Tax Court New Ruling Favors Professional Gamblers

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It’s that time of year again, and good news for those that file as a “Professional Poker Player.”

“Professionals” are now able to deduct business expenses incurred as part of their job. Read more about it in the Las Vegas Review Journal.

We asked Tax Attorney, and fellow Poker Tax Blogger, Brad Polizzano, on his thoughts on the decision:

PLD – How does this ruling impact Professional Poker Players?

BP: The holding’s significance:  Although professional gamblers may still only deduct gambling losses to the extent of gambling winnings, the professional gambler may further deduct the “ordinary and necessary” expenses incurred with the business of gambling.  This may cause a professional gambler to have a business loss, which may be applied against other income.

I also discussed the decision shortly after the case was decided.


PLD – What is the ruling’s impact if a professional poker player does not have business expenses?

BP: The answer:  None.

The significance of the ruling is that if the professional poker player has business expenses from gambling AND they exceed gross profits from gambling (i.e. gambling winnings less gambling losses, 0 or greater), then that excess can be deducted against the gross profits, and if the result is negative in amount, that result is a business loss that may be applied against other income, or carried back or carried over to another tax year.

So, if the professional gambler does not have business expenses that exceed gross profits from gambling, then the gambler will still have income to report on the Schedule C.  Note that in that situation the business expenses are still deductible, but we knew that was already the case.

PLD: What constitutes a business trip for a poker player? With internet poker and the live circuit, a player can literally play anywhere. When is a trip not deductible?

BP: Regarding transportation expenses, the general rule is that transportation from a taxpayer’s “tax home” to a business destination is deductible as a business expense.  If a taxpayer’s “tax home” is his/her residence, then, for example, if a professional poker player lives in NY and takes a cab to the airport for $20, and spends $450 on round trip airfare to and from Las Vegas to play poker for the weekend, then those transportation expenses are deductible.

The key is traveling from the “tax home” to the business destination.  The tax home is the taxpayer’s regular place of business, regardless of where the family home is.  If the taxpayer does not have a regular place of business, then the tax home is where the taxpayer regularly lives.  **If the taxpayer does not live at his/her tax home, there is no allowable deduction for the cost of traveling between the tax home and family home.**

An important note is that the burden is on the taxpayer to substantiate deductions reported on a tax return.  A professional poker player should keep a detailed travel log indicating departure and arrival cities, the nature of the trip, and the cost.  He/she needs to maintain receipts.

This IRS publication is pretty helpful and covers most general situations regarding travel expenses.

Hope that helps,

Brad

[box type=”info”]*Disclaimer – The views expressed herein are those of Poker Lifestyle Design and are not intended to address anyones particular tax situation. Poker Lifestyle Design does not guarantee quality, content, or accuracy of the information. Items and material contained on its web pages comes from a variety of sources. Any federal tax advice contained in this communication (including attachments) was not intended or written to be used, and it cannot be used, by you for the purpose of (1) avoiding any penalty that may be imposed by the Internal Revenue Service or (2) promoting, marketing, or recommending to another party any transaction or matter addressed herein. Consult a tax professional before relying on any information provided on this website.

For basic information in regaurds to taxes and poker, visit this thread on TwoPlusTwo.[/box]

Category : Taxes