Nonresident Alien’s U.S. Gambling Winnings Were Taxable, Accuracy-Related Penalty Applied (Park, TC)

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

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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