13 replies to this topic

[crocd99]

guys my tax teacher sent me this article. it is pretty interesting but long. this ruling is definately not in the direction poker players want rulings to be handed down.The Tax Court held yesterday that tournament poker is gambling subject to the § 165(d) limitation and is not a sport. As a result, the taxpayer could not deduct her poker losses in excess of her winnings. Tschetschot v. Commissioner, T.C. Memo. 2007-38:Similar to live-action poker, ... a player's tournament success depends on a combination of both luck and skill. [Fn 3: A court in England recently had the opportunity to decide whether Texas Hold 'Em was a game of chance or a game of skill, and the jury decided on the former.] A player might have a decent hand, but as Kenny Rogers tells us in "The Gambler", he or she would still have to "know when to hold 'em, know when to fold 'em, know when to walk away and know when to run" to actually be a success.] ... For 2000, the taxable year in issue, Mrs. Tschetschot earned approximately $49,000 in wages. She also participated in nine poker tournament series, winning in excess of $11,000. Mrs. Tschetschot claimed a net loss of $29,933 from her "professional gambler" activity in 2000 on her Schedule C, Profit or Loss From Business. ...Petitioners contend that Mrs. Tschetschot's professional tournament poker playing activity is more properly classified as "entertainment and professional sports" than professional gambling and should bear the resulting tax treatment; i.e., that her net loss should not be limited by section 165(d) restricting losses from wagering activities. ...Central to petitioners' contention is the thesis that tournament poker, unlike other types of poker, is not a wagering activity. The term "wagering" has different meanings depending on the context in which the term is used. More often than not, and as it is used in the Internal Revenue Code, the term is synonymous with "gambling". Congress has made a policy decision such that, while section 165 generally allows losses to be deducted from gross income, "[l]osses from wagering transactions shall be allowed only to the extent of the gains from such transactions." [Fn 7: Sec. 165(d) applies to both professional and recreational gamblers.] Sec. 165(d); see also sec. 165(a). However, neither the Internal Revenue Code nor the regulations define what constitutes a wagering activity. ...[C]ourts have routinely held that poker is a wagering activity. ... [P]etitioners ask us to treat tournament poker differently than other kinds of poker. ... After a careful review of the record, it is clear that while there are differences between tournament poker and other types of poker, none rise to the level of meaningful, substantive differences that would warrant different tax treatment under the current Internal Revenue Code. ...Petitioners argue that tournament poker is conducted in much the same way as other professional sporting tournaments. Participants pay an entry fee and compete to win prizes through their good fortune and superior skill. But simply because a sport or activity is played or conducted in a tournament setting does not transform the underlying activity into something different. ... Petitioners also raise an equal protection argument and argue that there is no valid reason to treat tournament poker differently, for tax purposes, from tournament golf or tennis. Petitioners argue that the benefits of being able to offset "exaggerated income" from very successful years by losses sustained in less successful years should be available to professional tournament poker players as much as they are to other professions. Congress made a policy decision to treat businesses based on wagering activities differently. In the absence of Congressional action, we are not free to correct any perceived unfairness stemming from a rationally based policy choice.

[Mercury69]

Hmmm...the words "taxes" and "interesting" in the same sentence...I can't be reading that properly.

[sb2cakm]

mercury that wasn't funny

[crocd99]

Mercury69, on Friday, February 23rd, 2007, 3:43 PM, said:

Hmmm...the words "taxes" and "interesting" in the same sentence...I can't be reading that properly.

lol very true. sorry about the mix up

[Mercury69]

sb2cakm, on Friday, February 23rd, 2007, 3:46 PM, said:

mercury that wasn't funny

No one asked you to make sense of a joke that requires contemplation and has nothing to do with bodily emissions.

[outsider13]

Did I read this right?Teacher has won $11k, but is trying to write off $29k in losses? That seems kind of ridiculous to me. Having a tax write off for being a degenerate poker player seems a little silly.

[pokerinc]

That's actually a rather large decision for large buy in players. If you brick out in 5 10k buy ins during the year and then take down a pre lim and win say 65000. You have to show a 65000 gain, when it's really only 15000. After tax you're now in the red. That's bad for biz.

