- Status
- Judgment entered (judgment)
- As of
- 10 Oct 1990 · read from the court record
- Court
- U.S. Court of Appeals for the Third Circuit (from the Tax Court) · Appellate court
- Docket
- 3d Cir. No. 90-1240
- Judge
- Cowen (author), Weis; Stapleton dissenting
- Filed
- 1987
- Type
- Individual suit, gambling tax litigation
- Money
- No settlement fund or award on record
- Payout
- No payout exists as of 14 Nov 2026
Status words follow the court record: a complaint states one side's allegations, only the court's orders decide anything. Filing a settlement claim is always free.
What this case is about
Resorts extended credit to Zarin after New Jersey regulators had ordered it to stop; he lost millions, the casino sued for $3.4 million and settled for $500,000. The Tax Court (92 T.C. 1084, 1989) found $2.9 million of income. The Third Circuit reversed (916 F.2d 110): the chips were not property and the debt was unenforceable under state law and disputed, so settling it for less created no income. Still the leading case on the tax treatment of forgiven gambling markers.
What this case is about
Zarin v. Commissioner of Internal Revenue is a federal tax case decided by the U.S. Court of Appeals for the Third Circuit (No. 90-1240, 916 F.2d 110), on appeal from the Tax Court (92 T.C. 1084, 1989).
David Zarin, a compulsive craps player at Resorts International in Atlantic City, challenged the IRS Commissioner. The case started in 1987.
The question was whether settling a USD 3,435,000 casino credit debt for USD 500,000 produced USD 2.9 million of discharge-of-indebtedness income. It is a leading example in gambling tax litigation for forgiven gambling markers.
Who is covered
The ruling concerns a gambler who owed a casino credit debt and settled it for less. David Zarin was the only taxpayer in the case, and no class exists.
The wider list of American cases is on the page for gambling lawsuits in the United States.
Is there a payout?
No payout exists in this case. It is a tax dispute between one taxpayer and the IRS, and the record shows no fund, settlement or consumer claim process.
The outcome removed a tax liability. It paid no money to Zarin or to any other player.
What the court decided
The facts came first. Resorts extended credit to Zarin after New Jersey regulators had ordered it to stop. He lost millions, the casino sued for USD 3.4 million, and the parties settled for USD 500,000.
The Tax Court found USD 2.9 million of income (the asserted discharge income was USD 2,935,000). On 10 October 1990 the Third Circuit reversed in an opinion by Judge Cowen, joined by Judge Weis, with Judge Stapleton dissenting.
The court held that the chips were not property and that the debt was unenforceable under state law and disputed, so settling it for less created no income.
As of 14 November 2026 the case is decided, and it remains the leading case on the tax treatment of forgiven gambling markers.
Why it matters
The decision treats a disputed, unenforceable casino debt differently from an ordinary loan that a lender forgives. A different question is whether settlement payments to players are taxable. That is covered in Are Gambling Settlement Payments Taxable? with the IRS, ATO, HMRC and BFH references.
Questions people ask
How much casino debt did Zarin settle?
Zarin owed USD 3,435,000 to Resorts International and settled for USD 500,000. The IRS asserted USD 2,935,000 of discharge income on the difference.
Did the Third Circuit agree with the Tax Court?
No. The Tax Court found income in 1989. The Third Circuit reversed on 10 October 1990 (916 F.2d 110), with one judge dissenting.
Why did the court find no income?
The Third Circuit held that the chips were not property and that the debt was unenforceable under state law and disputed. Settling such a debt for less created no discharge income.
Who is involved
Plaintiffs: David Zarin (compulsive craps player at Resorts International, Atlantic City)
| Defendants | Commissioner of Internal Revenue |
|---|---|
| Judge | Cowen (author), Weis; Stapleton dissenting |
| Claims |
|
Is there a payout?
No payout exists in this case as of 14 Nov 2026.
What happens next
No future date is on the record we hold. The case is closed on the record we hold; later appeals or enforcement steps would be added here.
Timeline
2 dated steps on record, oldest first. Future dates come from court notices and can move.
| Date | Event |
|---|---|
| 1987 | Filed |
| 10 Oct 1990 | Judgment entered |
Documents and sources
4 primary sources (court file, administrator notice, regulator) and 2 secondary. Press is supporting evidence only.
- Court document: case.law (law-firm page, not linked)
- Press coverage: quimbee.com
| What it supports | Source | Type | Retrieved |
|---|---|---|---|
| Third Circuit opinion text, 916 F.2d 110 | law.resource.org (law-firm page, not linked) | n/a | 14 Nov 2026 |
| Tax Court facts: $3,435,000 debt settled for $500,000, deficiency | quimbee.com | n/a | 14 Nov 2026 |
| Zarin v. Commissioner, 916 F.2d 110, No. 90-1240, decided 10 Oct 1990, Cowen J. (Weis joining), Stapleton J. dissenting; reversing the Tax Court (92 T.C. 1084); USD 2,935,000 asserted discharge income | static.case.law (law-firm page, not linked) | primary | 14 Nov 2026 |
| decision date 10 Oct 1990 | static.case.law (law-firm page, not linked) | primary | 14 Nov 2026 |
| panel | static.case.law (law-firm page, not linked) | primary | 14 Nov 2026 |
| law.resource.org URL returns 404; Caselaw Access Project copy of 916 F.2d 110 | case.law (law-firm page, not linked) | primary | 14 Nov 2026 |
Last checked against the sources on 14 Nov 2026. Found an error? Tell us and we correct the record with a dated note.