IRS Changes for Gambling

why not

GeorgeD said:
This is not precedent, but sounds to me like the IRS is reconsidering deductions above winnings for professional gamblers. I'm sure everyone here reports all their winning.

http://www.irs.gov/pub/irs-utl/am2008013.pdf

This now refers to "Casual Gamblers"

http://www.irs.gov/taxtopics/tc419.html
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How do you expect the U.S. to pay for it's empire, give billions to israel and Egypt and Jordan and Africa because they won't wear condoms when they do the Nasty. :mad:

God Bless this wonderful country.

And goodby to the casino business and all the taxes that come from it.

I think I will just go listen to Lee Greenwood again and again:laugh::laugh:

CP
 
Wait George, I don't think the IRS ever allowed deductions of losses over winnings, for anyone, anywhere.

If you're a pro and declaring everything as business expense you get to "net" your wins/losses, which is very significant, but I don't think you were ever able to call your net gambling losses a business loss.

I thought the memo's notes about (probably) allowing deducting other business expenses (e.g. travel) separately was pretty interesting.
 
It's not real clear to me, but sounds like they are making a distinction between casual and pro gamblers. I took it that if you're a pro you can deduct any business related expenses. In any other business (sole proprieter, partnerships), you can take a loss as a deduction off other personal income so why not here? If you take a personal deduction loss too many years in a row from a part time business, the IRS might be able claim it's a hobby

I suppose it means then that comped RFB could then be taxed as income.

Not sure how you can demonstrate you're a pro. A sport fisherman is clearly different from a commercial fisherman, how do you differentiate a pro from a casual gambler. It can't be frequency of activity since a lot of people have part time businesses they don't work often. Anyone can say "I'm a pro because I read books, and practice and count cards".





EasyRhino said:
Wait George, I don't think the IRS ever allowed deductions of losses over winnings, for anyone, anywhere.

If you're a pro and declaring everything as business expense you get to "net" your wins/losses, which is very significant, but I don't think you were ever able to call your net gambling losses a business loss.

I thought the memo's notes about (probably) allowing deducting other business expenses (e.g. travel) separately was pretty interesting.
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GeorgeD said:
It's not real clear to me, but sounds like they are making a distinction between casual and pro gamblers. I took it that if you're a pro you can deduct any business related expenses. In any other business (sole proprieter, partnerships), you can take a loss as a deduction off other personal income so why not here? If you take a personal deduction loss too many years in a row from a part time business, the IRS might be able claim it's a hobby

I suppose it means then that comped RFB could then be taxed as income.

Not sure how you can demonstrate you're a pro. A sport fisherman is clearly different from a commercial fisherman, how do you differentiate a pro from a casual gambler. It can't be frequency of activity since a lot of people have part time businesses they don't work often. Anyone can say "I'm a pro because I read books, and practice and count cards".
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Right, but if they start taxing sport fishermen on the fish they take out of the water, there's a justification for deducting the equipment you use to take that fish. That would be fair. But we're talking about the IRS, fair is whatever they say it is.

If you treat AP income like a job, they're going to come after you for self-employment tax too. My advice would be to make sure you have a regular part-time job so you can show means of support, pocket your winnings, avoid conspicuous luxury items, and keep your mouth closed.
 
Automatic Monkey said:
If you treat AP income like a job, they're going to come after you for self-employment tax too. My advice would be to make sure you have a regular part-time job so you can show means of support, pocket your winnings, avoid conspicuous luxury items, and keep your mouth closed.
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This system is really ridiculous. They will tax your winnings heavily, but they won't offset the tax burden on losses.

At least in the stockmarket capital gains is balanced with capital losses.

What is the effective tax rate on gambling income anyway? Is it equivalent to short term capital gains? or worse?! :eek:
 
Mimosine said:
This system is really ridiculous. They will tax your winnings heavily, but they won't offset the tax burden on losses.

At least in the stockmarket capital gains is balanced with capital losses.

What is the effective tax rate on gambling income anyway? Is it equivalent to short term capital gains? or worse?! :eek:
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The part that annoys me most is that if your form of advantage gambling is not called "blackjack" but is called "options trading" or "futures trading" and the person handling your transactions wears a suit and tie instead of a gay shirt and a nametag, you're now considered a legitimate businessman and your losses and trading expenses are deductible. You could be a scumbag who shorts a stock and then sabotages it from the inside and the SEC might not like it, but as far as the IRS is concerned you're just like any other businessman.

On the other hand, if what we do was easily understood even by educated people, it would be much harder for us to do.
 