[Jordan]

pokerinc, on Friday, February 23rd, 2007, 2:50 PM, said:

That's actually a rather large decision for large buy in players. If you brick out in 5 10k buy ins during the year and then take down a pre lim and win say 65000. You have to show a 65000 gain, when it's really only 15000. After tax you're now in the red. That's bad for biz.

yes, yes it is. it's def not +EV to be an american professional poker player these days. err. i think?- Jordan

[fitsnstarts]

pokerinc, on Friday, February 23rd, 2007, 2:50 PM, said:

That's actually a rather large decision for large buy in players. If you brick out in 5 10k buy ins during the year and then take down a pre lim and win say 65000. You have to show a 65000 gain, when it's really only 15000. After tax you're now in the red. That's bad for biz.

I think your reading that wrong. As long as both the losses and income are related to poker, you can deduct the losses. So, in your example, the taxable income is the 15k.This decision means that, for example, if a large buy-in player bricked out of 5 10k tourneys then cashed for only 30k - leaving a net poker loss of around 20k, but also had a "regular" income of around 50k for the year, they could not claim a net income of 30k, because the poker losses could not be deducted from "regular" income.

[HoosierAlum]

fitsnstarts, on Friday, February 23rd, 2007, 5:11 PM, said:

I think your reading that wrong. As long as both the losses and income are related to poker, you can deduct the losses. So, in your example, the taxable income is the 15k.This decision means that, for example, if a large buy-in player bricked out of 5 10k tourneys then cashed for only 30k - leaving a net poker loss of around 20k, but also had a "regular" income of around 50k for the year, they could not claim a net income of 30k, because the poker losses could not be deducted from "regular" income.

Correct. People are confusing this article because the person in question is not actually a "professional gambler". You are only considered a professional if gambling is your main source of income.If you are a professional, you are able to deduct your poker losses from your "regular" income. Of course the downside to filing as a professional is the self-employment tax you must pay.

[JoeyJoJo]

HoosierAlum, on Friday, February 23rd, 2007, 3:46 PM, said:

Correct. People are confusing this article because the person in question is not actually a "professional gambler". You are only considered a professional if gambling is your main source of income.If you are a professional, you are able to deduct your poker losses from your "regular" income. Of course the downside to filing as a professional is the self-employment tax you must pay.

That's what I thought initially as well. But this is from an article about it on bloomberg.com:"The IRS agreed that Gloria was a professional but still said the gambling limitations applied. Armen agreed with the IRS."

[HoosierAlum]

JoeyJoJo, on Friday, February 23rd, 2007, 5:54 PM, said:

That's what I thought initially as well. But this is from an article about it on bloomberg.com:"The IRS agreed that Gloria was a professional but still said the gambling limitations applied. Armen agreed with the IRS."

That doesn't make any sense. How could she be a professional gambler if she made 49k from her main job and didn't win/lose close to that much gambling?So if she was considered a professional gambler this would mean she would also have to pay self-employment tax and basically LOSE money on the year? Something isn't right here...

[BigDMcGee]

When I clicked on the link, I thought it was " Interesting but long read about poker and Texas" and I thought it was going to be a sweet post about the ole days when Brunson, Moss and Slim cheated the hell out of the texas oil men. Imagine my shagrin when I saw that it was taxes.

[crocd99]

HoosierAlum, on Friday, February 23rd, 2007, 6:46 PM, said:

Correct. People are confusing this article because the person in question is not actually a "professional gambler". You are only considered a professional if gambling is your main source of income.If you are a professional, you are able to deduct your poker losses from your "regular" income. Of course the downside to filing as a professional is the self-employment tax you must pay.

i agree somewhat. the way i understood it was that if you were a professional gambler and that was the main source of you income it was treated like a business and you could deduct all of it. The reason why i posted this was because it seems like this ruling is going away from that. This ruling says that professional and recreational gamblers are treated the same way and thus professional or not you losses are limited up to your gains. Meaning that if i made 100k in tourneys (a dream yes i know) but i spent 150k on buyins and such i could only claim a loss of 100k. and i would be SOL on the other 50k i lost. so they are basically treated poker like a hobby. and you calculate losses as you would hobby losses, which you can only claim a loss up to what you made.the second reason why i posted this was because of there idea that poker is not a skill game. While they say it does involve skill, the skill involved isnt enough to seperate it from other forms of gambling. I think this is bad because if organizations like the PPA are going to try to argue that poker should be looked at differently then other forms of gambling... then rulings like this dont help the cause.I just think it will be hard to tell congress to change the unlawful internet gambling act (to have an exception for poker) if courts rule and continue to rule that poker is gambling and the amount of skill involved isnt enough to seperate it.i guess that makes sense if not oh well i tried but my brain isnt functioning well right now