DF2 <replyvia[at]newsgroup_please.com> wrote:
- quote -

I made some phone calls and learned that the more I understand
the less I want to know. There are a series of satellite
tournaments and they did start in 2008. But the final tournaments
will all be in 2009.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<removeps-groups[at]yahoo.com> wrote in message
news:bbee9d41-5033-4317-b629-291b12daff4d[at]x31g2000prc.googlegroups.com...
- quote -

A $2 bet that returns $0 because the bet failed. That's a $2 loss.

A $2 bet that returns $1 (like in the states' lotteries). That's a $1
loss.

- quote -

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Mar 29, 7:00 pm, "D. Stussy" <s...[at]bde-arc.ampr.org> wrote:

- quote -

So what is an example of a gambling loss?

- quote -

Yes, you're right. I do think he has to allocate the 4k between
personal and business use though.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <gqoqk7$fiv$1[at]aux.snarked.org> ,
D. Stussy <replies[at]newsgroups.kd6lvw.ampr.org> wrote:
- quote -


While I do not always agree with Stussy, I do agree that the W-2G
will be issued for the full $2,500 in this example.
--

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

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Dick Adams" <rdadams[at]panix.com> wrote in message
news:gqob85$101$1[at]reader1.panix.com...
- quote -

Wrong. The track will issue a W-2G for $2,500 because that's what they're
supposed to report. It's up to you to prove that your bet was $100.

- quote -

That's because information returns (W-2G, 1099-G) report GROSS PROCEEDS,
not winnings. This is just like form 1099-B that reports GROSS PROCEEDS
from the sales of securities. Basis information (prior to 2012) is NOT
part of the report on the document. The taxpayer is responsible for
keeping records of his bets and reconciling them against his winning
transactions, just like any other transaction where basis is a factor. A
bet is an asset at risk.

- quote -

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Dick Adams" <rdadams[at]panix.com> wrote in message
news:gqla9m$dlp$1[at]reader1.panix.com...
- quote -

I dispute that. He had gross gambling PROCEEDS of $33k, but to determine
winnings, one has to subtract the amounts that constitute the returns of
the bets. Winnings do not equal proceeds unless the amount bet was zero,
which is not the case here.

If one bets $2 and gets $5, one is only $3 ahead. Out of the winning
proceeds of $5, the first $2 is the return of the bet, and the last $3 are
the winnings.

IRC Section 165(d) makes that clear: "Losses ... shall be allowed only to
the extent of the GAINS (emphasis added) ...."

IRC Section 1001 defines a gain or loss as the difference between the
amount realized (proceeds) and basis (for gambling, the amount bet).
Winnings are gains, not proceeds.

He has gross gambling winnings of $22,800.

- quote -

He has NO gambling losses (from these transactions). What you call losses
were actually his bets.

- quote -

I disagree: IRC 212 - "Expenses for the production of income."

He has winnings with which the expense may offset. IRC 183 doesn't apply.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In misc.taxes.moderated, Dick Adams wrote:

- quote -

While you are thinking about that, suppose the satellite is in 2008
and the WSOP is in 2009.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Let's talk about what are gamnling losses and what might be
return of capital.

I believe that if I put $100 on a Daily Double at a racetrack
and it pays 25 to 1, the track will give me $2,500 and a 1099-G
for $2,400 because the other $100 is return of capital.

Thus, it makes no sense to me that this guy got a 1099-G from
WSOP for $23,000. It should have been for $13,000 OR he should
not have gotten a 1099-G from the satellite tournament.

But what about the person who wins a satellite, gets an
admission to the WSOP, and finishes out of the money.
I don't know enough about the how it actually works.