Automatic Monkey said:
The part that annoys me most is that if your form of advantage gambling is not called "blackjack" but is called "options trading" or "futures trading" and the person handling your transactions wears a suit and tie instead of a gay shirt and a nametag, you're now considered a legitimate businessman and your losses and trading expenses are deductible. You could be a scumbag who shorts a stock and then sabotages it from the inside and the SEC might not like it, but as far as the IRS is concerned you're just like any other businessman.

On the other hand, if what we do was easily understood even by educated people, it would be much harder for us to do.
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Actually, casino gambling is significantly different from financial securities trading. You can in fact make educated guesses (based on chains of causality) about price fluctuations. However, you cannot do this with most casino gambling (Blackjack is somewhere in the middle in that you can use statistical techniques to make estimates of fluctuating probabilities, however you cannot use causal chains of reasoning (i.e. "people prefer x, y has occurred which will mean people's preferences are not satisfied, therefore ceteris paribus, z will occur")).

I will agree, however, that professional gamblers should not be treated any differently from any other profession. Its no different to being a professional sportsman: you are making money from playing an organized game.
 
StudiodeKadent said:
Actually, casino gambling is significantly different from financial securities trading. You can in fact make educated guesses (based on chains of causality) about price fluctuations. However, you cannot do this with most casino gambling (Blackjack is somewhere in the middle in that you can use statistical techniques to make estimates of fluctuating probabilities, however you cannot use causal chains of reasoning (i.e. "people prefer x, y has occurred which will mean people's preferences are not satisfied, therefore ceteris paribus, z will occur")).

I will agree, however, that professional gamblers should not be treated any differently from any other profession. Its no different to being a professional sportsman: you are making money from playing an organized game.
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I don't know, the chain of reasoning in BJ seems pretty casual to me- there are a lot of high cards left in the shoe, high cards being played give the player the advantage therefore I will bet more now. The Intrade platform identifies derivatives trading for what it really is, as you can trade contracts on changes in stock indices just like you can on the weather.
 
Automatic Monkey said:
I don't know, the chain of reasoning in BJ seems pretty casual to me- there are a lot of high cards left in the shoe, high cards being played give the player the advantage therefore I will bet more now.
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As I acknowleged, Blackjack is somewhere in between traditional "casino gambing" (i.e. games where there is absolutely no way to make educated logical approximations as to what will happen next on the basis of past events) and making extrapolations on the basis of market information (which allows you to make intelligent approximations). Indeed you could probably argue that Blackjack is on a similar level when card-counting in that you are making educated guesses about future outcomes on the basis of previous outcomes (although its also arguable that statistical reasoning is less 'connective' than logical reasoning but thats a different point).

I'd argue that making predictions on markets is closer to sports betting than casino gambling, in that there is more information that needs to be factored into the prediction and this information can be used to make an intelligent speculation as to what will happen.

The Intrade platform identifies derivatives trading for what it really is, as you can trade contracts on changes in stock indices just like you can on the weather.
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First, derivatives are simply financial products whose value is derived from another underlying asset. Derivative price fluctuations can be intelligently predicted by, for example, looking at the market for the underlying asset. If the world supply of bananas is decimated by a disease, you can expect derivatives for banana trading to be effected significantly (people that are purchasing forwards in bananas (i.e. they agreed upon a future price) are going to be very happy).

Indeed market prices really are just 'average' valuations of things on the basis of collected information. Information gets 'priced into' the market prices. For more on this, see F. A. Hayek's work.

The issue I have is lumping 'market price fluctuations' in with gambling. Whilst I will grant that advantage play on Blackjack allows intelligent guesses, I do have some difficulties with blurring the distinction between speculating in a market and putting all one's money on black in Roulette.
 
StudiodeKadent said:
...The issue I have is lumping 'market price fluctuations' in with gambling. Whilst I will grant that advantage play on Blackjack allows intelligent guesses, I do have some difficulties with blurring the distinction between speculating in a market and putting all one's money on black in Roulette.
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But there is little distinction between speculating in a market and putting a portion of one's money on the half of the roulette wheel that you predict the ball will land on and can predict accurately most of the time, by watching the movement of the ball and the wheel. It's the same thing. Being casinos have moral implications it is understandable why the squares in government don't want to acknowledge its legitimacy as a profitable profession. Despite also being zero-sum propositions it's easier to accept derivatives trading because they wear the same uniforms and work in the same buildings as securities traders. If casinos offered trading as a table game (Eureka!*) these people would freak out over the sacrilege of comingling the venerable profession of trading with the vice of gambling.

A non-advantage gambler will not make money in the long term so the tax people have little need to worry about him. It also seems unethical to tax the players who win when the only guaranteed long term winner is the casino. The government could efficiently extract all the tax revenue they need simply by taxing only the casinos on their winnings.

