Tax Court decision on tournament poker expenses

[broiler]

Section 165(d) does not mean that the loss must be deducted on Schedule A. This code section is merely a limitation on any losses from gambling transctions.

From Boyd v. US: a professional gambler's loss deductions were limited to the extent of his winnings. The specific provision of Code Section 165(d) limiting gambling losses prevails over the more general provision of Code Sec 162(a) providing for the deduction of ordinary and necessary business expenses.

Therefore, the IRS acceptance of professional status and expense treatment means that the limitation was applied at the Schedule C level.

[adanthar]

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First, the only way a gambler can deduct "ordinary and reasonable" expenses is filing a Schedule C (that is, being a professional gambler). The IRS wanted to hold that the petitioner wasn't a professional; they conceded that issue for this case. That's interesting, because the petitioner had substantial outside income.

[/ QUOTE ]

That's a major boost to today's "second job" poker pros.

[Emperor]

Why does MGM and Harrahs get to file differently than Mrs. Tschetschot?

[NickMPK]

Just to clarify:
- You only deduct as gambling losses the buy-ins for the tournaments where you don't cash
- In tournaments where you do cash, you subtract the buy-in from the prize to determine your gambling winnings

In other words, every tournament is either gambling winnings or gambling losses (unless you win exactly your money back), but never both.
Is this correct?

[broiler]

Nick,
You are correct and you have given a very good summary of the rules for tournaments. Your summary is written much better than the decision of the case that started this thread.

[Poker CPA]

There is nothing new here, except the Court find that Tour poker is not a sporting event, but a gambling activity.

Considering the legal fees, HUGE chase to the river. The whole case rested on the "sporting event" issue.

[Poker CPA]

And yes nick you are correct