More Wikipedia Law,

from last year, in Gagliardi v. Commissioner (Tax Court=):

Respondent attempted to discredit Dr. Pike by claiming her definition of "gambler's fallacy" was incorrect. Respondent relies on a definition of "gambler's fallacy" he obtained from Wikipedia. Respondent did not call any witness, or expert witness, to counter Dr. Pike's conclusions. Respondent's reliance on a definition of "gambler's fallacy" found in Wikipedia[18] is not persuasive. Dr. Pike and Mr. Nicely, a second expert witness whose testimony and opinions are discussed in greater detail infra, credibly explained that there is a difference in the definition of "gambler's fallacy" depending on the field of study -- e.g., psychology versus mathematics. We find Dr. Pike to be credible and rely on her expert opinion.

[Footnote 18:] Although we conclude that the information respondent obtained from Wikipedia was not wholly reliable and not persuasive in the instant case, we make no findings regarding the reliability, persuasiveness, or use of Wikipedia in general.

corneille1640 (mail):
Whew! I guess that means I can still use wikipedia to prepare my lectures.
2.11.2009 4:06pm
ChuckC (mail):
Not apropos to the Wiki issue, but if this doesn't qualify as "pathological", I don't know what does:

"Mr. Gagliardi did not enjoy winning jackpots because the machine locked up and he had to spend time waiting for money to gamb1e (either from the casin0 or by having to go get money from an ATM)."
2.11.2009 4:09pm
Duffy Pratt (mail):
The cool thing about this opinion is that the court finds that he didn't win any money playing the slots because an expert testified that the odds against him winning money were really, really high. There was an absence of other records about his winnings on jackpots smaller than $1200, so the court went with the odds.

Too bad they kept good records about his winning the lottery. Otherwise, he would have a slam dunk case against paying his taxes on those winnings. The odds against winning the lottery are just as astronomical.

What the government is trying to do here is pathetic. The guy's gambling addiction is pathetic. The pro-gambling law that allows people to deduct their losses to the extent of their winnings is also pathetic. But it's all pretty amusing as well.
2.11.2009 4:23pm
What the government is trying to do here is pathetic. The guy's gambling addiction is pathetic. The pro-gambling law that allows people to deduct their losses to the extent of their winnings is also pathetic.

Huh? This makes no sense. Would you apply the same logic to stocks, where losses couldn't be applied against gains?
2.11.2009 4:57pm
Houston Lawyer:
So if I win the lottery and take my payout in installments, for the next 25 years all of my Vegas blowouts will be deductable against those installments? How cool is that
2.11.2009 5:00pm
Duffy Pratt (mail):
It at least makes enough sense for you to disagree with it.

In both cases, I think its a pretty stupid compromise. If trading stocks or gambling is a worthwhile activity, then losses should be fully deductible, not with the limitation to winnings, or with the absurd carry-forward. Also, suppose you are engaged in a long term activity like playing the lottery. In years one through 49, you lose 5 dollars per week, every week. Then in yard 50, you hit the jackpot in your first week, and stop playing. None of your losses are deductible.

Again, if the activity is not worthwhile, then losses or expenses should not be deductible. I know crack dealers are supposed to report their incomes, but do they get to deduct losses for when their stuff is seized? or expense the cost of ammunition used in a drive-by shooting? The government really needs to decide how it feels about gambling, and until it does, any "policies" it has on the matter are pretty pathetic.
2.11.2009 5:23pm
Again, if the activity is not worthwhile, then losses or expenses should not be deductible.
It has nothing to do with how "worthwhile" gambling is, whatever on earth that is supposed to mean.

The issue is that gambling is both a means of recreation and a means of making money. It may be difficult or impossible to determine in the case of a particular taxpayer which purpose predominates. In order to accurately reflect net gambling winnings (and ours is a net income tax), it is proper to deduct losses incurred earning those winnings.

Since gambling has a fundamental recreational element, however, it is not proper to use net gambling losses to shelter unrelated income.

