For his livelihood, Robert Groetzinger (plaintiff) depended solely on his income from gambling on dog races, on which he spent between 60 and 80 hours a week. In 1978, Groetzinger suffered a net gambling loss. The commissioner of internal revenue (defendant) determined that, under the alternative-minimum-tax law in effect in 1978, a portion of Groetzinger’s losses was a taxable item of tax preference. Groetzinger sought a redetermination in the United States Tax Court. The tax court ruled in Groetzinger’s favor, finding that the entirety of Groetzinger’s 1978 losses arose from tax-deductible trade or business activity under § 162(a) of the federal tax code. The court of appeals affirmed. The United States Supreme Court granted certiorari.