in-20250730-IR-045250362NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20251132; 01-20251324; 01-20251541 Individual Income Tax For the 2021, 2022, and 2023 Tax Years HOLDING Individual established that the Department’s assessment was incorrect. ISSUE

I. Individual Income Tax – Gambling Income.

Authority: I.R.C. § 61; IC 6-3-1-3.5; IC 6-3-2-1; IC 6-8.1-5-1; Shollenberger v. Comm’r, T.C. Memo. 2009-306; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); I.R.S. AM 2008-011. Taxpayer protests the assessment of additional Indiana income tax. STATEMENT OF FACTS Taxpayer is a resident of another state who regularly files income tax returns with the Indiana Department of Revenue (“Department”). Taxpayer’s only income from Indiana sources in the 2021, 2022, and 2023 tax years were jackpots that she won from playing video poker at an Indiana casino. The Indiana casino issued Taxpayer W-2G forms whenever she won a jackpot, and it reported the jackpots to the Department. Taxpayer reported to the Department in all three years less income than the amounts listed on her W-2G forms, and the Department adjusted her returns to include the complete sum reported to it. The Department accordingly issued proposed assessments, which Taxpayer timely protested. This Letter of Findings results. Additional facts will be provided as necessary. Because Taxpayer waived her right to a hearing, this Letter of Findings relies on documents submitted by Taxpayer and the Department’s records.

I. Individual Income Tax – Gambling Income.

DISCUSSION Taxpayer argues that she was entitled to report a lower income amount than the Department’s figure because she calculated her income using the “net sessions” method. As a threshold issue, it is the taxpayer’s responsibility to establish that the existing tax assessment is incorrect. A proposed assessment is prima facie evidence that the Department’s claim for the unpaid tax is valid. IC 6-8.1-5-1(c). The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made. Id.; See e.g., Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012) and Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Consequently, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department’s position is wrong. Further, “[W]hen [courts] examine a statute that an agency is ‘charged with enforcing . . . [courts] defer to the agency’s reasonable interpretation of [the] statute even over an equally reasonable interpretation by another party.’” Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Thus, all interpretations of Indiana tax law contained within this decision shall be entitled to deference. Indiana imposes a tax on “the adjusted gross income of every resident person” and on “that part of the adjusted gross income derived from sources within Indiana of every nonresident person[.]” IC 6-3-2-1. Indiana law requires taxpayers to begin with their adjusted gross income as calculated under federal law and then make Indiana-specific adjustments. IC 6-3-1-3.5. I.R.C. § 61(a) provides that gross income includes “all income from whatever source derived[.]” Thus, for both federal and Indiana income tax purposes, gains from gambling winnings are income subject to income tax pursuant to I.R.C. § 61. Federal law distinguishes between causal gamblers and professional gamblers. Shollenberger v. Comm’r, T.C. Memo. 2009-306 at *2. “In particular, gambling losses incurred in a trade or business of gambling are allowable in computing adjusted gross income[.]” Id. However, casual gamblers may only deduct gambling losses if they choose to itemize their deductions. Id. The Internal Revenue Service has stated that casual gamblers do not realize income every time they win a wager — rather, a casual gambler does not incur any income “until the taxpayer redeems her tokens and can definitively calculate the amount above or below basis (the wager) realized.” I.R.S. AM 2008-011. In other words, “a casual gambler who enters a casino with $100 and loses the entire amount after playing the slot machines has a wagering loss of $100, even though the casual gambler may have had winning spins of $1,000 and losing spins of $1,100 during the course of play.” Id. Taxpayer agrees that she is a casual gambler and that the above-described calculation method applies to her. Taxpayer explained that when she wins a large jackpot, the casino immediately prepares tax paperwork and reports the jackpot as income to the Department. However, Taxpayer explained that she generally continues to play after she has won a jackpot without “redeeming her tokens.” Taxpayer provided contemporaneous documentation recording her per-session wins and losses, and Taxpayer also provided a year-end record of her total wins and losses from the Indiana casino that corroborates her records. The Department therefore agrees that, as provided by Shollenberger, IC 6-3-1-3.5, and I.R.C. § 61(a), Taxpayer has carried her burden to show that her income was the same as was reported or her return originally, and the Departments adjustments were incorrect. FINDING Taxpayer’s protest is sustained. April 4, 2025 Replaces Finding Document: New