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MikeH
05-30-2008, 04:56 PM
Copied this from a CPA Tax Forum that I read:

Question that gets asked:
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Hi Group,

Anyone have a definition of a professional gambler ???

Taxpayers (H & W) spend most of their time casino gambling on slot machines. Their gross (winnings) are 10 times their other income. OF course they have a net loss from the gambling activity. Can this be reported on SCH C ??? Each year has had and will have a LOSS until all their money is gone....
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Answer:
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From the PPC 1040 Deskbook:

Where gambling losses are reported on Form 1040 depends on whether the taxpayer is in the trade or business of gambling. While most individuals are not *professional* *gamblers*, the Supreme Court ruled in Groetzinger that an individual could be in the trade or business of gambling (i.e., a *professional* *gambler*) if he pursued gambling full-time, in good faith, with regularity, and as a livelihood rather than as a hobby. In that case, the taxpayer had no other employment and gambled full-time at pari-mutual dog racing. The Court found that his activity required skill, which he applied, and was more than a mere hobby. In Castagnetta , the taxpayer held a part-time job in addition to
spending about 40 hours per week carrying on his gambling activity (horse racing). Even though the taxpayer was employed part-time in a job unrelated to gambling, the Tax Court held that the amount of time devoted to his gambling qualified this activity as a trade or business.

Consequently, the taxpayer can deduct his gambling losses on Schedule C as business expenses and not on Schedule A as miscellaneous itemized deductions.

KMS
05-30-2008, 05:32 PM
I did a little reading on this one time, there are a few other criteria--making a profit in something like at least two of the last five years is one of them. It was also my impression that a professional gambler has to pay FICA taxes on his gambling winnings. If that's the case, it may not make sense to treat your winnings as business income, even if you qualify.