Tax Court Ruling - Slot player in the business

[pmacdaddy]

Reading it through. It says she was allowed to deduct gambling losses to offset gains. Isn't that the case for anyone with reportable gambling income?

It says she wasn't allowed to deduct the net gambling losses against her regular (trucking) income. So what did she really accomplish?

Is it an issue of being able to deduct expenses associated with her slot play and carryover of losses?

[SniperSB23]

Originally Posted by pmacdaddy

Reading it through. It says she was allowed to deduct gambling losses to offset gains. Isn't that the case for anyone with reportable gambling income?

It says she wasn't allowed to deduct the net gambling losses against her regular (trucking) income. So what did she really accomplish?

Is it an issue of being able to deduct expenses associated with her slot play and carryover of losses?

I'm no expert on taxes but I believe the difference is that she could still take the standard deduction instead of having to do an itemized deduction. Let's say she made $50,000 from her business and $7,000 from gambling.

With the itemized deduction she would have $57,000 for income and then take off the itemized deduction of $7,000 to wind up at $50,000.

Being able to offset the $7,000 above the line means she only has income of $50,000. She wouldn't need an itemized deduction so could then take the standard deduction of $5,350 to wind up with $44,650. I assume this wouldn't work for anyone who is a homeowner and already does an itemized deduction.

[pmacdaddy]

Maybe. But if you run a trucking business and piss away $1.4M a year on slots and can't itemize on your tax return, you have some serious problems.

[SniperSB23]

Originally Posted by pmacdaddy

Maybe. But if you run a trucking business and piss away $1.4M a year and can't itemize on your tax return, you have some serious problems.

I'm thinking playing slots for over 40 hours a week already puts you in the serious problems category.

[Cannon Shell]

The fact that the court found her to be a gambling 'expert' is a troubling sign that our justice system has gone insane.

[SniperSB23]

Originally Posted by Cannon Shell

The fact that the court found her to be a gambling 'expert' is a troubling sign that our justice system has gone insane.

Well, she did consult with casino employees....

[Dunbar]

Originally Posted by Cannon Shell

The fact that the court found her to be a gambling 'expert' is a troubling sign that our justice system has gone insane.

And don't forget she consulted the slot attendants, which shows how shrewd she was.

Here's a link to the opinion: http://www.ustaxcourt.gov/InOpHistor...pd.SUM.WPD.pdf

The whole opinion reads like a parody. Honestly, it's like the Tax Court was trying to be absurd. The paranoid side of me, however, wonders if the Tax Court is trying to either provoke Congress into writing some new tax code which would prohibit anyone from filing a Sch C as a professional gambler, or else provoke the Supreme Court into overturning Groetzinger.

Note that a "summary opinion" cannot be used as a precedent for other cases.

Originally Posted by pmacdaddy

Reading it through. It says she was allowed to deduct gambling losses to offset gains. Isn't that the case for anyone with reportable gambling income?

It says she wasn't allowed to deduct the net gambling losses against her regular (trucking) income. So what did she really accomplish?

Is it an issue of being able to deduct expenses associated with her slot play and carryover of losses?

Yes, you can deduct expenses if you file Sch. C, but I'm pretty sure you cannot carry over losses. I know for sure there's a specific prohibition against writing off gambling business losses against other income--that's even alluded to in this Tax Court opinion. And I'm reasonably sure that you cannot carry over losses.

Her biggest incentive to file as a business is to avoid the problems with the Alternative Minimum Tax. If you declare your losses as a deduction on Sch A, you can still get hit with a big tax bill because of the AMT.

It's not clear to me what was different about 2003 from the other years. It says she made a profit in 2003, but then it seems to say she deducted her losses up to the amount of her winnings.

--Dunbar

[pmacdaddy]

Thanks Tax Guys.

That AMT stuff is wild in it's own right...

[pmacdaddy]

Originally Posted by SniperSB23

I'm thinking playing slots for over 40 hours a week already puts you in the serious problems category.

Very true

[Holland Hacker]

Originally Posted by pmacdaddy

Reading it through. It says she was allowed to deduct gambling losses to offset gains. Isn't that the case for anyone with reportable gambling income?

It says she wasn't allowed to deduct the net gambling losses against her regular (trucking) income. So what did she really accomplish?

Is it an issue of being able to deduct expenses associated with her slot play and carryover of losses?

The difference is where you take the deduction on your return.

If it is trade or business it goes on page one, showing 0 in income.

If it is not a trade or business the income goes on page 1 and the deductions go on schedule A "below the line".

This primarily impacts your AGI which could exclude you from certain income limited benefits like the child tax credit, and other credits not to mention would probably put your AGI into the phase out of personal exemptions and itemized deductions.

I think there might also be another classification of a professional gambler, where you would be able to deduct track admission, handicapping materials, etc against your winnings.