Gambling Wins and Losses Defined For Tax Purposes
In a dispute over an $1808 tax deficiency for a self-described recreational gambler, the Internal Revenue Service (IRS) identified the proper methodology for calculating a gambler's wins and losses for federal income tax filings: each should be calculated at the moment the patron cashes out at the end of a gambling session. (LaPlante v. Commissioner, No. 17951-08, T.C. Memo, 2009-226 (Oct. 1, 2009).)
In 2004, Ann LaPlante won 26 slot jackpots greater than $1,200, large enough to trigger an IRS Form W-2G. The jackpots totaled more than $56,000. After deducting her losses, LaPlante reported only $4,000 in gambling winnings on her tax return.
In challenging her return, the IRS explained that a casino visit should be viewed as a separate occasion for recognition of win or loss. Annual winnings should be determined by adding up all those casino visits that resulted in a net win. The taxpayer then can calculate total losses by adding up all those casino visits that resulted in a net loss. The total annual losses then may be deducted from total annual winnings. This procedure is also outlined in Tax Memorandum AM2008-011, released by the IRS Chief Counsel on December 12, 2009.
The outcome in LaPlante's case was not effected by the IRS' methodology for calculating winnings and losses. The tax judge concluded that her financial records were inadequate to challenge the IRS' notice of her tax deficiency.
