Discussion:The Gambling Accountant
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Death&Taxes (talk|edits) said: | 17 September 2007 |
| Wonder if this guy has posted here: http://www.ustaxcourt.gov/InOpHistoric/Mohammadpour.SUM.WPD.pdf
How do I hire this lawyer "Pro Se?" | |
Bushmaster (talk|edits) said: | 17 September 2007 |
| One thing that burns me the hell up is how the code treats gambling losses and winnings. Unfair is not a strong enough word. IMHO, the should be netted and losses subject to 2% AGI and winnings on the other income line subject to SE (or not), but this adding all income to AGI and then losses subtracted on schedule A goes against everything that makes sense. | |
| 17 September 2007 | |
| Talk about unfairness: In another legal matter involving on-line gambling, there is a move on to declare poker a skill, and allow on-line/off shore poker. However, sports betting would still be outlawed. Any true gambler will tell you that NCAA basketball, if you are willing to put in tons of work, can earn you a living. But that's not a skill? | |
| 17 September 2007 | |
| Bush, all other hobby income is treated this way, why should gambling be different? | |
Bushmaster (talk|edits) said: | 17 September 2007 |
| Actually, direct expenses (COGS) is netted out against income and put on the other income line. All other is taken to Schedule A. I would think gambling LOSSES is a direct expense, seeing as how you have to RISK that money to make money. | |
| 17 September 2007 | |
| Bushmaster, I just reviewed §183 and the Regs again, as my memory is different from what you stated. Where do you find that COGS would be netted out first to determine the "income" from a hobby? I can't find that, but remember a post here earlier this year that took the same position.
My thinking was that income from the hobby was GROSS INCOME, not Gross Profit (which would be gross income less COGS). | |
| 17 September 2007 | |
| oops, just saw that you were a CPA so you didn't need to be reminded what Gross Profit was - I'll leave it in for other viewers though. | |
Death&Taxes (talk|edits) said: | 17 September 2007 |
| Correct me if I am wrong, but unless you are a professional gambler, would not gross profit be measured on a wager by wager basis? | |
| 17 September 2007 | |
| My point is that Gross Profit doesn't matter, it is GROSS INCOME that matters for hobbies and gambling that doesn't rise to the level of a trade or business. | |
Bushmaster (talk|edits) said: | 17 September 2007 |
| Kevin, I googled hobby income and the 2nd or 3rd hit was to a post by Riley2 on the subject!!! Imagine that.
"The cost of goods sold should not be reflected as an expense on Sch. A. Instead, it is a direct reduction of gross income. See Reg §1.183-1(e." "Bell, there is no problem with deducting the COGS against the gross sales, thereby limiting the amount shown on line 21 to the 30% commission. This is clearly provided for in the Sec. 61 and Sec. 183 regulations and is consistent with the definition of "gross income" in Sec. 61. " Keep in mind I am not stating that money lost for a gambler IS similar to COGS. I am saying it SHOULD be. but that is JMHO. I had a client win about $750k in a casino. They also lost every dime of it. A lot of "up a hundred and down a hundred". The entire $750k was included in AGI which THOROUGHLY screws up a tax return. And the subject to 2% means they paid tax on $15k in income they never got. | |
| 17 September 2007 | |
I'll post 1.183-1(e) here for future readers:
(e) Gross income from activity not engaged in for profit defined. For purposes of section 183 and the regulations thereunder, gross income derived from an activity not engaged in for profit includes the total of all gains from the sale, exchange, or other disposition of property, and all other gross receipts derived from such activity. Such gross income shall include, for instance, capital gains, and rents received for the use of property which is held in connection with the activity. The taxpayer may determine gross income from any activity by subtracting the cost of goods sold from the gross receipts so long as he consistently does so and follows generally accepted methods of accounting in determining such gross income. | |
| 17 September 2007 | |
| OK, Bushmaster, now how do we get each wager to be part of COGS for a hobby gambler? I see your point! | |
| September 17, 2007 | |
| Yet another example of our unfair tax law which probably leads normally law-abiding taxpayers to try to skirt around the law in the future to make it fair on their own. | |
Bushmaster (talk|edits) said: | 18 September 2007 |
| IDK. My BFF Jill?
I just think it is nuts for that client to pay tax on 15k they never received. They play slots mostly. Nickel and dime stuff, but they go ALL THE TIME. And combined, its not uncommon for them to win 500k to 600k a year, but they don't NET anything. Its more for enjoyment than anything. And its not like they are up a couple hundred thousand either. | |
| September 18, 2007 | |
| IDK? BFF? I'm still really weak on those acronyms.
The only way to make sense out of it is to look at it as a "sin" tax. | |
Bushmaster (talk|edits) said: | 18 September 2007 |
| IDK. My BFF jill is a commercial you see for cell phone companies. It has to do with text messaging. IDK = I don't know. My BFF is best friend forever. Jill is her name. | |
| September 18, 2007 | |
| Thanks Bushmaster. I don't watch TV, so I've never seen that commercial. | |
Bushmaster (talk|edits) said: | 18 September 2007 |
| Its quite silly. | |
