## Facts

- Robert P. Groetzinger lost his job in February 1978 and, for the rest of 1978, devoted himself to pari-mutuel wagering on greyhound races, mainly in Florida and Colorado.
- He spent roughly 60–80 hours per week on gambling-related activity, had no other employment, and wagered solely for his own account with the aim of earning a living.
- In 1978 he had approximately $70,000 in gross winnings on bets totaling $72,032, resulting in a net gambling loss of $2,032.
- After audit, the Commissioner treated part of the gambling loss deduction as an “item of tax preference” under the 1978 minimum tax rules.
- The minimum tax rules allowed reduction of “items of tax preference” by deductions “attributable to a trade or business carried on by the taxpayer,” implicating I.R.C. §§ 162(a) and 62(1).
- The Tax Court and the Seventh Circuit held Groetzinger’s gambling was a “trade or business,” eliminating the asserted minimum tax liability.

## Issues

1. Whether a full-time gambler who wagers solely for his own account is engaged in a “trade or business” within the meaning of I.R.C. §§ 162(a) and 62(1).
2. What general standard determines when an activity qualifies as a “trade or business” for federal income tax purposes.
3. Whether Groetzinger’s gambling-loss-related deduction was “attributable to a trade or business” and therefore not an “item of tax preference” for minimum tax purposes.

## Decision

- The Supreme Court affirmed the Seventh Circuit.
- The Court held that a full-time gambler wagering solely for his own account may be engaged in a “trade or business” under I.R.C. §§ 162(a) and 62(1).
- The Court declined to adopt a rigid or categorical test and required a fact-based inquiry.
- Applying its standard, the Court concluded Groetzinger’s sustained, profit-seeking, full-time gambling activity qualified as a trade or business.
- Because the deductions were attributable to a trade or business, the relevant gambling-loss amount was not an item of tax preference for the minimum tax.

## Legal Principles

- “Trade or business” status generally requires (1) continuity and regularity of the activity and (2) a primary purpose of income or profit.
- Sporadic activities or hobbies do not qualify; sustained, profit-oriented conduct can qualify even without traditional “clients” or “customers.”
- The absence of an employer-employee relationship does not determine trade-or-business status.
- Full-time gambling pursued in good faith and with regularity to produce income for a livelihood can qualify as a trade or business under § 162(a).
- When an activity is a trade or business, deductions tied to that activity may be “attributable to a trade or business” under § 62(1), affecting minimum tax treatment.

## Conclusion

The Court held that a taxpayer who pursued gambling full time, regularly, and for profit was engaged in a trade or business, so his gambling-loss-related deductions were attributable to that business and were not treated as items of tax preference under the minimum tax rules at issue.


Comm’r v. Groetzinger, 480 U.S. 23 (1987)