A nonresident alien’s U.S. gambling winnings were not exempted from income tax by either the Treaty of Friendship, Commerce and Navigation (FCN treaty) or the income tax treaty between the United States and his country of residence (South Korea). Furthermore, the gambling income was not considered income that was connected with a U.S. trade or business. He did not provide evidence sufficient to establish that his gambling activity was engaged in for income or profit; therefore, it was taxable under Code Sec. 871(a). His interest income was not excludable from tax because the interest income was not from deposits effectively connected with the conduct of a U.S. trade or business.
The accuracy-related penalty applied to the underpayment of tax on his gambling winnings because the underpayment of tax was attributable to his negligence or disregard of rules or regulations. The reasonable cause and good faith exception to the accuracy-related penalty did not apply because there was no evidence that he acted on the advice received from his tax return preparer or other tax professional.
S.J. Park, 136 TC –, No. 28, Dec. 58,657
Other References:
Code Sec. 871
CCH Reference – 2011FED ¶27,343.049
CCH Reference – 2011FED ¶27,343.1354
Code Sec. 6662
CCH Reference – 2011FED ¶39,651G.135
CCH Reference – 2011FED ¶39,651G.14
Code Sec. 6664
CCH Reference – 2011FED ¶39,661.654
Tax Research Consultant
CCH Reference – TRC INTL: 3,556
CCH Reference –
TRC INTL: 3,650
CCH Reference – TRC PENALTY: 3,106
CCH Reference – TRC PENALTY: 3,108
CCH Reference – TRC PENALTY: 3,116
