[tek]

[ QUOTE ]
The key to audits is this.

Can you prove it?
do you have written documents to support your proof?

Make sure you keep a daily log. I'm sure there are a handfuld of twoplustwoers who could file as a business expense. make sure you keep your receipts!

[/ QUOTE ]

I would think that your log of cash-ins and cash-outs (plus the Dec 31 balance taken into account) would constitute a sufficient log. I know on Stars this is readily available. This would be equivilant to an inventory system of cash treatment.

Anyway, I was audited a few years back for my 1999 stock trading as reported on my Schedule C. I brought my log of stock purchases (the broker issued a 1099 for sales transactions but not purchases). They made copies and a few weeks later I received a letter stating that there woulkld ne no change in tax liability. Uncle was assessing me tax on the total sales volume until a cost basis could be proven (not just claimed).

Full-time stock trading using Schedule C was new so I hit the radar along with many others. The whole matter was no more scary than getting a drivers license renewed.

My deductions (such as technical analysis software, books, 1/3 of cable tv cost, etc) wasn't an issue.

Since using Sch C for gambling will be a new issue, there will be audits. You may not get one for 2-3 years, but it will happen. As long as you have had a logical and forthright way of accounting for your wins, losses and expenses you should not worry.

The agents want low hanging fruit. If you are above-board they will move on to get the evaders.