Harry, a single 60-year-old taxpayer with no dependents, became very rich from his previous career as a cop and is now a compulsive gambler (he always feels lucky). In 2017, Harry borrowed $5 million to gamble and lost it all. He was unable to pay it back in full, but settled the debt for a $75,000 payment in December of 2017.

Consider the following independent scenarios:

1) Harry borrowed the money from Ronald’s Taj McHal in Las Vegas. He signed a loan agreement and borrowed all the money at once.

2) Instead, because Harry was such a good patron, the Taj McHal let him borrow money periodically over the course of the year. There was no documentation of each borrowing and due to the nature of Harry’s compulsive gambling, he lost track of the amounts.

3) Rather than a casino, assume Harry borrowed the money from his bookie in California, where gambling is illegal, making the debt unenforceable. (Fortunately, Harry developed a very particular set of skills over his long career, so he’s not worried about the bookie).

What is Harry's taxable income and tax liability for each scenario?

Also, cite tax code used or other primary authority and 1-2 cites from relvant cases if possible.