Interesting tax decision for those residing in states...

[Tuff_Fish]

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The other problem is that even if you do play for "a great deal [of time]," are you playing for your livelihood? That's the standard in the Groetzinger decision. Take the case of a full-time (40/hr week) individual who earns a good salary, and plays poker 20 hours per week. Suppose the individual earns $100,000 year in his day job and $60,000 (net) playing poker. Is that individual playing for his livelihood?
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Is this situation handled differently for a gambler as opposed to any other type of side business?

If one has a dog grooming business as a side business and earns $10,000 a year in addition to the 60,000 as a nurse, the IRS treats the dog grooming business as a legitimate business.

Why wouldn't a poker playre be treated the same? Poker is a side business just like hundreds of other secondary endeavors.

Curious?

Tuff

[Legislurker]

Because the IRS wants every bit of income it can get. Im sure they would stand behind you at a $1 slot machine and take out 33% every spin that hit mixed bars. They want to bump people up to pay AMT. Every instance of reportable, taxable income they cna find they want paid. TO them gambling money is discretionary funding you don't need. So what if you lost 10k to win 8k, they want the 8k. Its a rapacious intrusive mentality that is part of their culture.
Agents sit around and brag about what they've seized or taken from people. They simply dont give a [censored] how unfair it is or whose livelihood they degrade. And they are pretty unaccountable. Like Russ said, if you fight them, you lose $ even if you win.

[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]

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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.

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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]

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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).
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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

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[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