Purpose

This assignment is intended to help you learn to apply the tax research process.

Overview

Your client, Mrs. Luck, is a full-time professional poker player who lives in Reno, Nevada. Luck has been competing in poker tournaments for many years. For the last several years, Luck has been very successful, and her poker tournament winnings have far exceed her losses and expenses. Unfortunately, last year was not a good one for Luck. Last year, Luck won money at some poker tournaments, amounting to $165,000 in winnings, but she lost $228,000 in other poker tournaments. In addition, Luck incurred the following expenses last year: (a) Travel to poker tournaments (others than in Reno): $2,500 and (b) Tournament admission/entry fees: $10,500. Luck also earned $82,000 of investment income last year. Luck recently told you that she assumes that, due to the losses and expenses, she will not owe any federal income tax for last year, and has asked you to confirm that for her.

Action Items

1. Complete the reading and view the videos for this module.
2. Review the scenario provided in the Overview section above.
3. Research the accounting situation using CCH AnswersConnect and submit a client letter:
   1. Use CCH AnswersConnectLinks to an external site. to answer the following questions:
      • Are gambling winnings taxable?
      • Are gambling losses deductible?
      • Are gambling expenses deductible?
      • Would Mrs. Luck owe any federal income tax?
   2. Hint: Perform a key word search. You should find a code section and treasury regulation that will help answer the above questions.
   3. Prepare a client letter that answers the above questions. Refer to Module 2 for appropriate Client Letter format. Make sure to include appropriate references to the code and treasury regulation that support your conclusion.
   4. Take a screenshot of the relevant sources that support your answers and include them at the end of your client letter.
4. Submit the completed first draft of your assignment. Your work will automatically be checked by Turnitin.
5. Access your Turnitin report by reviewing your Submission Details for this assignment. Revise your work as needed based on the feedback.
6. By the due date indicated, re-submit the final version of your work.