Gambling Loss and Casino Statement

[DonB]

I am curious if casino statements hold up upon audit.

Have YOU had a gambling loss been denied or accepted upon audit with a casino statement as documentation?

I have had GLs up to 150k but never questioned.

[Nashville]

Winnings

There would be quite a bit less danger of an audit unless the taxpayer was claiming more in losses than in winnings.

When you had a $150K gambling loss was it coupled with winnings of at least $150K?

[rtsietsema]

Schedule A and limited

Gambling losses cannot exceed winnings for deductions, and can only be claimed if you itemize on Schedule A.

[DonB]

Gambling losses cannot exceed winnings for deductions, and can only be claimed if you itemize on Schedule A.

150k income on line 21 and 150k deduction on schedule A.

I was not asking about how to take a loss deduction. I was asking if anyone had experience with casino statements as documentation.

[ttbtaxes]

Two methods

Correct me if I am wrong but there are two acceptable methods of income recognition with respect to gambling winnings and losses.

1) Add up all the winning winnings which are reported above the line, and add up the losses (limited to winnings) which are reported as a miscellaneous itemized deduction.

2) The per-session method

"Session-based analysis", which involves netting gains and losses at the end of each gambling session is allowed. All sessions are added up at year's end. This methodology is described in Ann M. LaPlante T.C. Memo. 2009-226 and cited in John and Esther Chow T.C. Memo. 2010-48.

It is discussed and acknowledged in Office of Chief Counsel Internal Revenue Service Memorandum Release Number: AM2008-011:

http://www.irs.gov/pub/irs-utl/am2008011.pdf

You can keep track of gains and losses on a "net" basis as long as they kept on a gambling-session basis. It requires more work and record keeping but may result in a better outcome for the client.

A recent 2013 US Court of Appeals case in the DC circuit, Sang J. Park and Won Kyung O, Appellants v. Commissioner of Internal Revenue Service, Appellee No. 12-1058, ruled favorably on the session vs. per-bet approach.

[DonB]

Why is everyone addressing HOW to deduct a loss?? Please see me initial question.

[ttbtaxes]

I've never had an audit on the issue but Rev. Proc. 77-29 addresses allowable records and substantiation. Section 3 of this Proc says, "Verifiable documentation for gambling transactions includes but is not limited to Forms W-2G; Forms 5754, Statement by Person Receiving Gambling Winnings; wagering tickets, canceled checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to the taxpayer by the gambling establishment."

[DonB]

Has Anyone had a Gambling Loss Audit??

If so, what was the result.

[JohnH]

I had a correspondence audit about 3-4 years ago. The client had close to $100K in winnings and even more in losses, but of course the loss was limited to winnings. As it turned out, he had failed to give me a $20K 1099G, so IRS sent a CP2000. We responded with a letter explaining that his losses actually exceeded even the $120K and we attached a revised Schedule A, changing the $100K to $120K. He had a diary, which we mentioned in the letter, but we did not send a copy of it to IRS.

I assumed IRS would probably follow up with a more thorough audit, but a couple of months later he received a "no change" letter. Nobody was more shocked than I was, but that's how it unfolded.

Here's a link to a pretty good site regarding gambling and taxes. Several clients have used their diary, and the clients say they like it. If you look at some of their other tabs, they do seem to stay cuireent on tax law.

http://www.ladyluckdiary.com/irs-info/

[S T]

A few experiences , which make me nervous - using the Casino Year End print outs - I believe they are useless, but all I have.

As JH stated, So far on CP2000 notices where the W2G forms did not match on return (missed) , I have submitted the added W2G income and associated losses up to the winnings, and then the CP2000 notice is in compliance and goes away!

Could affect AltMin though- had one of those.

Tried to obtain Diaries from clients - that is a pretty fruitless adventure, as the client thinks they are using their "Player Cards" and the Casino is recording everything - reality is the Casino gives only a net year end and NO detail.

So far so good and no "full audits"

Sandy