Discussion:Game show winnings

I had a client who won prizes on The Price Is Right. If it's things, then you can check the local newspapers and price out the items. Make a schedule and show the difference between what the show states is the value and the retail price. You'd report the lower of the two.

After all, "Deal or No Deal" sure looks like a simple game of chance to me... Not like Jeopardy, for example...

He had an HD Vest conference in Las Vegas, but being the conservative, accountant/financial planner type, wasn't sure that he wanted to gamble with real money. He walked over to the craps table.

"I'll just bet with my mind" he thought, "If I win I'll add the winnings to my beginning number, and if I lose I'll just subtract, keeping up the total in my mind until my next class at the conference starts."

He was up $100, then down $50 then up $75, then down $500. But this wasn't real money, he wasn't betting with real money. He was just betting with his mind. This continued for over an hour.

Well, you already know the end of the story......

he lost..... his mind

A concluding paragraph from the decision:

Consistent with the foregoing, we conclude that wagering losses must be accounted for and reported separately from the expenses incurred by the taxpayer in order to engage in the underlying wagering transaction. In applying this rule to the facts presented herein, we hold that the expenses incurred by petitioner in order to attend and participate in the “Wheel of Fortune” game show are at best expenses, deductible as a miscellaneous itemized deduction under section 67, rather than wagering losses under section 165(d). In so holding, we reject petitioners' contention that the expenses in issue are tantamount to a bet or wager. Unlike a wager or bet, petitioner incurred the expenses in question in exchange for specific goods and services, such as transportation, meals, and lodging. Further, we doubt that Congress ever intended to allow casual gamblers to treat expenses for transportation, meals, and lodging as anything other than either miscellaneous itemized deductions or nondeductible personal expenses. Consequently, we shall deny petitioners' Motion for Summary Judgment and grant respondent's cross motion.

Is the Whitten case, cited above, saying that the taxpayer's income from Wheel of Fortune *is* gambling income, but that the related expenses need to be distinguished from any wagers placed? If so, I no longer consider my comment about Deal or No Deal being gambling to be specious whatsoever.

Where is the statutory definition of "gambling" anyway? How is playing the stock market *not* gambling? Show me the law...

Neither the Code nor the regulations define the term “gains from wagering transactions” as used in section 165(d). Boyd v. United States, 762 F.2d 1369 (9th Cir. 1985). In interpreting the- phrase, therefore, the courts should give the words their ordinary meaning. Greyhound Corp. v. United States, 495 F.2d 863, 869 (9th Cir. 1974) (construction of revenue provision).

In Boyd, supra, the taxpayer was a renowned professional poker player who ran the poker room at the Golden Nugget Casino in Las Vegas. Pursuant to his contract, the taxpayer played in the games himself to attract customers and to stimulate play. The taxpayer's contract had an incentive clause awarding him a portion of the take- off in the card room. Take-off is the fee the house charges card players for playing poker at the casino. The question was whether the taxpayer's share of the take-off qualified as “gains from wagering transactions,” within the meaning of section 165(d), so as to permit the taxpayer to deduct gambling losses against such income.

The government argued that the operative phrase refers to gains from wagering transactions entered into by the taxpayer. The taxpayer argued that it refers to gains flowing to the taxpayer from wagering transactions, whether as a participant or as the house taking a fee for table rental. Although the Boyd court noted that there was no controlling authority, the government's position was more persuasive to the court. Therefore, the court ruled for the government.

The opinion in Boyd supports an argument in the instant case that “gains from wagering transactions,” as that phrase is used in section 165(d), should be construed to require a close nexus between the “gain” and the “wagering transaction.”

A “wager” has been defined as follows:

A contract by which two or more parties agree that a certain sum of money or other thing shall be paid or delivered to one of them or that they shall gain or lose on the happening of an uncertain event or upon the ascertainment of a fact in dispute, where the parties have no interest in the event except that arising from the possibility of such gain or loss. (Emphasis added.) Black's Law Dictionary, 6th Ed. (1990) at p. 1579. Note the key words in the definition above which have been underscored. Any money or property flowing outside of the wagering contract (such as the instant comps) should not be considered to be gains from wagering transactions.

Wagering gains arise only from wagering activities. Generally, wagering activities consist of the following three elements: (1) a consideration, (2) an element of chance, and (3) a reward. See In re Gaming Devices Seized at American Legion Post No. 109, 197 Pa. Super 10, 176 A.2d 115 (1961), and Commonwealth of PA v. Two Electronic Poker Game Machines, 502 Pa. 186, 465 A.2d 973 (1983). The instant comps are not sufficiently connected with wagering activities to be considered wagering gains. First, there is no consideration involved in the receipt of the comps by the taxpayer. “Consideration” is defined as the inducement to a contract. Black's Law Dictionary, 6th Ed. (1990) at p. 306. There is nothing remotely resembling a contract involved here. We are simply concerned with the unilateral grant of a prize or award by the casino. Second, there is no element of chance involved.

The contestant can never have a true loss for the session. It is true that once he wins a round, the money on the board is his, but he can never bet more than that money and can never come out worse than even.

Sure as heck sounds like the stock market to me...

What's an FSA 917, anyway?

1) The kind you buy in ... say the entry fee is $10,000 and you receive $10,000 in chips. This would be gambling (example: World Series Of Poker). 2) The kind you pay an entry fee to play. (most internet poker sites). taxbilly

[6] Field Service Advice memoranda are prepared by attorneys employed in the Office of Chief Counsel for the Internal Revenue Service, located in Washington, D.C., and issued to, among others, IRS field attorneys, revenue agents and appeals officers. /1/ FSAs are issued in response to requests for advice, guidance and analysis on difficult or significant tax issues. They are taxpayer-specific documents, written in particular cases, with reference to particular taxpayers. FSAs provide advice on docketed or nondocketed cases, or, alternatively, may provide advice on industry-wide issues, or in response to hypothetical questions; and may address substantive and procedural matters. FSAs deal with "significant" tax issues, and one of their purposes is the "promotion of uniformity" in IRS assertions of positions on tax law.

The above comes from a District Court case that was brought by Tax Analysts. FSAa were considered "internal" but Tax Analysts brought suit to have these FSAs be made public under FOIA. TA won!!!

This also sounds allot like the survivor who did not report any of his winnings from the show - those winnings didn't qualify as gambling then, why should it now?