Commissioner v. Groetzinger

480 U. S. 23

February 24, 1987

After losing his job in 1978, Robert Groetzinger spent the entire rest of the year gambling on dog races as a means of providing income for himself. He put great effort into this pursuit, ultimately wagering over $70,000. He had no other employment. When the IRS audited his tax return, it found that he owed additional taxes because of this gambling activity. The case turned on whether or not full-time gambling could be considered a “trade or business” within the meaning of the Internal Revenue Code. If it was, Groetzinger’s alleged additional tax liability would disappear.

In a 6-3 vote, the Court sided with Groetzinger, and held that full-time gambling could be a “trade or business.” Justice Blackmun reviewed Court precedent on this question for several pages before finally concluding that it offered little to no meaningful guidance. In the absence of any useful precedent, Blackmun made the equitable decision that Groetzinger’s gambling ought to be considered trade or business because it was the principal way in which he attempted to secure his livelihood. He rejected the argument that a trade must provide a useful good or service to the public to qualify.

White, joined by Rehnquist and Scalia, dissented. In 1982, Congress passed a law which plainly excluded gambling from being a “trade or business.” White argued that in doing so Congress was codifying a pre-existing understanding, although his evidence for this claim was pretty slim. To be fair, Blackmun also gave little support for his ultimately conclusion. In the absence of much evidence from either opinion, I think I would side with Blackmun, if for no other reason than to give the IRS a poke in the face. It is true that making a living off gambling is parasitic, unproductive, and soulless, but the worse sin in my mind was the decision of the IRS to audit and go after a man with virtually no income. All that said, I am glad Congress passed the law they did in 1982.


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