Dick

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Mar 28, 6:56 am, rdad...[at]panix.com (Dick Adams) wrote:

- quote -

This makes sense to me. Though the 33k of winnings increases his AGI
and makes the floor for the 2% of AGI deductions higher, specifically
by 10200*0.02=204. Other floors and phaseouts are also increased.
Though if he could declare the $10,200 as a return of capital, his AGI
would be lower, and in addition he'd be able to take the standard
deduction of about 5k. On the other hand, if he itemizes the 10.2k he
essentially loses the standard deduction.

- quote -

Why it would not pass an audit? And I'm not sure if you can classify
it as a return of capital. For that matter, all gambling losses could
be classified as a return of capital, if there are winnings. I
couldn't find where in the IRC they define gambling and capital
investments.

- quote -

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Mar 28, 6:56 am, rdad...[at]panix.com (Dick Adams) wrote:

- quote -

I just read the other reply, and it says that 4k can be deducted as a
misc expense for the product of taxable income -- subject to 2% and
AMT.

In any case, what records would one need to allocate between business
and personal use? If the tournament happened in Vegas or some other
fun city, then an IRS might cast a suspicious eye on writing of 4k.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

removeps-groups[at]yahoo.com <removeps-groups[at]yahoo.com> wrote:
- quote -

He had gross gambling winnings of $33,000 for which he paid
entry fees of $10,200. He shows the $33,000 as other income
and he takes the $10,200 as gambling losses. If for some
reason this is disalowed upon audit, he just claims it as
return of capital. Since he is not a professional gambler,
he must use Schedule A.

- quote -

Agree.

Dick

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Mar 24, 8:27 pm, rdad...[at]panix.com (Dick Adams) wrote:

- quote -

How did you come up with $22,800 of net winnings? And did he win 10k,
or the opportunity to pay 10k and get into the WSOP? Can you deduct
the 4k of expenses on Schedule A or C? I would think the deduction
can only happen on schedule C, and that only if they are a
professional gambler.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Dick Adams" <rdadams[at]panix.com> wrote in message
news:gqc8ak$iu6$1[at]reader1.panix.com...
- quote -

Wrong as to losses. Those were the amounts at risk, not lost.

His $200 bet yielded a $10k return. That's a gain of $9,800.
His $10k bet yielded a $23k return. That's a gain of $13k.

He has gambling gains of $22,800 and no gambling losses.
He gets a miscellaneous itemized deduction (subject to 2% of AGI) for his
expenses - for the production of income.

- quote -

No.


Remember that winnings and losses are positions based on the bet. A bet
that returns zero is a loss of that bet. A bet that returns less than the
amount bet is a loss. A bet that returns more than the bet is a winnings
item (to the extent that the proceeds exceed the bet). This parallels
capital transactions. A return of the bet is equivalent to a return of
capital - the amount at risk is not taxed or taxable.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Avrum Lapin <avrum223[at]verizon.net> wrote:

- quote -

The general rule is when a professional gets to trade dollars
with a novice, the novice will soon be bankrupt.

Dick

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Stuart A. Bronstein <spamtrap[at]lexregia.com> wrote:
- quote -

That is not a bad trade off for big money winners. You
don't get to deduct your expenses, but you don't have to
pay self-employment taxes.

Dick

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

mtm as follows:

"The client (I do tax counselling for the elderly) is a retiree with a
fixed but comfortable income and does not have enough deductions to
itemise.

She is a frequent player of slot machines in Indian Casinos.
Occasionally she will win a jackpot of > $1200 which generates a W2-G but
she is a net loser for the year (but still not enough losses to
itemise).

In the past I have have told her toughluck - make smaller bets or use
nickel slots. The reference in the 1040 booklet to "Professional
Gambler" inspired my question.

My response to her in the future would be - take a chance on the C-EZ
but understand the risks of interest penalties. Leona Helmsley not
withstanding, I don't think that the IRS is going to go after an 80 year
old widow living in a senior housing complex"

Kaye Thomas posted (1/20/02) the following in response to a previous
response by Dick Adams? (see also Google "Professional Gambler IRS" for
more recent postings)

"> Many years ago I heard that in order to be considered "In
- quote -

That's sort of in the ballpark. Here's the story.

