I have a retired client that goes to a casino 6 days a week for 8-10 hours each day. She only plays slots. Her winnings are over $1 million and losses almost that. Can she report on Schedule C as a professional gambler and deduct all losses?
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Originally posted by lshuling View Post
In my opinion, no, she is not a professional gambler. Part of being a professional gambler involves "production of income for a livelihood". In other words, her winnings are enough to live on. I don't see how that could ever be the case with somebody that only plays slots.
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Maybe yes, maybe no.Originally posted by lshuling View Post
Facts and circumstances control. I would suggest you go to the Tax Court website and search the cases for “professional gambler”. Will give you some insights.Comment
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One more thing, I actually filed this return in 2019 taking winnings on line 21 and losses on Sched A. She later died in 2019 and her husband wants to amend the 2018 return to report her as a professional. I know there are no records of her transactions other than win loss statements. I am not comfortable amending. What are your thoughts?Comment
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There are numerous similar posts regarding your post.Originally posted by lshuling View Post
See TTB 4-26 “gambling losses”. Professional Gamblers TTB 3-16
From TTB:
Professional gambler. If the taxpayer can prove the gambling activity was conducted as a trade or business, gambling losses would be deductible on Schedule C (Form 1040) rather than Schedule A (Form 1040). Courts often rule for nonprofessional status when the activity has some characteristic of being recreational. Regardless of whether a taxpayer’s gambling activity is a trade or business, IRC section 165(d) limits losses from gambling to the extent of gains from such transactions. (Mohammadpour, T.C. Summary 2007-163)
Also:
In Commissioner v. Groetzinger (480 U.S. 23), the Supreme
Court stated that to be considered a trade or business, the
taxpayer must be involved in the gambling activity with
continuity and regularity and that the taxpayer’s primary
purpose for engaging in the activity must be for income
or profit.
Always cite your source for support to defend your opinionComment
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My problem is that I am not comfortable arguing that my client treated this as a business. There are no records other than win loss statements and W-2 G. Wouldn't this be a problem putting it on a schedule C?
The tax law also requires record keeping, not just profit motive.Comment
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That's an interesting twist. While I do not recall ever amending an MFJ return where one spouse is now deceased but wasn't when it was filed, my first thought is that from a strictly ethical point of view, it seems odd that he and his spouse signed a return taking a position that she was not a professional, but now that she's gone, he wants to take that position on her behalf.Originally posted by lshuling View Post
My second thought is, an amended return that seeks to reduce AGI by a million dollars and replace it with a Schedule C showing essentially zero profit is not going to just sail through. Is it correct that all the potential tax savings involved come from reducing AGI and associated limits thereon? (I can't remember if itemized deduction Pease phaseout was in place for 2018).
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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The Federal return will not benefit by amending, but the state of OK will. OK limited itemized deductions to $17,000. Big difference there. I have decided I am not comfortable calling this individual a Professional. If they would like to amend using sessions of loss, that is a possibility, but even doing this could hurt them on Federal, what if there was a big loss one day, and little to no loss another? It is the stinginess of OK that is hurting this return. Our State Senate and House passed a measure exempting gambling losses before April 15th last year and it was stopped by our Governor. I had every belief my client would be able to amend their OK return and take these losses or I would have considered sessions loss when I filed. Major bummer.Comment
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Actually, Congress passed a law that temporarily eliminated the Pease limitation in 2010, after being reduced gradually for several years before that. Trump's suspenders have nothing to do with tax law.Originally posted by Burke View Post
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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Numerous sources that I have accessed confirm that it was eliminated in the TCJA signed by Trump Dec 22, 2017 for tax years beginning in 2018 through 2025. Scheduled to return in 2026. Prior to that it was affected by indexing AGI numbers for higher income taxpayers. .Comment
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There were different versions of the law ( one version completely repealed section 68 from the Code).Originally posted by Burke View Post
The final version passed by Congress ( at section11046(a) ) added subsection 68(f) to the Code which states that section 68 shall not apply for tax years 2018 through 2025.
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