Will anyone challenge the bill based on the Bill Baxter case?

[MagCFO]

I think the "poker is a game of skill" route is a long shot, but it would be worth a try.

For those who don't know what the Baxter case was about...it had to do with the IRS stating his poker playing was not earned income, thus making it passive income and in the 70% tax bracket (from years ago). The IRS claimed poker was a game of luck and could not be considered earned income.

Braxter sued. The Nevada court made short work of the case and sided with Baxter. Poker was not a game of chance. The IRS appealed to the US Circuit court of appeals. Batxer won again.

Then the US took the case to the Supreme Court. Before the case got to the court, the IRS offered a settlement with Baxter. Baxter said no thanks, let's just take it to the SC. The IRS "folded", dropping the case and return all monies owed to Baxter.

It seems to me precident has been set to exclude poker from "gambling".

Any attorneys have an opinion?

[lambchop]

The Baxter case was about being able to file as full time gambler as opposed to itemizing all losses.

The following is a recap from the Supreme Court Ruling if you would like to read it:

Adjusted gross income: Adjusted gross income defined: Wagering losses: Business deductions: Trade or business expenses: "Business" defined for purposes of determining deductibility: Gambling.--The Supreme Court of the United States ruled that a full-time gambler who made wagers solely for his own account was engaged in a trade or business within the meaning of Code Secs. 162(a) and 62(1) . Therefore, no part of his losses in 1978 was an item of tax preference subject to the minimum tax. In reaching its decision, the Court stated that in order to be engaged in a trade or business, the taxpayer must be involved in the activity with continuity and regularity and 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 would not qualify. By adhering to its general position taken in Higgins (41-1 USTC ¶9233 ), the Court held that the resolution of the issue of whether a taxpayer is engaged in a "trade or business" within the meaning of Code Secs. 162(a) and 62(1) requires an examination of the facts in each case. In so doing, the Court expressly rejected the position taken by Justice Frankfurter in his concurring opinion in DuPont (40-1 USTC ¶9161 ) that the carrying on of any trade or business involved holding one's self out to others as engaged in the selling of goods or services. The Court stated that an attempt judicially to formulate and impose a test for all situations would be counterproductive, unhelpful, and even somewhat precarious for the overall integrity of the Code. The Court cautioned that its opinion in interpreting the phrase "trade or business" was confined to the specific Code section at issue and did not purport to construe the phrase elsewhere in the Code. There was one dissent, in which two justices joined. BACK REFERENCES: 87FED ¶576A.20, 87FED ¶716.169, 87FED ¶1332.107, 87FED ¶1581.10, 87FED ¶1581.30, and 87FED ¶4866.173

[Zele]

Blackjack players are also allowed to file pro, so I don't think this helps the case for a poker exemption.

[MiltonFriedman]

Thanks for the summary.

Too bad about the express caution about 'trade or business", but it should be looked at with respect to what "trade or business" a poker company is in, and analogy to other "market administrative businesses" ...

Does the NYSE or CBOT pay taxes based upon the net wins or losses of traders in the market ? (I know there are express exemptions in the Act.)

It seems worth looking at, at least.