Ed Miller's Tax Article

[Foghatlive]

[ QUOTE ]
My analogy would be a casino comping a player a hotel suite. Would the fair market value of the room offset any winnings a gambler might have?

Yeah, I don't know how comps work. I might guess that by giving you stuff the casino is assuming that you're losing (at least theoretical dollars over the long run) b/c the games have a house edge. So as long as you keep wagering you're theoretically losing. As long as you're losing the IRS doesn't care. Plus valuing comps could be hard? Don't know.

I do know that the IRS decided a while back that frequent flier miles are tax-free (in a situation where you receive them for business travel that is company paid). It wasn't so much that the IRS didn't want the money for what it saw as non-cash compensation, but that they were impossible to value due to the many and constantly changing variables relating to redemption.

So maybe the answer to your question is to collect all of your rakeback in 'leopard print thongs' as someone posted to me here a long while back.

[/ QUOTE ]

You figured out what I was trying to say even though I didn't express myself correctly. I meant to ask if the FMV (fair market value) of a comp is considered income.

From my understanding, casinos give comps to keep players hanging around longer so they eventually lose. It's not based on how the player is doing, so much as how much he's playing for.

Another analogy would be a bank that gives you a gift for opening an account. IMO, that gift isn't taxable. I see rakebacks and bonuses the same way.

[oxymoron]

[ QUOTE ]
[ QUOTE ]
My analogy would be a casino comping a player a hotel suite. Would the fair market value of the room offset any winnings a gambler might have?

Yeah, I don't know how comps work. I might guess that by giving you stuff the casino is assuming that you're losing (at least theoretical dollars over the long run) b/c the games have a house edge. So as long as you keep wagering you're theoretically losing. As long as you're losing the IRS doesn't care. Plus valuing comps could be hard? Don't know.

I do know that the IRS decided a while back that frequent flier miles are tax-free (in a situation where you receive them for business travel that is company paid). It wasn't so much that the IRS didn't want the money for what it saw as non-cash compensation, but that they were impossible to value due to the many and constantly changing variables relating to redemption.

So maybe the answer to your question is to collect all of your rakeback in 'leopard print thongs' as someone posted to me here a long while back.

[/ QUOTE ]

You figured out what I was trying to say even though I didn't express myself correctly. I meant to ask if the FMV (fair market value) of a comp is considered income.

From my understanding, casinos give comps to keep players hanging around longer so they eventually lose. It's not based on how the player is doing, so much as how much he's playing for.

Another analogy would be a bank that gives you a gift for opening an account. IMO, that gift isn't taxable. I see rakebacks and bonuses the same way.

[/ QUOTE ]

There is a court case which involved gambling where the very wealthy gambooooler was given very expensive comps. He also lost big and claimed the comps as income. The IRS didn't think they should be listed as income and it went to court. The court ruled that the gamboooler would not have received the comps if he was not gambooooling and so therefore he is being "paid" to come back. The court ruled the comps are income.

I have a decent gambling/tax book I bought after reading this thread and will post the names and court case. I do not think this is considered a grea area.

I think the issue of what a session is can be a grey area. I am of the opinion after much thought that a "session" is any continuous level of play (even breaking to go to the restroom). I believe if you go to a B&M casino and play craps, then BJ then use the restroom then play some more craps that everything is considered one session.

[broiler]

If we are thinking about the same case (from 97 or 98, can't remember off the top of my head), both the IRS and the taxpayer believed that the comps were income. The IRS argued that the income was not gambling source income and could not have losses used to off set this income. The court ruled as you said that the income was gambling source income for the reason that you listed above and should be included in the maximum writeoff for gambling losses. The case I'm thinking of was in New Jersey at a Trump entity.

[mmcd]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Also the US government could go to Party and say something like, "So far we have been pretty much turning a blind eye to your activities. Turn over the financial records of your US clients or we will bring the hammer down."

[/ QUOTE ]

Seeing as how Party is based in...Gibraltar, I believe?? correct me if I'm wrong....I somehow don't think Party would be quaking in their boots over the threat of said hammer.

[/ QUOTE ]

No offense intended, but that's a very naive view.

