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kakalia

kakalia

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Published by Brad Polizzano
Kakalia - Board of Equalization, California 12-14-2011
Kakalia - Board of Equalization, California 12-14-2011

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Published by: Brad Polizzano on Apr 01, 2012
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06/11/2014

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Appeal of Marsha E. Kakalia
NOT TO BE CITED AS PRECEDENT
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BOARD OF EQUALIZATIONSTATE OF CALIFORNIA
In the Matter of the Appeal of:
MARSHA E. KAKALIA
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SUMMARY DECISIONPERSONAL INCOME TAX APPEAL
Case No.404650Adopted: December 14, 2011Representing the Parties:For Appellant:James Ireijo, Attorney at LawFor Franchise Tax Board:Judy F. Hirano, Tax Counsel IIICounsel for the Board of Equalization:Charles D. Daly, Tax Counsel IIIThis appeal is made pursuant to section 19045 of the Revenue and Taxation Code(R&TC) from the action of respondent Franchise Tax Board (respondent or FTB) on appellant’s protestagainstaproposed assessment of additionaltax in the amount of $6,083.00, plus a failure to provideinformation penalty in the amount of $1,520.75,for2003.
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The issue in this appeal is whether appellanthas established entitlement to a gambling loss deduction for 2003. ///  /// 
 
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This case was pulled by a Board Member from the consent calendar of the Board meeting of September 20, 2011, forpurposes of further review and discussion.
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As discussed below, respondent subsequently stated that it would withdraw the failure to provide information penalty andalso reduced the additional tax from $6,083 to $3,730.
 
Appeal of Marsha E. Kakalia
NOT TO BE CITED AS PRECEDENT
-2-
 
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FINDINGS AND DISCUSSIONBackgroundAppellant filed a timely California tax return for 2003. On that return, appellant reportedfederal adjusted gross income (AGI) of $89,980. On Schedule CAof that return, appellant reportedgambling losses of $89,980, which she offset against the federal AGI of that amount to determine aCalifornia AGI of zero. Appellant also reported a California standard deduction of $3,070, taxableincome of zero, and tax of zero.After examining her 2003 return, respondent twice requested appellant to providedocumentation in relation to what its auditor understood to be her claim that her income was excludablefrom California tax because that income was earned on or received from an American Indianreservation. When respondentdid not receive a reply from appellant, respondent issued a Notice of Proposed Assessment (NPA) against her on December 11, 2006. In its NPA, respondent added back toappellant’s taxable income the gambling losses she reported on Schedule CA of her returnon the basisthat she did not provide information substantiating that she met the requirements for her tribal income tobe considered non-taxable by California. Respondent also imposed a 25 percent penalty for appellant’sfailure to reply to its request for information. As a result, the NPA proposed the assessment of additional tax of $6,083.00and a failure to furnish information penalty of $1,520.75, plus interest.Appellant filed a protest against respondent’s NPA. In her protest letter, appellant statedthat she was not a member of any Indian tribe and requested elaboration on how that fact affected hertax liability. In a reply letter, respondent acknowledged its error in treating appellant’s matter ashavingany relevance to Indian issues and requested appellant to provide an IRS Form 1099-G for 2003showing her gambling winningsfor that year. When appellant did not reply, respondent issued a Noticeof Action onMay 2, 2007, affirming its NPA. This timely appeal followed.
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ContentionsIn appellant’sopening brief,her representativeprovidedtwo statements, one fromHarrah’s dated June 7, 2007, and the other from Thunder Valley Casino dated July 2, 2007. The
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This appeal was deferred for over a year for bankruptcy proceedingsand later was once more deferred to allow respondent’scounsel to review appellant’s amended return.
 
Appeal of Marsha E. Kakalia
NOT TO BE CITED AS PRECEDENT
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statement from Harrah’sindicated that appellant’s account associated with use of her Harrah’s TotalRewards program card showed that she had total losses of $14,666 during 2003 as a result of gamblingat four different Harrah’s locations. Appellant’s total losses includedhand-paid jackpot winnings of $14,585.75 thatare required by theInternal Revenue Service (IRS) to be reported in its Form W-2G.
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 Appellant had net losses of $12,736from gambling at slot machines, while the remainder of her totallosses resulted from table games or other unspecified gambling activities. The statement from Harrah’semphasized that “only play that occurred when your Total Rewards Card was inserted into a slotmachine or a manual rating was created at a table game, keno, or sports and race book area is included inthis statement.” The statement further emphasized that the information on it was not intended for taxreporting, and, therefore, the statement made no representation regarding the accuracy of the informationor its effectiveness as proof of losses. The statement also indicated that the IRS recommends keeping adiary of gambling activity with such pertinent information as dates, slot machines, or table numbers, jackpots, and total winsand losses.The statementfrom Thunder Valley Casinoindicated that, based on tracking when herplayer’s card was used, appellant had net slot machine losses of $35,861.20, after taking into account jackpot winnings of $51,110.00 reported on Form W-2G. Thestatementfurther indicated that she hadnet table game losses of $290.00 which, when combined with her net slot machine losses of $35,861.20,resulted in total net losses for 2003 of $36,151.20.
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The statement emphasized that Thunder ValleyCasinowas unable to provide any information about appellant’s gambling activities other than whatappeared on the statement. The statement also explicitly disclaimed providing information for “claimingwins/losses as part of your income tax”and noted that the statement had not been audited.Herrepresentative statesthat, after reviewing the two statements, respondent woulddeterminethat there was no doubt appellanthad no gambling income for 2003 from any casino. Herrepresentative concludesby asking whetherthe two statementswere sufficient to allow respondent tocomplete its audit and offering to provide any further supplementary information that it might require.
 
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Form W-2G provides, in pertinent part, that winnings (not reduced by the wager) from a bingo game or slot machine of $1,200 or more are required to be reported on the form. Keno and other games have different minimum reporting amounts.
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The statement alleges that winnings and losses for table games were tracked by entries made by personnel of the casino.

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