Filing as a "pro" - minimum number of hours required?

[yahboohoo]

I don't think hours worked has any real bearing on the "pro" vs. "not pro" argument. It just doesn't make any sense.

Take a pro basketball player. How many hours a day do they play and/or practice? How many days a week? How many weeks a year?

A consultant can make $150,000 for 3 weeks of work -- and not work for the rest of the year.

A professional speaker may only speak 3-4 times a year but get paid enough to do it for a living.

Professional writers... Crab fisherman... The list goes on and on.

Your tax advisor's claim that pro status is (partially?) defined by 35 hours a week means that anyone not working 1,850 hours a year isn't a professional.

If you made all your money in a given year from poker, you could say you're a professional poker player.

[AZplayer]

Let's agree that just because we think something makes sense or not doesn't have any bearing on what the IRS thinks.

You are preaching to the choir with those arguments... and I made very similar arguments back to my CPA.

I am trying to see if anyone has personal, or direct, or even indirect knowledge or experience in this area.

My CPA looked at actual cases the IRS has brought against people and the 35hrs/week average is a "test" they use to determine if you are able to FILE as a pro in their view. Those other professions don't matter because they can deduct their losses IN EXCESS of their earnings. Only professional gamblers not able to do so and are treated differently.

That having been said, I intend to document my other hours (writing a plan, reading/research/professional development, keeping books, travel time, etc.) and I think I can get there.

Does anyone have any experiences/anecdotes/etc. in this area?

[+EV]

[ QUOTE ]
[ QUOTE ]
So it is conceivable that as a "hobbiest" you could earn a gross 100K per year but actually the sum of your winning sessions would be 300K plus.

[/ QUOTE ]

Actually, even as a hobbyist with this difference, 200K, you would file itemized and deduct the 200 k losses as anyone can who has losses enough to make itemizing greater than a standard deduction.

Difference between this and a pro are:
No 'expenses (hotel, computers, travel, ect) may be deducted.
On the flip side, no SS owed either.

obg

[/ QUOTE ]

Really, cause I thought that once you hit the AMT you no longer deduct?

+EV

[oldbookguy]

You stop SS at I believe around 96K, other income taxes and deductions do not stop.

obg

[Poker CPA]

This is EZ. You're a pro. To bad just out there, couple of weeks ago, we could have had lunch next to the car on top of the slot machine. Facts and circumstances, this is all you do. Pretty simple.

[Merkle]

Precede this with I am no longer a professional tax preparer and I am not a CPA. The following informatin is so you can tell your accountant/tax preparer where to look and how to think about your situation.

If you qualify as a pro poker player and are a sole proprietor you enter your income and expenses on a Schedule C like any other business. And yes your losses can be carried over to future years and deducted from future winnings. You can also claim travel and educational expenses as well as possibly a part of your computer costs, internet costs and a home office if done properly.

The IRS will not let you have losses year in and year out and still claim that you are making a living at it. But if your net over a 3+ year period is reasonable then that would be a good argument for being a pro.

A quote from the 2006 Instructions for Schedule C at the IRS.gov
http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

An activity qualifies as a business if your primary
purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity.

Your CPA should approach your poker playing the same way he would a chess player. He should use the same criteria to determine if your poker playing is a business as he would to determine if a chess player is a hobbiest or a professional. If you spend enough time on it and make a reasonable income from it, then you are doing it for a living instead of a hobby. Not having another source of income that generates more income on a regular basis would also be a positive argument.

[DrewDevil]

I don't think you can deduct your losses even if you file as a professional gambler.

Are there any CPAs here?

[broiler]

You definitely cannot have a schedule C for a professional gambler with losses exceeding winnings. The case law is clear that the Section 165(d) limit on deducting gambling losses prevails over the Section 162(a) provision for deducting ordinary and necessary business expenses.

For anyone with case access, the cases are: Skeeles vs US (1951), Offutt (1951), and Valenti (1994) TC Memo 1994-384.

The ability to carryover gambling losses to future years is also not allowed because of the above requirement to stop at zero for your Schedule C.

[AZplayer]

Broiler - since you seem to know a bit about this what is your understanding of the 35hr/week "test"? Thanks!

[broiler]

There is no such thing as a 35 hour/ week test, however one of the criteria that is used in Groetzinger to determine a professional is the idea of operating full-time for the purpose of making a living.

Castagnetta (TC Summary Opinion 2006-24) is a case where the taxpayer was a part-time truck driver and was allowed to file as a professional gambler. The case states that he spent 40 hours/week betting and handicapping horse races. Therefore, the specific act of gambling was not the only thing considered in time spent on the activity.

The problem that you run into is that these cases are always at the extremes of gambling. You either find someone with 5-10 hours being deemed a hobby or someone well into full-time being deemed a professional.

Your idea to document everything that you do to further your gambling activity is easily the most important action in your case. In fact, documenting activities and planning are one of the considerations for a professional that cases will use.