Nick Popovich v. Indiana Department of State Revenue, 90 N.E.3d 704

Background

Nick Popovich, an Indiana resident, claimed to be a professional blackjack gambler for tax year 2004 and reported $44,200 net gambling income on his federal return via Schedule C, deducting large gambling losses as business expenses.
Popovich tracked gambling activity with self-prepared "Gaming" and "Win/Loss" records and retained casino markers, redemption vouchers, and trip-history reports; he also used casino credit lines and accepted some complimentary items.
The Indiana Department of State Revenue audited Popovich, concluded he was not a professional gambler for 2004, disallowed his business-loss treatment, and issued a proposed assessment (including taxes, interest, penalties); Popovich appealed to the Indiana Tax Court.
The court applied the Groetzinger two-part test (continuity and regularity; primary profit motive) and Treasury Regulation §1.183-2 factors to decide whether gambling was a trade or business.
The court found significant inconsistencies among Popovich’s records and between his records and casino records, questioned the credibility of his testimony about time spent gambling and the source of certain funds, and found he gambled sporadically rather than full-time.
Weighing the §1.183-2 factors, the court held Popovich failed to show both continuity/regularity and a primary profit motive; the Department’s 2004 assessment was sustained.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Popovich gambled with the continuity and regularity required to be a professional gambler	Popovich: gambled ~60 days in 2004 (~1,000 hours annualized), 5–6 hour sessions, 10 hrs/week studying; this equals full‑time effort	Department: activity was sporadic, records inconsistent, and evidence does not show full‑time or continuous gambling	Held: Not continuous/regular; records inconsistent and gambling no more than ~5 days/month — favors Department
Whether Popovich’s primary purpose was profit (profit motive)	Popovich: maintained records, studied strategies, used credit and businesslike practices, accepted comps to reduce costs, and achieved net winnings in 2004	Department: recordkeeping unreliable, avoided some profit-maximizing techniques, losses prior years, possible other income sources; motive unclear	Held: On balance, profit-motive factors split; overall insufficient to establish primary profit intent
Whether Popovich carried on gambling in a businesslike manner (Treas. Reg. §1.183-2(b)(1))	Popovich: contemporaneous records, changed methods after 2002 losses, used credit lines and casino relationships	Department: records contain internal inconsistencies and mismatch with casino documents; comingling of funds undermines businesslike presentation	Held: Factor favors Department due to unreliable records and inconsistent evidence
Whether Department’s proposed assessment should be overturned	Popovich: met burden to show professional status and deduct losses; assessment wrongful	Department: Popovich failed to prove prima facie case on both Groetzinger prongs	Held: Assessment upheld; Popovich failed to carry burden of proof

Key Cases Cited

C.I.R. v. Groetzinger, 480 U.S. 23 (U.S. 1987) (establishes two‑part test for trade or business: continuity and regularity, and profit motive)
F.A. Wilhelm Constr. Co. v. Indiana Dep’t of State Revenue, 586 N.E.2d 953 (Ind. Tax Ct. 1992) (Indiana AGIT to be interpreted in harmony with referenced IRC provisions)
Popovich v. Indiana Dep’t of State Revenue (Popovich VII), 52 N.E.3d 73 (Ind. Tax Ct. 2016) (prior determination that 2003 proposed assessment was void)
Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007) (burden of proof and prima facie case standard in Indiana Tax Court)
Donovan v. Grand Victoria Casino & Resort, L.P., 934 N.E.2d 1111 (Ind. 2010) (upholding casino exclusion of card counters)
Slade v. Caesars Entm’t Corp., 373 P.3d 74 (Nev. 2016) (casino exclusion of card counters upheld)