Katherine Kalk v. Comm., TCM 2024-82

Katherine Kalk worked as an IT consultant. During 2011 and 2012 she provided the bulk of her services to a client that had 120,000 employees. On her tax returns for those years, she claimed cost of goods sold for computers, computer peripherals and software. She also claimed expenses for legal, home office, rental, utilities, commissions, supplies and other expenses. Unfortunately, Katherine was unable to provide one shred of documentary evidence to support her deductions. Ms. Kalk also filed a Schedule C for an activity she described as developing a “casino app” for use by casinos and their patrons. She testified that she recorded activity playing slot machines, with and without her player card, to see if there was a difference in how the machines acted. She produced a 27-page spreadsheet showing “cash in” and “cash out” on an almost daily basis. She also produced her casino win-loss statements and bank records showing casino ATM withdrawals.

The court could not utilize Cohan for her IT consultant work in part because there were no documents that could corroborate her testimony, and in part because the court clearly did not believe her. She claimed that she was purchasing computer hardware for a company that had 120,000 employees. The court observed that companies of that size would not rely upon IT contractors to acquire computer hardware. The computer hardware would be acquired by the company to ensure both compatibility and security concerns were mitigated.  The court also did not believe her testimony about developing a “casino app.” She was just another slot machine gambler. However, they allowed gambling losses based upon the records she did produce, up to the amount of her winnings.