J.P. Sanford, a Texas attorney, went to Las Vegas in 1962 with a plan. He believed he had a system to turn the game of craps into a profitable enterprise. Like any aspiring businessman, he also thought he was entitled to deduct his expenses.
After a trip spent at the craps tables, he tallied up his travel, food, and lodging costs to $571.20*. He then claimed the entire amount as a business deduction on his tax return.
*Based on the Consumer Price Index (CPI) data from the Bureau of Labor Satistics, J.P. Sanford’s $571.20 deduction in 1962 would be equivalent to approximately $6,152.46 in today’s money (as of March 2026).
The IRS Calls His Bluff
Sanford’s reasoning was simple: he argued he was in the “trade or business of gambling,” which made his trip a necessary professional expense. The IRS, deeply skeptical of such remarkable optimism, saw a lawyer on vacation. They promptly disallowed the deduction, classifying the trip as a personal expense and his gambling as, at best, a hobby.
But Sanford was an attorney who believed in his argument. He was willing to fight for his deduction, and so this dispute over a $571 trip ended up in the U.S. Tax Court.
Business or Hobby? A Billion-Dollar Question
The case boiled down to one of the most fundamental questions in tax law: what separates a business from a hobby?
The answer determines whether your expenses are deductible. The court looks past a taxpayer’s stated intentions and examines the cold, hard facts. The judge asked a series of practical questions:
- Did Sanford conduct his gambling in a businesslike manner?
- Did he maintain complete and accurate books and records of his wins and losses?
- Did he have a business plan or a separate bank account for this “business”?
- Was his primary source of income from gambling or his law practice?
Of course, scrutinizing gambling profits was nothing new for the government. Learn all you need to know about what happens to your winnings. (You can read that full article here.)
The Verdict: A Losing Hand
On all of these fronts, Sanford’s case crumbled. He had kept no credible, businesslike records. He was a full-time attorney, and his income came from his law practice, not the casino. The judge concluded his actions were indistinguishable from those of any other hopeful tourist trying their luck.
The court ruled decisively in favor of the IRS: the gambling was a hobby, the trip was a personal vacation, and the deduction was denied.
The Sanford case is a timeless lesson. The tax code makes a clear distinction between a business and a hobby, and simply wanting to make money isn’t enough to cross that line. Today, professional poker players successfully deduct travel expenses, but they also keep meticulous records and treat it as a full-time job. They can prove they are running a business.
Mr. Sanford couldn’t. He had the dream, but he didn’t have the receipts, and in the eyes of the Tax Court, that makes all the difference.
