## Facts

- Fernando Barba, a Mexican citizen and nonresident alien not engaged in a U.S. trade or business, vacationed in Nevada in 1980.
- Barba won about $61,580 playing keno at two Nevada casinos.
- The casinos withheld and remitted to the IRS about $18,474 as U.S. income tax under withholding rules applicable to nonresident aliens.
- Barba filed Form 1040NR reporting the winnings and sought a refund of the withheld tax; the IRS disallowed his administrative refund claim.
- Barba asserted he incurred more than $475,000 in gambling losses at a U.S. casino during the same tax year and sought to offset those losses against his winnings.
- Barba sued for a refund in the United States Claims Court; the parties filed cross-motions for summary judgment, treating the material facts as undisputed.

## Issues

1. Whether a nonresident alien’s Nevada casino gambling winnings constituted U.S.-source “fixed or determinable annual or periodical” (FDAP) income taxable on a 30% gross basis under I.R.C. § 871(a) and subject to withholding under I.R.C. § 1441.
2. Whether, if the winnings were FDAP income not effectively connected with a U.S. trade or business, the taxpayer could reduce that gross-basis tax by offsetting claimed gambling losses against the winnings.

## Decision

- The court held that Barba’s Nevada keno winnings were U.S.-source FDAP income within the nonresident alien gross-basis regime.
- The court rejected Barba’s argument that gambling winnings were too contingent or uncertain to be “fixed or determinable” once paid in an ascertainable amount.
- The court held Barba could not offset claimed gambling losses against FDAP gambling winnings because the income was not effectively connected with a U.S. trade or business.
- The court granted summary judgment to the United States and denied Barba’s refund claim.

## Legal Principles

- For nonresident aliens not engaged in a U.S. trade or business, certain U.S.-source income classified as FDAP is taxed at a flat rate on a gross basis under I.R.C. § 871(a) and generally collected through withholding under I.R.C. § 1441.
- “Fixed or determinable” focuses on whether the amount is ascertainable at the time of payment; contingency in the event producing the payment does not prevent FDAP treatment once the payment is made.
- Deductions or loss netting are generally unavailable against FDAP income taxed under the gross-basis regime unless the income is effectively connected with a U.S. trade or business (or a specific exception applies).

## Conclusion

The Claims Court upheld withholding on a nonresident alien’s Nevada casino winnings, ruling the winnings were U.S.-source FDAP income taxable at a 30% gross rate and that claimed gambling losses could not be used to reduce that liability absent effectively connected income status.


Barba v. United States, 2 Cl. Ct. 674 (Cl. Ct. 1983)