The taxpayers are Texas residents. During tax year 2004, Ms. Arizpe had substantial gamblings winnings and losses from a casino located in New Mexico. On their 2004 income tax returns, which were prepared by a Texas office of H&R Block, the taxpayers listed the gambling winnings the casino reported on Form W-2G as income and claimed an equal amount of gambling losses as an itemized deduction. On their New Mexico return, the taxpayers failed to allocate the gambling winnings to New Mexico, but claimed a refund for the entire $11,252 of tax withheld by the casino. The Department denied the refund, citing insufficient substantiation of the claimed losses. The taxpayers protested the denial and, at the hearing on their protest, presented evidence that established approximately one-half of the gambling losses claimed on their income tax return. The hearing officer granted a portion of the taxpayers refund based on this evidence, but denied the balance of the refund due to a lack of evidence.
Raul & Antonieta Arizpe