Commissioner of Internal Revenue v. Groetzinger (1986)
- Docket
- 85-1226
- Decided
- 1986-01-01
Summary
Question: Does a taxpayer’s gambling activity constitute as a “trade or business” under the Internal Revenue Code of 1964 and therefore allow a deduction of gambling losses to be deducted from gross income instead of constituting a requirement for the minimum tax? Conclusion: Yes. Justice Harry A. Blackmun delivered the opinion of the 6-3 majority. The Court held that a taxpayer’s gambling activity does constitute a “trade or business” under the Internal Revenue Code of 1964. Since Groetzinger was in the “trade or business” of gambling, no part of his gambling losses was an item of tax preference subjecting him to a minimum tax. The Court held that the term “trade or business” has a broad definition within the statute. While a mere hobby does not constitute as a trade or business, activity with continuity and regularity with the purpose of making a profit or income is, so Groetzinger’s gambling activity qualifies. Justice Byron R. White delivered a dissenting opinion, in which he argued that the 1982 amendments to the Internal Revenue Code made it clear that gambling was not a trade or business. Although the relevant year for this case is 1978, the later provisions indicate that the legislature did not intend to include gambling activity in constituting as a trade or business. Justice Antonin Scalia and Justice William H. Rehnquist joined in the dissent.