Positive TAX Ruling for Gamblers

Tax Court Ruling can be read here...

http://www.ustaxcourt.gov/InOpHistor...ER.TCM.WPD.pdf

Key point is that casual gambler was allowed to NET casino jackpot W-2G with additional slot play. This does not mean you net losses with wins through the year as a casual gambler.

...from ruling
petitioners entered the casino with $500 and took home $1,600 of winnings,
the amount of gambling income which petitioners should have
reported on their 2005 return was $1,100 ($2,000 jackpot winnings
less $500 brought to the casino for gambling and less $400 taken
from the jackpot for additional gambling) rather than $2,000 as
determined in the notice of deficiency.

KEY HERE IS THEY ONLY NEEDED TO REPORT $1,100 and NOT $2,000 W-2G AMOUNT

...also
Drawing an analogy to the recovery of a capital investment,
this Court has held that a casual gambler’s gross income from a
wagering transaction should be calculated by subtracting the bets
placed to produce the winnings, not as a deduction in calculating
adjusted gross income or taxable income but as a preliminary
computation in determining gross income

This would be very beneficial to people who only take the standard deduction or who live in states who have a state income tax which does not allow gambling loss deductions.

To me there should be no difference if a person substitutes casino with racetrack in the above ruling.

[Scav]

If I read that correctly, they got pinned because they forgot to report it, and then when they tried to report it, they tried to take the losses as an itemized deduction, when they took the standard already.

But yeah, this goes to the point of, lets say a P6 player. If said player puts a 4k ticket in, and the P6 hits and pays $2,500, he is forced to report that on his 1040 becuase of the 600/2 threshold.

Originally Posted by Scav

But yeah, this goes to the point of, lets say a P6 player. If said player puts a 4k ticket in, and the P6 hits and pays $2,500, he is forced to report that on his 1040 becuase of the 600/2 threshold.

Exactly, what isn't clear is if you can further reduce the W-2G issued on a race with subsequent losses within that race or day. That is what needs clarification, but for a slot machine player to be able to "net" a day at the casino, shouldn't a horse player also be able to "net" a day at the track.

[Scav]

This one is classic...

http://www.ustaxcourt.gov/InOpHistor...ca.sum.WPD.pdf

I was looking for the Hockman v. Commissioner one but I can't find it...

[Scav]

Originally Posted by SundaySilence

Exactly, what isn't clear is if you can further reduce the W-2G issued on a race with subsequent losses within that race or day. That is what needs clarification, but for a slot machine player to be able to "net" a day at the casino, shouldn't a horse player also be able to "net" a day at the track.

The answer from me would be yes but as the code is written, the real answer is no.

Originally Posted by Scav

This one is classic...

http://www.ustaxcourt.gov/InOpHistor...ca.sum.WPD.pdf

I was looking for the Hockman v. Commissioner one but I can't find it...

I read your Calif. case and that guy got screwed for not having proof/documentation of losses.

I found Hockman at
http://www.taxesandpoker.com/uploads...man_v_Comm.pdf

[Scav]

Originally Posted by SundaySilence

I read your Calif. case and that guy got screwed for not having proof/documentation of losses.

I found Hockman at
http://www.taxesandpoker.com/uploads...man_v_Comm.pdf

I was more laughing at the descriptions of that case. Thanks for finding that, gonna read it now

[chucklestheclown]

If that decision has the force of law it certainly should carry over to horseracing. It was predicated on what they came in with and what they left with. But, what if it were the Oaks/Derby Double, or I never leave my house?

Originally Posted by chucklestheclown

If that decision has the force of law it certainly should carry over to horseracing. It was predicated on what they came in with and what they left with. But, what if it were the Oaks/Derby Double, or I never leave my house?

That just triggered an interesting thought...what if the money is held in an ADW and no withdrawal is taken and the money is just used for more wagers. How would that be different than waiting for redemption of coins from a slot machine? Even though a player is issued a W-2G, if the money isn't withdrawn has there been any income generated?

[jpops757]

Originally Posted by SundaySilence

That just triggered an interesting thought...what if the money is held in an ADW and no withdrawal is taken and the money is just used for more wagers. How would that be different than waiting for redemption of coins from a slot machine? Even though a player is issued a W-2G, if the money isn't withdrawn has there been any income generated?

Withdraw and invest in a tax defered anuity with flexable withdrawals to reduce tax burden?

[Holland Hacker]

Originally Posted by SundaySilence

That just triggered an interesting thought...what if the money is held in an ADW and no withdrawal is taken and the money is just used for more wagers. How would that be different than waiting for redemption of coins from a slot machine? Even though a player is issued a W-2G, if the money isn't withdrawn has there been any income generated?

I would think the Govt's position is that you have constructive receipt and therefore income.

Originally Posted by Holland Hacker

I would think the Govt's position is that you have constructive receipt and therefore income.

These slot players in the cited example had a "constructive receipt" and yet were able to net their slot play on MULTIPLE machines & MULTIPLE transactions to reduce their tax burden.

The better view is that a casual gambler, such as
the taxpayer who plays the slot machines, recognizes a
wagering gain or loss at the time she redeems her
tokens. We think that the fluctuating wins and losses
left in play are not accessions to wealth until the
taxpayer redeems her tokens and can definitively
calculate the amount above or below basis (the wager)
realized. See Commissioner v. Glenshaw Glass Co., 348
U.S. 426 (1955). For example, a casual gambler who
enters a casino with $100 and redeems his or her tokens
for $300 after playing the slot machines has a wagering
gain of $200 ($300-$100). This is true even though the
taxpayer may have had $1,000 in winning spins and $700
in losing spins during the course of play. Likewise, a
casual gambler who enters a casino with $100 and loses
the entire amount after playing the slot machines has a
wagering loss of $100, even though the casual gambler
may have had winning spins of $1,000 and losing spins
of $1,100 during the course of play. [Fn. ref.
omitted.]

[chucklestheclown]

Originally Posted by SundaySilence

That just triggered an interesting thought...what if the money is held in an ADW and no withdrawal is taken and the money is just used for more wagers. How would that be different than waiting for redemption of coins from a slot machine? Even though a player is issued a W-2G, if the money isn't withdrawn has there been any income generated?

That is what I meant by never leaving the house! I think there's a strong argument that it's what your balance reflects at the end of a day.