[/ QUOTE ]

His reason is completely wrong, but I think he's right that nothing is likely to transpire between the U.S. government and Party Poker. First of all, because of the WTO ruling on the matter and the fact that PartyGaming is now a multi-billion dollar public corporation, the U.S. would catch a LOT of flack if tried to interfere with or shut down Party in the U.S. Second, Party would be VERY unlikely to cooperate with the U.S. governemnt willingly. The pros and semipros who currently play on there but don't report the income would probabaly just start reporting, but the vast majority of the recreational players would probably just stop playing rather than have the hassle of having to keep track of everything and deal with the IRS.

[Man of Means]

[ QUOTE ]
Another analogy would be a bank that gives you a gift for opening an account. IMO, that gift isn't taxable. I see rakebacks and bonuses the same way.

[/ QUOTE ]

Recently I received a $50 bonus from my bank for using direct deposit and I am told it will appear as "interest income" on a form at the end of the year. So, cash bonuses are, in my mind, "other income" or could be considered as reductions of your cost basis. Either way, I'd suggest reporting them to be consistent.

[Ineedaride2]

[ QUOTE ]
From what I can gather, poker winnings are not taxable as long as they are not your main (only) source of income.

[/ QUOTE ]

Seriously? This would be huge for me if true..

[Mr.K]

If you live in the US, it just isn't true. Sorry. Reality > Wishful Thinking. More importantly Compliance > Audit/Fines/Jail

[belgianbeerlover]

Wow- where does one start? I started playing 7-8 months ago. Everything "just clicked" 2-3 months ago, thanks to Ed, David, Mason and all the great posters here. This year-I probably should be concerned. Next year- I'll definitely have to be concerned. So my questions are:

1. Where would one find a "Pitbull" CPA well versed with gambling tax law? (I live in a small community)

2. Gambling is illegal in my locality. Am I potentially implicating myself?

3. Say I take bi-weekly withdrawals from Neteller. Can't I just claim 26 winning sessions for simplicity's sake? Is it really necessary to keep track of the 50,183(slight exaageration) tables I played that year?

I would like to start off 2006 in the right way, but have no clue what I should be doing when I sit down in front of the computer for my first 2006 session.

[LittleOldLady]

[ QUOTE ]
Wow- where does one start? I started playing 7-8 months ago. Everything "just clicked" 2-3 months ago, thanks to Ed, David, Mason and all the great posters here. This year-I probably should be concerned. Next year- I'll definitely have to be concerned. So my questions are:

1. Where would one find a "Pitbull" CPA well versed with gambling tax law? (I live in a small community)

2. Gambling is illegal in my locality. Am I potentially implicating myself?

3. Say I take bi-weekly withdrawals from Neteller. Can't I just claim 26 winning sessions for simplicity's sake? Is it really necessary to keep track of the 50,183(slight exaageration) tables I played that year?

I would like to start off 2006 in the right way, but have no clue what I should be doing when I sit down in front of the computer for my first 2006 session.

[/ QUOTE ]

I can't refer you to a CPA in your area, but I can tell you that that you must pay taxes on income derived illegally even if it does implicate you (apparently you are not protected in this regard by your 5th Amendment constitutional rights). Crooks get convicted and incarcerated for failure to pay taxes on illegal income even if the government does not have the evidence to convict them on the criminal acts themselves. No, you cannot just declare net winnings or withdrawals from Neteller. You have to keep track of winning sessions and losing sessions--and what constitutes a session is not all that clear. There is nothing simple about the US Tax Code at all--except that the IRS simply wants your money. When you sit down to play record everything per session, however you define session. And look for advice on what constitutes a session.

And, Belgianbeerlover, toast the new year with a bottle of Grimbergen or Verboden Vrucht (my favorites).

[belgianbeerlover]

[ QUOTE ]
And, Belgianbeerlover, toast the new year with a bottle of Grimbergen or Verboden Vrucht (my favorites)

[/ QUOTE ]

Mmmm... I have not tried either of them, I will have too soon. I have enjoyed others by Hoegaarden. I celebrated Christmas with Corsendonk Agnus and La Fin Du Monde. Thanks for the tax info.