WASHINGTON, July 2 -- A gambler who wins $50,000 at the tables and loses $50,000 over the same year walks away even, no richer and no poorer. Under a tax rule the Internal Revenue Service moved a step closer to enforcing this week, that gambler will still owe the federal government income tax on $5,000 that never actually existed.

The IRS said Wednesday it will hold a public hearing July 17 on proposed regulations implementing a provision that limits gambling loss deductions to 90 percent of winnings, a change tucked into the sweeping tax law President Trump signed almost exactly a year ago. The hearing will not decide whether the rule survives. It will decide how the IRS writes the fine print for a rule that professional gamblers, casin...