DONE! Treasury/IRS Issues Updated Tax Rules

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Example 10. (i) B places a $15 bet at the cashier window at the racetrack for
horse A to win the fifth race at the racetrack that day. After placing the first bet, B gains
confidence in horse A’s prospects to win and places an additional $40 bet at the cashier
window at the racetrack for horse A to win the fifth race, receiving a second ticket for
this second bet. Horse A wins the fifth race, and B wins a total of $5,500 (100 to 1
odds) on those bets. The $15 bet and the $40 bet are identical wagers under
paragraph (c)(1)(iii)(A) of this section because winning on both bets depended on the
occurrence of the same event and the bets are placed in the same parimutuel pool with
the same payer. This is true regardless of the fact that the amount of the wager differs
in each case.
(ii) B cashes the tickets at different cashier windows. Pursuant to paragraph (d)
of this section and §1.6011-3, B completes a Form W-2G indicating that the amount of
winnings is from identical wagers and provides the form to each cashier. The payments
by each cashier of $1,500 and $4,000 are less than the $5,000 threshold for
withholding, but under paragraph (c)(1)(iii)(A) of this section, identical wagers are
treated as paid with respect to a single wager for purposes of determining the proceeds
from a wager. The payment is not subject to withholding or reporting because although
the proceeds from the wager are $5,445 ($1,500 + $4,000 - $55), the proceeds from the
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wager are not at least 300 times as great as the amount wagered ($55 x 300 =
$16,500).
Example 11. B makes two $1,000 bets in a single “show” pool for the same jai
alai game, one bet on Player X to show and one bet on Player Y to show. A show bet is
a winning bet if the player comes in first, second, or third in a single game. The bets are
placed at the same time at the same cashier window, and B receives a single ticket
showing both bets. Player X places second in the game, and Player Y does not place
first, second, or third in the game. B wins $8,000 from his bet on Player X. Because
winning on both bets does not depend on the occurrence of the same event, the bets
are not identical bets under paragraph (c)(1)(iii)(A) of this section. However, pursuant to
the rule in paragraph (c)(1)(ii) of this section, the amount of the wager is the aggregate
amount of both wagers ($2,000) because the bets were placed in a single parimutuel
pool and reflected on a single ticket. The payment is not subject to withholding or
reporting because although the proceeds from the wager are $6,000 ($8,000 - $2,000),
the proceeds from the wager are not at least 300 times as great as the amount wagered
($2,000 x 300 = $600,000).

Example 12. B bets a total of $120 on a three-dog exacta box bet ($20 for each
one of the six combinations played) at the dog racetrack and receives a single ticket
reflecting the bet from the cashier. B wins $5,040 from one of the selected
combinations. Pursuant to the rule in paragraph (c)(1)(ii) of this section, the amount of
the wager is $120, not $20 for the single winning combination of the six combinations
played. The payment is not subject to withholding under section 3402(q) because the
proceeds from the wager are $4,920 ($5,040-$120), which is below the section 3402(q)
withholding threshold.

Example 13. B makes two $12 Pick 6 bets at the horse racetrack at two different
cashier windows and receives two different tickets each representing a single $12 Pick
6 bet. In his two Pick 6 bets, B selects the same horses to win races 1-5 but selects
different horses to win race 6. All Pick 6 bets on those races at that racetrack are part
of a single parimutuel pool from which Pick 6 winning bets are paid. B wins $5,020 from
one of his Pick 6 bets. Pursuant to the rule in paragraph (c)(1)(ii) of this section, the
bets are not aggregated for purposes of determining the amount of the wager because
the bets are reflected on separate tickets. Assuming that the applicable rate is 25%, the
racetrack must deduct and withhold $1,252 (($5,020-$12) x 25%) because the amount
of the proceeds of $5,008 ($5,020 - $12) is greater than $5,000 and is at least 300 times
as great as the amount wagered ($12 x 300 = $3,600). The racetrack also must report
B’s winnings on Form W-2G pursuant to paragraph (e) of this section and furnish a copy
of the Form W-2G to B.

Example 14. C makes two $50 bets in two different parimutuel pools for the
same jai alai game. One bet is an “exacta” in which C bets on player M to win and
player N to “place.” The other bet is a “trifecta” in which C bets on player M to win,
player N to “place,” and player O to “show.” C wins both bets and is paid $2,000 with
respect to the bet in the “exacta” pool and $3,100 with respect to the bet in the “trifecta”
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pool. Under paragraph (c)(1)(iii)(A) of this section, the bets are not identical bets.
Under paragraph (c)(1)(ii) of this section, the bets are not aggregated for purposes of
determining the amount of the wager for either payment because they are not wagers in
the same parimutuel pool. No section 3402(q) withholding is required on either
payment because neither payment separately exceeds the $5,000 withholding
threshold.
Example 15. C makes two $100 bets for the same dog to win a particular race. C
places one bet at the racetrack and one bet at an off-track betting establishment, but the
two pools constitute a single pool. C receives separate tickets for each bet. C wins
both bets and is paid $4,000 from the racetrack and $4,000 from the off-track betting
establishment. Under paragraph (c)(1)(ii) of this section, the bets are not aggregated
for purposes of determining the amount of the wager because the wager placed at the
racetrack and the wager placed at the off-track betting establishment are reflected on
separate tickets, despite being placed in the same parimutuel pool. No section 3402(q)
withholding is required because neither payment separately exceeds the $5,000
withholding threshold.
Example 16. C places a $200 Pick 6 bet for a series of races at the racetrack on
a particular day and receives a single ticket for the bet. No wager correctly picks all six
races that day, so that portion of the pool carries over to the following day. On the
following day, C places an additional $200 Pick 6 bet for that day’s series of races and
receives a new ticket for that bet. C wins $100,000 on the second day. Pursuant to the
rule in paragraph (c)(1)(ii) of this section, the bets are on two separate tickets, so C’s
two Pick 6 bets are not aggregated for purposes of determining the amount of the
wager. Assuming that the applicable rate is 25%, the racetrack must deduct and
withhold $24,950 (($100,000 - $200) x 25%) because the amount of the proceeds of
$99,800 ($100,000 - $200) is greater than $5,000, and is at least 300 times as great as
the amount wagered ($200 x 300 = $60,000). The racetrack also must report C’s
winnings on Form W-2G pursuant to paragraph (e) of this section and furnish a copy of
the Form W-2G to C.