Zarin v. Commissioner

916 F.2d 110 (3rd Cir. 1990)


Zarin was an engineer who had a gambling habit. In 1978, he got a credit line at Resorts in Atlantic City. That line was $10,000. Zarin developed a reputation as an extravagant high roller who routinely bet the maximum while playing craps. This resulted in his credit limit being increased to $200,000. Between June 1978 and December 1979, Zarin lost $2,500,000 at the craps tables for which he paid those losses in full. In response to credit abuses, the gaming commission made any further extensions of credit to Zarin illegal. Resorts illegally continued to grant Zarin credit by what it called considered cleared credit and this trip only credit. By January 1980, Zarin was gambling compulsively and uncontrollably at Resorts spending as much as 16 hours per day at the tables. Dishonored checks totaled $3,435,000, and eventually, Resorts cut off the credit. Resorts sued for the debt and Zarin denied enforceability in that the claims were unenforceable under New Jersey gaming regulations intended to protect compulsive gamblers. The dispute was settled for $500,000. The IRS then got involved and determined that Zarin owed them money first under larceny by trick and then simply because the $2,935,000 had been forgiven by Resorts. The tax court ruled for the IRS and that Zarin owed $2,047,245 and with interest and penalties $5,209,033.96.