Re: Self Employment Income of Gambling Winnings

"Gross Winnings" are the amount he won less the amount he bet; which is what he did. He didn't subtract any expenses; losing bets are not expenses, they are losses.

Is it the amount he won minus the total amount he bet, or the amount he won minus the amount he bet on the winning bets? If he places a bet of $5,000 and wins, he gets $10,000 back. Gross winnings is $5,000 on that bet. Suppose, in addition, he placed a bet of $2,000 and lost. Are his gross winnings $3,000 or $5,000? Suppose both bets were somehow placed in one transaction? At the extreme, "gross winnings" can't be calculated. Consider a poker player who wins 100 hands over the course of an evening. He knows how much he started with and how much he ended with, but it's practically impossible to keep track of winnings and losses on each hand. If he's allowed to count cash out - cash in as winnings, why can't someone who opens an account at a sports book do the same? Seth

Ah, but gross winnings are entirely reportable and losings only deductible on schedule a, assuming he's not in the trade or business and thus net would be reported on the schedule c. When a gambling entry is made on line 21, it is ALWAYS gross! And if you don't believe it, I can tell you about some new clients whose VITA preparers did just what you are suggesting, i.e. line 21. ChEAr$, Harlan Lunsford, EA n LA

Okay, I looked it up and find you are correct. But that is positively insane. I was just in Las Vegas and didn't see a single person keeping the required log. Having a law that no one observes just encourages contempt for all laws. Doesn't actually matter to me; I don't gamble, I was there for a woodworking show.

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Wasn't there a long discussion of this topic in the last year or two on this forum, covering esoteric topics like after-tax basis in lottery tickets and such?

Yes. Placing a bet does not require any money to change hands at all. You and I can shake hands on it if we trust each other, or if I employ vicious henchman who will break your kneecaps if you don't pay up. However, often one or both bettors are required to put up a deposit. Examples of the former include lottery, racetrack, or casino betting, examples of the latter include poker pots or office betting pools. This money is not a gambling loss until such time as you actually lose the bet. If you win the bet, the return of your deposit is neither a winning nor a loss. Example: I "buy" a lottery ticket for $1. If I lose, the state keeps my $1 deposit to cover my side of the bet, and I have a $1 gambling loss. If I win and the ticket pays $20, the state returns my $1 deposit and I have a gross win of $19. This is not a "net", otherwise you would have to somehow posit that I both won $20 and lost $1 on the same bet -- but you can't both win and lose the same bet.

Gross winnings = $5,000, loss = $2,000. Each bet is a single, separate transaction. You either win or lose (but not both) each bet, regardless of whether you made an advance deposit.

I don't see why. Although 100 hands in the course of single evening does not sound like a very relaxed game to me (at five hours, this would be one complete hand every three minutes without any breaks), I certainly could keep next to me a sheet of paper with two columns: hand number, win/loss amount. It shouldn't take me any longer to jot these two numbers down than it does to take a sip of my beer. Taxpayers are expected to keep track of hundreds of individual business auto trips or meals, why should poker hands be any different?

-Mark Bole

"positively insane" ; tax law ; hmmmm..!

What amazes me sometimes is to receive a brochure or get an email announcement for tax courses, that education which we have to take each year to keep our licenses you know, and many of them are held where? Las Vegas! Even the state association of EA's over in Mississippi hold their seminar at known gambling dens of iniquity. dens of iniquities? ChEAr$, Harlan Lunsford, EA n LA

Moderator: Casinos offer low room rates and low cost meals.

What if I make a deal with a casino, where I hand them $7,000 and the terms are: "If A and B win, I get $14,000. If A wins and B loses, I get $10,000. If B wins and A loses, I get $4,000. If A and B both lose, I get $0." Sure, that looks like a $5,000 bet on A and a $2,000 bet on B, but it's really one more complicated bet.

When I used to play, that would be slow. Most hands don't take that long.

Taxpayers don't take hundreds of individual business trips one evening while they're half-drunk. There's also precedent that if you walk into a casino, buy $10,000 worth of chips, gamble for a while, and cash out $30,000 worth of chips and leave, you have $20,000 gross winnings (as the W2G form the casino gives you will assert), not maybe $120,000 gross winnings and $100,000 gross losses. So if you play poker for chips, why shouldn't the same apply? Seth

I would be willing to bet, except for a few professional gamblers, that nobody actually does this. If they have a record, it is probably something they dummied up afterwards. What would the harm be in taking the net of winnings minus losses? Taxwise it would come out the same (wouldn't it?) and it wouldn't encourage/force people to lie on their tax returns. I don't gamble, so it is a moot point for me personally; I just think that encouraging fraud is bad practice. If they have to lie about this, it is a small step to lying about otherthings. A gateway lie, if you will.

There are a lot of machine players who insert a card into the machine when they play. The casino stores that history. I suspect that info is potentially available to the player.

And you can give your casino card to the tables manager who will record yourbetting history several times during your table play. While that will be usful for recording your gambling history, it also will decide if the casino will offer to comp you in the future. BTW if you were at a table and pulled out a log book to record your betting hstory, you would be, um, invited to put it away or leave the table at once. Blackjack tip of the day: If you find yourself at a table where someone decides to split tens, leave immediately.

-- ArtKamlet at a o l dot c o m Columbus OH K2PZH

Moderator: Blackjack tip: It's ok to split 5's if the pit boss is watching you closely and you want to convince her/him that you are clueless.

I actually saw a woman dealt two fives.

She slid the double down money to the card, and the dealer, instead of verifying her bet, dealt her one card, maybe a 6. With a straight face she indicated she wanted to hit that

5-6! As if she had intended to split all along! The pit boss let her split, -- she lost, and I left the table.

-- ArtKamlet at a o l dot c o m Columbus OH K2PZH

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No, taxwise it's the difference in Adjusted Gross Income (AGI) that is at issue. Putting gross winnings in AGI helps set certain other limits in many places throughout the tax return. Even with equal net incomes, the return with the higher AGI will most likely end up paying more tax.

-Mark Bole

The $7,000 deposit you made, and the lack of same by the casino, is irrelevant. You have broken out all the possible outcomes of two separate bets in one statement, but doing so does not merge them into a single bet. Bets can be bundled -- you won't make any of them unless you make all of all, or one bet is contingent on the outcome of a prior bet -- but they are still separate bets. I argue that every time it's your turn to put money in the poker pot, you are making a new, separate bet with each individual at the table. This would truly be a record-keeping nightmare. Now, people who actually play poker may not see it this way, and as a practical matter, the tax people probably don't see it this way. I assume they would be glad if anyone reported any of their private poker winnings on any significant scale. [...]

If your poker buddies issued you W2-G statements, I think the IRS would be happy with that number.

-Mark Bole

If casino issues you a 1009-G, the expected outcomes are:

A B 1099-G

- - ------ Y Y $ 7000 Y N 3000 N Y (3000) N N (7000)

Talk with an accountant at a casino and find how 1099-G amounts are determined.

What if the deal cannot be decomposed? "If they both win, I get $10,000. If one of them wins, I get $2,000. If neither wins, I get $0." Seth