United States v. D. I. Operating Co., United States of America v. United Resort Hotels, Inc., United States of America v. Desert Inn Operating Company

Section 4401 of the Internal Revenue Code of 1954 imposes an excise tax of ten per cent on wagers. Section 4421(1) (B) of the code defines a wager as:

Under section 4421 the Treasury has promulgated Treasury Regulation section 44:4421(c) (4) construing the statutory language “conducted for profit”:

The question presented here is whether this Treasury Regulation is valid insofar as it interprets the word “profit” in section 4421(1) (B) of the code to include indirect as well as direct profit. The district court found that section 4421(1) (B) clearly and unambiguously referred only to direct profits of a wagering pool and held the Treasury Regulation to be invalid. We reverse.

This case arises from the following undisputed facts as reported in the opinion of the district court. The three corporate defendants (herein referred to as the “Desert Inn” or the “Inn”) seek to recover wagering taxes paid under protest for the period April, 1953, through April, 1959. Beginning in 1953, and continuing through the years in question, the Desert Inn sponsored an annual golf “Tournament of Champions” in Las Vegas, Nevada. Each year during the period in question a “Calcutta” wagering pool was…