Posted by & filed under Taxation & Planning.

Case:

A Toronto man trying to write off casino and racetrack losses against his income tax bill has gambled and lost at Canada’s Federal Court of Appeal.

Giuseppe Tarascio claims that gambling is how he earns the bulk of his income. He filed tax returns for several years, claiming both his wins and losses.

By day, Tarascio is a technician with Bell Canada. But on evenings and weekends, he responds to what he claims is his true calling: horses, slot machines, casino games and lotteries.

He claims to have won tens of thousands of dollars. For years he claimed those winnings as income, but he also deducted his losses and expenses.

In his income tax returns for 2002 and 2003, he deducted from his gambling winnings his losses and associated expenses: $40,933 in 2002 and $56,000 in 2003.

Luck Ran Out!

Canada Revenue Agency (CRA) stepped in and disallowed those deductions.

Tarascio objected and went to tax court. He presented his books and records, but lost there too.

No ‘systematic method,’ court rules

He claimed that his degree in mathematics — coupled with his experience in probability theory — gave him the expertise to register his gambling as a business.

Decision by the Canadian Court:

 The court turned him down, saying Tarascio had no “systematic method” for gambling and had spent no time practising his skills. He was also required to pay court costs of $1,000.

 Read the court decision:  Federal Court of Appeal

What constitues an allowable business expense?

 The Supreme Court was clear that a commercial endeavour, with no personal element, will be able to deduct its expenses, whether showing a profit every year or not, as long as a source of income exists.

 Discussion Questions:

1. Do you think Gambling Losses, should be tax deductible?

2. Based on the Supreme court decision as to what constitutes a commercial endeavour: Was the law properly applied?

3. Would the case have taken a different turnabout, if the Appelant had kept perfect records? 

Leave a Reply

Your email address will not be published.