It has nothing to do with whether gambling is "worthwhile". Compare the gambling loss provisions with the hobby loss provisions, which are very similar, and for similar reasons. Nobody is suggesting that hobbies aren't "worthwhile"--it simply isn't appropriate to shelter unrelated income with losses from quasi-recreational activities.
2.11.2009 5:39pm
Doug Sundseth (mail):
Mr. Nicely, the gambling expert? That wouldn't be Nicely-Nicely Johnson, would it? I mean, he's certainly a gambler, but Nathan Detroit or Sky Masterson would seem to be more expert*.

Perhaps they weren't available?

* At least they didn't resort to Big Jule. I mean, sure, he'll get whatever result you want, but there have been rumors....
2.11.2009 5:51pm
Yet another example of why Wikipedia is a problematic source, from Slashdot (I'd link to the original article, but it's in German):

"Germany has a new minister of economic affairs. Mr. von und zu Guttenberg is descended from an old and noble lineage, so his official name is very long: Karl Theodor Maria Nikolaus Johann Jacob Philipp Franz Joseph Sylvester Freiherr von und zu Guttenberg. When first there were rumors that he would be appointed to the post, someone changed his Wikipedia entry and added the name 'Wilhelm,' so Wikipedia stated his full name as: Karl Theodor Maria Nikolaus Johann Jacob Philipp Wilhelm Franz Joseph Sylvester Freiherr von und zu Guttenberg. What resulted from this edit points up a big problem for our information society. The German and international press picked up the wrong name from Wikipedia — including well-known newspapers, Internet sites, and TV news such as, Bild,, TAZ, or Süddeutsche Zeitung. In the meantime, the change on Wikipedia was reverted, with a request for proof of the name. The proof was quickly found. On an article cites Mr. von und zu Guttenberg using his 'full name'; however, while the quote might have been real, the full name seems to have been looked up on Wikipedia while the false edit was in place. So the circle was closed: Wikipedia states a false fact, a reputable media outlet copies the false fact, and this outlet is then used as the source to prove the false fact to Wikipedia."
2.11.2009 5:58pm
Duffy Pratt (mail):
When the government decides which activities it is going to tax, which its not going to tax, and the extent to which it will subsidize those activities, it is making a determination about how worthwhile it considers them.

Thus, as a matter of tax law, owning a home is more worthwhile than renting. Running a business is more worthwhile than pursuing a hobby, even if there is no substantive difference between two people doing the same activity. Giving to a charity is more worthwhile than giving to a specific individual, even if he desperately needs the money.

When you talk about whether something is "appropriate" or not, it seems to me that its just an obfuscation. What is the reason that business deductibility is favored, but not recreational deductions, especially in areas where its so easy for a person to convert their activities into a business? For me, its not enough to simply pigeonhole one as recreational and the other as business. The tax law encourages one activity more than the other, and I think it should do so because it thinks one activity is better than the other. (Actually, I would rather have a system that didn't make any such preferences. But, as long as it does, I would like the preferences to be well-reasoned.)

Also, does the net income approach apply to illegal gains and losses?
2.11.2009 5:58pm
ASlyJD (mail):
We just covered this in tax law last semester. (Sold the book, so I can't reference. Sorry.) Business expenses and losses are deductible, even for illegal business. However, if the business is illegal drugs, the only permitted deduction is for the cost of the raw drugs.

Don't you just love tax law?
2.12.2009 12:57pm
zuch (mail) (www):
Since when does the gummint (in the form of the IRS) rely on Wikipedia for its expert knowledge? Isn't that fact a little scary?

2.12.2009 6:52pm
Duffy Pratt (mail):
Here is the Wikipedia article on public policy exceptions to business deductions for illegal activity. As with most tax questions, its more complicated than I would have thought. Of course, I'm taking Wikipedia at face value here.
2.12.2009 10:09pm
Wikipedia is one of the greatest inventions in the history of the world. It's an extremely valuable information source, though it must be used carefully. Although it's value is diminished by the problems that result from the temptation not to cross check its info, its massive value overwhelms that detraction. I'm not sure if its inventors had the genius to see that it would work or if they just guessed it might and got lucky. I don't think they knew. I think they just got lucky. I'm grateful for their optimism.
2.13.2009 8:53pm

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