McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 63

Jake is a retired jockey who takes monthly trips to Las Vegas to gamble on horse races.Jake also trains race horses part time at his Louisville ranch.So far this year, Jake has won almost $47,500 during his trips to Las Vegas while spending $27,250 on travel expenses and incurring $62,400 of gambling losses.Jake also received $60,000 in revenue from his training activities and he incurred $72,000 of associated costs.Explain how Jake's gambling winnings and related costs will be treated for tax purposes.Describe the factors that will influence how Jake's ranch expenses are treated for tax purposes.