For married clients, or a former spouse facing a bill from the other spouse’s gambling.
Step 1 Joint return or separate
On a joint return the spouses’ gains and losses are combined; on separate returns each deducts only his or her own losses. Each signer of a joint return is liable for the whole tax.
Leading cases
- Norgaard v. Commissioner of Internal Revenue (1989) cited by 12
- Presley v. Commissioner of Internal Revenue (1979)
- Conley v. Commissioner of Internal Revenue (1992)
- Baumann v. Commissioner of Internal Revenue (2005)The Tax Court had already ruled that gambling losses can only offset gambling winnings, which left the couple owing $11,756.
Step 2 Innocent spouse relief
Evaluate relief under Section 6015(b), (c) and (f). Knowledge of the other spouse’s gambling or W-2Gs is usually decisive; equitable relief may remain.
Leading cases
- Norgaard v. Commissioner of Internal Revenue (1989) cited by 12
- Presley v. Commissioner of Internal Revenue (1979)
- Conley v. Commissioner of Internal Revenue (1992)
- Baumann v. Commissioner of Internal Revenue (2005)The Tax Court had already ruled that gambling losses can only offset gambling winnings, which left the couple owing $11,756.
Step 3 Concealed compulsive gambling
Compulsive gambling does not change the tax, but concealment by the gambling spouse may support equitable relief for the other.
Leading cases
- Gagliardi v. Commissioner of Internal Revenue (2008) cited by 6
- Barrish v. Commissioner of Internal Revenue (1984) cited by 4
- Zarin v. Commissioner of Internal Revenue (1989) cited by 4
- Zielonka v. Commissioner of Internal Revenue (1997) cited by 4The Tax Court ruled for the IRS.
In the treatise: Chapter 36 · Chapter 37