Irs Gambling Sessions
Posted By admin On 03/08/22
There are no rules created by the IRS to treat online gambling differently than gambling in a bricks & mortar cardroom. This means that we can apply the above rule. E has two sessions, a loss of $10 in hold’em and a win of $25 in Omaha. This included extreme financial distress resulting from his gambling activities. To cement this winning hand, the Tax Court judge used an annual netting method, rather than reliance on regular sessions, to determine that the taxpayer incurred losses of at least $350,000 during the year.
Notice 2015-21 contains a proposed revenue procedure that would permit gamblers engaging in electronically tracked slot machine play an optional safe harbor method to determine a wagering gain or loss from their slot machine play based on day-long play sessions.
Under the safe-harbor, a taxpayer would recognize a wagering gain if, at the end of a single session of play, the taxpayer’s total gains exceeded his or her losses and would recognize a loss if, at the end the session, the total amount of wagers exceeds the amount of payouts. A session would be treated as beginning when a gambler places the first wager on a particular type of game and ending when the same gambler completes his or her last wager on the same type of game before the end of the same calendar day, i.e., beginning on or after 12:00 a.m. and ending at 11:59 p.m.
A gambler using the safe harbor would be required to use the same session of play if he or she stops and resumes the same game in the same establishment during the same calendar day. Also, gamblers cannot offset gains and losses from separate sessions. Once a gambler goes to another gaming establishment, a new session would begin, even if it is on the same calendar day.
Irs Gambling Sessions
Under current IRS rules (Chief Counsel Advice Memorandum AM 2008-011), gamblers are allowed to calculate gambling gains and losses when they cash out of a single gambling session—in the words of the memo, “at the end of slot machine play.” However, determining what constitutes a single session has been difficult, especially with the advent of electronically tracked slot machines, which have led to less redemption of tokens by players.
The safe harbor will not be available until it is published as a final revenue procedure, after which it would apply to tax years ending on or after that date. A provision permitting taxpayers to claim this treatment on their tax returns by providing a note that the return is filed using these procedures will not apply until tax years beginning on or after Jan. 1, 2016.
Before it issues the final rules, the IRS is asking for comments. Specifically, taxpayers should comment on:
- Alternative definitions for the term “slot machine”;
- Whether an interruption in play should result in more than a single session;
- Whether a session should be based on a period other than a calendar day;
- Whether the definition of a single session should be determined by other factors;
- Whether the safe harbor should include merchandise and bonus reward payouts;
- Whether the issue should be part of the IRS’s Industry Issue Resolution program;
- Whether a safe-harbor method should be developed for other forms of gambling; and
- Whether the proposed safe harbor poses problems in administration for stakeholders.
Irs Gambling Sessions
—Sally P. Schreiber is a JofA senior editor.