Gambling Winnings And Losses

[Taxing Matters]

I have had to explain that to a lot of people. I like your use of the words "ripple effect". I am probably going to borrow that.

Feel free to use that, I don't have a copyright or trademark on it. I did spend a few minutes pondering exactly what word or phrase I really wanted to use there. I try hard to explain tax and legal matters in plain English as much as I can, but it isn't always easy.

 

[Taxing Matters]

are you referring to a single event win (like one hit at a slot or the cash out from a table game) or some accumulated winnings?

If it’s a single event, then I can see many ways to beat the system and not have a reportable level of winnings. Even if accumulative, depending on the period of accumulation, I can still see ways to result in a zero winnings situation.

Each gambling situation has to be looked at individually to determine how a win or loss is computed. But unfortunately for the taxpayer, the general approach is that each pull of the slot arm and each hand at the card table constitute separate wagers and need to be accounted for individually. The IRS and the courts generally reject the approach of simply reporting, say, the net results of a entire day of betting as a single win or loss. Most gamblers are terrible at keeping records of each wager, and it can can cost them.

 

[quincy]

Feel free to use that, I don't have a copyright or trademark on it. I did spend a few minutes pondering exactly what word or phrase I really wanted to use there. I try hard to explain tax and legal matters in plain English as much as I can, but it isn't always easy.

There are 15 "Ripple Effect" trademarks registered with the USPTO.

 

[justalayman]

Each gambling situation has to be looked at individually to determine how a win or loss is computed. But unfortunately for the taxpayer, the general approach is that each pull of the slot arm and each hand at the card table constitute separate wagers and need to be accounted for individually. The IRS and the courts generally reject the approach of simply reporting, say, the net results of a entire day of betting as a single win or loss. Most gamblers are terrible at keeping records of each wager, and it can can cost them.

Then that really screws the gambler. They could have 10 winning hands and win a total of $10,000,000but have just as many losing hands and lose $20,000,000. That means it will be reported they won $10,000,000 but in reality they have a net loss of $10,000,000. So while they actually lost money on their gambling, their income will reflect that $10,000,000 and depending on the rest of their return, those losses could have little effective value.

 

[LdiJ]

Then that really screws the gambler. They could have 10 winning hands and win a total of $10,000,000but have just as many losing hands and lose $20,000,000. That means it will be reported they won $10,000,000 but in reality they have a net loss of $10,000,000. So while they actually lost money on their gambling, their income will reflect that $10,000,000 and depending on the rest of their return, those losses could have little effective value.

Yes, although I have never dealt with anyone losing even 2% of that.

 

[Taxing Matters]

Then that really screws the gambler. They could have 10 winning hands and win a total of $10,000,000but have just as many losing hands and lose $20,000,000. That means it will be reported they won $10,000,000 but in reality they have a net loss of $10,000,000. So while they actually lost money on their gambling, their income will reflect that $10,000,000 and depending on the rest of their return, those losses could have little effective value.

They still get to deduct $10 million of the losses against the winnings, so in the end the $10 million is not taxed. But you are correct that it still can screw the gambler because of what happens on the return between the line where the income is included and where the losses finally take them back out of income. As I said before, Congress traditionally has been very much against gambling; lots of federal laws make that real clear. The tax treatment of gambling winnings is consistent with that. So I don't think the Congress persons that adopted these rules would feel very bad for the gambler in that situation.