Interesting tax decision for those residing in states...

[mo42nyy]

I dont see why she shouldnt be allowed to list herself as apro if she really goes there every day and sets out to win. Most business fail anyway. Ofcourse there is almost a 0 chance she is up at the end of the year. So what? If the gambling tax laws werent so obscene we wouldnt be discussing it anyway.

[Russ Fox]

[ QUOTE ]
Is this situation handled differently for a gambler as opposed to any other type of side business?...Why wouldn't a poker playre be treated the same? Poker is a side business just like hundreds of other secondary endeavors.

[/ QUOTE ]

Blame Congress. They wrote the Tax Code--it's law, Title 26 U.S.C.

The IRS used to argue that no one could be a professional gambler. One reason for this is that gambling income is not considered "earned" income. When you are self-employed in, say, a pet grooming business, your income is "earned" income. Gambling income specifically cannot be earned income (per the Tax Code).

However, back in 1987 the Supreme Court ruled in Commissioner v. Groetzinger that you can be a professional gambler if "...one's gambling activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere hobby, it is a trade or business...."

Additionally, Section 165(d) of the Tax Code prohibits, for tax purposes, gambling losses in excess of gambling winnings. Courts have held that this provision of the Tax Code is in effect for both amateur and professional gamblers.

In order for the law to change, Congress will have to act. I'm not holding my breath....

-- Russ Fox

[Tuff_Fish]

[ QUOTE ]

Blame Congress. They wrote the Tax Code--it's law, Title 26 U.S.C.
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.

The IRS used to argue that no one could be a professional gambler. One reason for this is that gambling income is not considered "earned" income. When you are self-employed in, say, a pet grooming business, your income is "earned" income. Gambling income specifically cannot be earned income (per the Tax Code).
.
.

However, back in 1987 the Supreme Court ruled in Commissioner v. Groetzinger that you can be a professional gambler if "...one's gambling activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere hobby, it is a trade or business...."
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So, if the above paragraph is true in regards to one's poker activities,(whether or not poker is gambling is not at issue here I suppose), then can you demand that your second job, poker, be treated as a trade or a business? If so, then what is the income if not earned? Does it have to be full time, what ever that is, to get business or trade status?
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Additionally, Section 165(d) of the Tax Code prohibits, for tax purposes, gambling losses in excess of gambling winnings. Courts have held that this provision of the Tax Code is in effect for both amateur and professional gamblers.

In order for the law to change, Congress will have to act. I'm not holding my breath....

-- Russ Fox

[/ QUOTE ]

[Russ Fox]

1. Being a professional can lead to a higher tax. Professionals must pay the self-employment tax, amateurs don't.

2. The standard for being a professional is very subjective. The key words are "livelihood," "full-time," and "regularity." If all of those are satisfied, you can file as a professional. This doesn't mean that the IRS won't challenge you (they are especially likely to if you have a full-time job as they will consider that your full-time job is your livelihood) but it does mean that you are more likely to prevail.

-- Russ Fox