Rough draft of my letter to the IRS
 

For background see my post a few links down (got a letter from the IRS)

Here is a very rough draft I just banged out. I just want to know if you think I'm heading in the right direction with this approach.


dear IRS

The majority of income reported on my 2004 return is from gambling wins, specifically from online poker.

I believe that the nature in which I pursued this activity does not qualify me for self employment status, and thus I disagree with your proposed changes to my return.


My situation in 2004 was the following:

- I was a full time graduate student at the University of Southern California for the duration of the year

- I played online poker for a total of 600 hours over the course of 2004, for an average of 11.5 hours per week. There were extended periods of time where I did not play at all. For example, from January to May I only played 100 hours total. I did not pursue gambling in a business like manner or with regularity.

- I did not play online poker with intention for profit. Prior to 2004 I did not win any money from online poker. In order to pay my university tuition of $16000, I received an $8000 stipend, and borrowed an additional $8000 from the federal government. In order to pay for my living expenses, I borrowed another $10,000.

According to The Gambler's Guide to Taxes by Walter L. Lewis, the court ruled in xxx vs. xxxx that in order to be a professional gambler (and thus qualify as self employed) the following conditions must be met:


"
1. There must be a profit motive. The expectation of making a profit to be able to support oneself must be evident. A profit must be shown in at least three of the last five years.

2. A considerable amount of time must be spent gambling. Gambling must be done with regularity.

3. A business operation must be evident. The IRS requires all businesses to maintain a set of books and records that document the activity. OTher items that would indicate business intentions include business cards, letterhead or stationery, all required buiness lincenses and registrations, a business telephone listing, and an office address or post office box."


I qualify for none of these conditions, and thus I believe it would be incorrect to label me as self employed due to my online poker activity.

Re: Rough draft of my letter to the IRS
 

It helps to have these letters on the letterhead of an accountant who has had favorable experience in the past corresponding with the IRS. Most competent tax accountants should have plenty of experience writing letters on topics very similar to yours. I would have this letter reviewed, re-written, and signed by an accountant that you pay for. If your initial plan of attack is writing a letter, then I can’t imagine a CPA charging much. I would explain what you want over the phone and get an estimate.

edit - I deleted my original last paragraph. I really can't recommend doing this without competent review that you pay for.

Re: Rough draft of my letter to the IRS
 

1) I would open with a clear explanation of what the irs wants and that you're challenging it.
2) I would reference the supreme court case on its own rather than referencing the book that references it.

Good luck.

2nd

Re: Rough draft of my letter to the IRS
 

Can you get any third year law student to review your letter? I know some of the law schools where I live provide assitance with the caveat that 'they are not attorneys, blah, blah, use at your own risk, blah, blah.'

S