The U.S. Supreme Court decided a case called Deputy v. duPont in 1940,
finding that certain transactions in stock (in unique circumstances I
won't get into) were not related to a trade or business. Concurring with
that decision, Justice Frankfurter said they could have made the
decision earlier by adopting a simple rule, that you don't have a trade
or business unless you hold yourself out to others as engaged in the
selling of goods or services. Although this was merely a concurring
decision, the IRS decided to run with this idea. In one case they argued
on this basis that a stock trader did not have a trade or business, but
lost
(Fuld v. Commissioner, 2d Cir 1943). Then they began to make this
argument against people who claimed gambling was a
trade or business. These were tough cases because under the law at the
time you couldn't deduct gambling losses against
gambling winnings unless you established a trade or business, so the IRS
would hit you with a tax on *gross* winnings even if you had a net loss.
Anyway, they won in some circuits and lost in others, so the Supreme
Court decided to resolve the issue in Groetzinger v. Commissioner, 480
US 23 (1987). The Court explicitly rejected Frankfurter's notion and
found that gambling can be a trade or business. Key language from the
opinion:

"We accept the fact that to be engaged in a trade or business, the
taxpayer must be involved in the activity with continuity and regularity
and that the taxpayer's primary purpose for engaging in the activity
must be for income or profit. A sporadic activity, a hobby, or an
amusement diversion does not qualify."

That isn't exactly a precise formula for determining whether you're a
professional gambler, but it gives some idea what they're getting at. I
have an emphatic opinion that you don't have to be a full-time gambler
(or a full-time stock trader) to have a trade or business. There are a
number of cases where people who had other jobs established that their
"moonlighting" activity was a trade or business. The key, in my view, is
you have to do it in a manner that indicates it was a business, not a
hobby or an amusement.

I discuss all this as it relates to stock traders in my book on capital
gains. Also, for those who might be considering trading for a living,
I'll mention that so far I've had four clients who managed to lose more
than $1 million at this business.

Kaye Thomas
http://www.fairmark.com

Avrum Lapin
Burbank, CA

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

rdadams[at]panix.com (Dick Adams) wrote:

- quote -

I don't know about the IRS per se. But the Superme Court had occasion
to rule on this issue in 1987, in COMMISSIONER v. GROETZINGER, 480 U.S.
23 (1987) they said that a facts and circumstances test is to be used.

"[W]e conclude that if one's gambling activity is pursued full time, in
good faith, and with regularity, to the production of income for a
livelihood, and is not a mere hobby, it is a trade or business within
the meaning of the statutes with which we are here concerned."

Stu

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

DF2 <replyvia[at]newsgroup_please.com> wrote:
- quote -

I agree. He shows the loss on Schedule A and the winnings
as Other Income. He also has expenses related to traveling
to and staying in Vegas which he gets to eat.

A good question is what is the current position of the IRS
on allowing taxpayers to use Professional Gambler as an
occupation?

Dick

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Alan <sfcnm-mtm[at]yahoo.com> wrote:
- quote -

That sounds right to me.

A followup question:
If he uses Line 23, he avoids paying self-employment taxes of
$2,574. For that amount of money plus interest, the IRS may
classify him as a "Professional Gambler" if they audit.

If he continues to enter tournaments, it may very well be in
his best interest to use a Schedule C for 2008 so that he can
continue to use one in subsequent years. However, my advice
to him was, and remains, "Unless you truly believe your
winning was a matter of skill, keep the money and find another
hobby."

Dick

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In misc.taxes.moderated, Dick Adams wrote:

- quote -

Taxpayer B does the same thing but goes out in the World Series of
Poker after 10 hands. Gets no cash.

He maintains that he did not win $10,000 (which he did not have the
choice of taking) despite any 1099. It was one big gamble that lost.
No tax. Just $200 in gambling loss that he eats.

- quote -

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >