updated 5/17/2006 3:48:51 PM ET 2006-05-17T19:48:51

What Estelle Busch lost at the slot machines, she won with tax collectors.

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The Minneapolis woman with a 60-hour-a-week gambling regimen — she labeled it a business — convinced the Minnesota Supreme Court that she should be able to deduct $200,000 in gambling losses over three years from her taxes. In all, she won $1.5 million and lost $1.7 million over the span.

"It was just plain hard work," said the 72-year-old retiree.

State tax collectors had been demanding she pay $102,000 in back taxes.

In siding with Busch, the state Supreme Court ruled she didn't owe the back taxes. Justices concurred that she was involved in a "trade or business," even if it wasn't a particularly reasonable one to practice.

Justice Paul Anderson wrote that she "gambled full time, made attempts to improve her 'skill' at using slot machines and to apply that skill, kept detailed, businesslike records of her winnings and losses."

Busch had argued that she researched slot machines on the Internet and frequently asked Mystic Lake staff and customers which machines were "rolling." In their argument, the Department of Revenue contended that playing the slots required no skill or research and was entirely dependent on chance.

Minnesota and federal tax formulas permit taxpayers to claim an itemized deduction for gambling losses to the extent of their winnings.

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