* Hey why not? Casinos could offer props on financial indicators, forex, commodities etc. It would be done parimutuel so the house doesn't have to worry about losing money. And it would probably be very popular among the senior day-trippers who are mostly looking for a place to hang out- come in the morning, place their bets on the market, hang out in the coffee shop or play their slots and bingo all day and their bus will leave an hour after the markets close and they cash in their tickets.

And not only that being this type of activity is considered investing and not gambling by most authorities it wouldn't be limited to casinos. We could erect kiosks everywhere, even in bars where people can buy their tickets. A 5-10% vig should do the trick.
 
Taxing Gambling Winnings

Why don't more east coast AP's come to Ontario Casino's or Montreal? The games are more or less the same as AC but you never pay a penny in income tax?
 
Foreign income is still taxable whether the tax man is at the cage or not. There are some pretty decent exclusion rates on it though. I am skeptical that most table games players declare every penny they earn in the US. (or any of it for some members).
BW
 
Automatic Monkey said:
But there is little distinction between speculating in a market and putting a portion of one's money on the half of the roulette wheel that you predict the ball will land on and can predict accurately most of the time, by watching the movement of the ball and the wheel. It's the same thing.
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No, they are not the same thing. Speculation, as I said, is an informational process. You can use information about previous events to predict future events. You cannot do this is most casino games (i.e. most casino games are based on independent trials). Barring unbalanced Roulette wheels, you cannot make educated guesses about the future outcome on a Roulette wheel based upon the outcomes of preceeding trials. No causal chains can be grasped.

Markets are not random chaos. They may appear chaotic, but they are an example of spontaneous, emergent, ground-up order similar to a biological system.

I hate to resort to naming qualifications but I am an economist (BEcon 2007, MBE currently being worked on). If you want literature references to back up my arguments I am happy to provide them.
 
StudiodeKadent said:
No, they are not the same thing. Speculation, as I said, is an informational process. You can use information about previous events to predict future events. You cannot do this is most casino games (i.e. most casino games are based on independent trials). Barring unbalanced Roulette wheels, you cannot make educated guesses about the future outcome on a Roulette wheel based upon the outcomes of preceeding trials. No causal chains can be grasped...
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But that's not what I said. You can place a roulette bet after the ball is dropped and before it comes to rest and there are those who can do this with an advantage. The information you use is the position and speed of the ball relative to that of the wheel. There is very little difference between that and technical trading.

These are not the only casino games that can be played consistently with an advantage. And in a totally different category are those who make a profit by playing the game in a manner that the operator hopes it is not played (promotion abuse, bonus hustling, exploiting dealer errors). I don't even know how I would explain this to the IRS so I don't think I'd attempt it. But I know all full-time pros do these things.
 
StudiodeKadent said:
I wasn't aware of this. Is it possible to do this within the rules of the game?
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Yes. A short time after the launch of the ball, the croupier waves his hand over the felt to signal that no more bets may be placed. A bet after that point in time is referred to as 'past posting' and is against the rules. However, within the time period between the ball's launch and the croupier's signal, bets may still be placed.

This is the period in which AP roulette players will place their bets based upon information they have collected during previous spins concerning the approximate rotational velocity of the wheel and the launch velocity of the ball used by the specific croupier in question. (The assumption being that a croupier will consciously or unconsciously launch the ball with about the same force from one spin to the next.)

Other APs look for flaws in individual roulette wheels by keeping a record of the outcomes of numerous spins and searching for any bias in the results caused by imperfections in the wheel (which always exist, but in most cases will probably not cause statistically significant deviations from the random).
 
Pelerus said:
Yes. A short time after the launch of the ball, the croupier waves his hand over the felt to signal that no more bets may be placed. A bet after that point in time is referred to as 'past posting' and is against the rules. However, within the time period between the ball's launch and the croupier's signal, bets may still be placed.

This is the period in which AP roulette players will place their bets based upon information they have collected during previous spins concerning the approximate rotational velocity of the wheel and the launch velocity of the ball used by the specific croupier in question. (The assumption being that a croupier will consciously or unconsciously launch the ball with about the same force from one spin to the next.)

Other APs look for flaws in individual roulette wheels by keeping a record of the outcomes of numerous spins and searching for any bias in the results caused by imperfections in the wheel (which always exist, but in most cases will probably not cause statistically significant deviations from the random).
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Understand. Thanks for that... I wasn't aware. The time between ball launch and 'no more bets' is very short if I remember correctly so it must be a very difficult trick to pull off
 
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