Example Last but not least Lewis incurs other expenses in terms of purchases made for wigs, fake mustaches, fake beards and special clothing meant to make him appear heavier. According to IRC  §162 (a) deductions are permissible for all the conventional and indispensable outlays or sustained for the period of a tax year. All ventures or trade are, for this reason, taxable. IRC  §165(d) on the other hand applies to gambling losses by just stating that losses from wagering transaction are deductible to the extent of wagering gains. This provision serves to limit the usage of  §162 (a) to the charges made to cover gambling losses. In Offutt v. Commissioner, 16TC1214, the tax court decided that taxpayers’ losses cannot be covered with income from other sources or the gambler’s salary. This means that under limitation of  §165 and Offutt, Kevin’s gambling losses are only deductible to the extent of his gambling gains of $ 1000,000. In Mayo v. Commissioner, 136TC No 4, the tax court judged that a gambler’s business expenses incurred in the course of his trade are deductible under IRC  §162(a) even though these losses may not offset other income. The court reasoning in this case founded on the fact that the court in Mayo held that non-wagering expenses were not within the loss limitation defined by sec 165and reversed Offutt on this matter. To further strengthen the judgment, the court in Mayo quoted Boyd v. Commissioner, 56 AFTR 2d 85-5266, which indicated that restrictions of  §165(d) do not take into account more than direct expenses from wagering. The Boyd case also gave a clear difference in losses arising from wagering and expenses associated with the gambling activities. It, for this reason, makes it easy and clear that the limitation of the  §165(d) does not affect peripheral expenses. This provision, for this reason, implies that losses resulting from direct wagering are subject to the