Exacta box payout question

[raybo]

I'm going to ask this, knowing that it is probably basic wagering knowledge, but I have never even thought about it before.

Let's say you are playing a 2 horse exacta box at $2 per combination. That means the box ticket costs you $4. If the payout for a $2 exacta is $8.80, does that payout include the $2 base cost, meaning that your net profit is only $4.80? I know in WPS wagers that is the case, but what about exotics?

[Cardus]

Do you wager?

[Brogan]

I'm going to ask this, knowing that it is probably basic wagering knowledge, but I have never even thought about it before.

Let's say you are playing a 2 horse exacta box at $2 per combination. That means the box ticket costs you $4. If the payout for a $2 exacta is $8.80, does that payout include the $2 base cost, meaning that your net profit is only $4.80? I know in WPS wagers that is the case, but what about exotics?
In your example, if you have the right two horses, you collect $8.80, the bet cost you $4.00...net profit = $4.80.

Now, if this isn't something you've thought about before, I'd suggest you stop betting until you do start thinking about it.

[Cardus]

In your example, if you have the right two horses, you collect $8.80, the bet cost you $4.00...net profit = $4.80.

Now, if this isn't something you've thought about before, I'd suggest you stop betting until you do start thinking about it.

I think that this is explained at the HANA website.

[Dave Schwartz]

Raybo,

In other words, you got back $8.80 for $4.00. That would make it the same as a $4.40 payoff for $2: In other words, you got 6/5.



Dave

[apatter503]

Yes what you receive at the window is $8.80. your profit is $4.40.

[DeltaLover]

I have never even thought about it before.


What is the exact period this never covers? You really mean more than a day?

[Dave Schwartz]

Come on... so the guy had a brain fart. LOL - I have them every day!

[iceknight]

In your example, if you have the right two horses, you collect $8.80, the bet cost you $4.00...net profit = $4.80.

Now, if this isn't something you've thought about before, I'd suggest you stop betting until you do start thinking about it.

But the IRS will think your profit is $ 6.80 when it comes to extracting their pound of flesh..

[PhantomOnTour]

But the IRS will think your profit is $ 6.80 when it comes to extracting their pound of flesh..
Sad, but true...good point.

[Dave Schwartz]

I used to have a client who was profitable every year from hitting big ticks.

By around October a couple of years, the IRS had withheld so much money that it had eaten his entire bankroll! He had to wait until he filed his taxes in January to get his withholding back so that he had a bankroll again!

(At least this is the story he told me.)


Dave

[Cardus]

Raybo,

In other words, you got back $8.80 for $4.00. That would make it the same as a $4.40 payoff for $2: In other words, you got 6/5.



Dave

No, Dave, the guy didn't have a "brain fart". He posted that he had never "thought about it before", which is somewhere beyond ridiculous.

And telling, I think.

[A. Pineda]

But the IRS will think your profit is $ 6.80 when it comes to extracting their pound of flesh..

No, the IRS views it as a gain of $8.80.

It's up to you to document your losses, at which time the $4 comes into play.

Not to worry, though, as they won't know about that $8.80 unless you tell them.

[raybo]

No, Dave, the guy didn't have a "brain fart". He posted that he had never "thought about it before", which is somewhere beyond ridiculous.

And telling, I think.

Yeah, I figured someone would post something like this.

You are correct, I have "never" thought about this before, as I've never played exactas.

The reason I asked the question was because someone asked for help with Excel formulas for exacta box calculations for profit. I wanted to make sure I was thinking correctly, so, I posted the question.

Don't know what you mean with the "And telling" comment.

[therussmeister]

No, the IRS views it as a gain of $8.80.

It's up to you to document your losses, at which time the $4 comes into play.

Not to worry, though, as they won't know about that $8.80 unless you tell them.
I think you are wrong about that, but am not 100% sure. The IRS requires that you document the net results of each gambling session individually, and report the combined net profits from all profitable sessions as gross income. For horse racing the IRS considers a session to be one race. So you can combine the results of multiple bets in the same race and thus write off losing tickets from winning tickets from the same race.

So in the example of the original poster, the IRS would consider it $4.40 profits, and if the poster had also bet $3.60 in losing dime supers the profit would be $0.80.

[A. Pineda]

He could also declare losses on other events where there was no profit at all, which could eliminate the profit altogether, which is why you document all of your losses, not just the wagers where you made a profit.

[Ocala Mike]

I think you are wrong about that, but am not 100% sure. The IRS requires that you document the net results of each gambling session individually, and report the combined net profits from all profitable sessions as gross income.




Where did you get that from? I believe Pineda is correct for the casual horseplayer; you may be right as regards the professional gambler who files a Schedule C.

For the casual horseplayer, the $8.80 is reported on Form 1040 as Other Income on Line 21, and is fully taxable unless one itemizes deductions on Schedule A, and takes gambling losses up to but not exceeding the amount on Line 21, USING THE ABOVE DOCUMENTATION that one is required to keep.

Like some OP said, the practice of actually reporting all gambling winnings comes into play for the casual horseplayer only where a record of the winnings is going to be forwarded to the IRS by the venue.


Ocala Mike

[Johnny V]

Where did you get that from? I believe Pineda is correct for the casual horseplayer; you may be right as regards the professional gambler who files a Schedule C.

For the casual horseplayer, the $8.80 is reported on Form 1040 as Other Income on Line 21, and is fully taxable unless one itemizes deductions on Schedule A, and takes gambling losses up to but not exceeding the amount on Line 21, USING THE ABOVE DOCUMENTATION that one is required to keep.

Like some OP said, the practice of actually reporting all gambling winnings comes into play for the casual horseplayer only where a record of the winnings is going to be forwarded to the IRS by the venue.


Ocala Mike
Does anyone know of anyone who actually files a Sked C as a professional gambler, specifically as it pertains to horse racing? I would think you would be audited frequently.To me the value in that would be if you had a losing year but then you can only deduct losses if you have shown a profit in so many years out of the last several years or something to that effect if you are gambling as a business. I am assuming you could also deduct expenses involved such as forms, etc.
I really cannot see the value in that at all as it pertains to a horseplayer (particularly a winning one) although some poker players and others maybe do file as professional gamblers. Just wondering.

[skate]

Come on... so the guy had a brain fart. LOL - I have them every day!

welp... then it is very good that you do not show up every day...thanks for that much Swartzy:)

[skate]

Does anyone know of anyone who actually files a Sked C as a professional gambler, specifically as it pertains to horse racing? I would think you would be audited frequently.To me the value in that would be if you had a losing year but then you can only deduct losses if you have shown a profit in so many years out of the last several years or something to that effect if you are gambling as a business. I am assuming you could also deduct expenses involved such as forms, etc.
I really cannot see the value in that at all as it pertains to a horseplayer (particularly a winning one) although some poker players and others maybe do file as professional gamblers. Just wondering.


depends on how much $ that leads to the frequentality

[skate]

I'm going to ask this, knowing that it is probably basic wagering knowledge, but I have never even thought about it before.

Let's say you are playing a 2 horse exacta box at $2 per combination. That means the box ticket costs you $4. If the payout for a $2 exacta is $8.80, does that payout include the $2 base cost, meaning that your net profit is only $4.80? I know in WPS wagers that is the case, but what about exotics?

these thoughts can become twisted when we attempt to calculate "the Take", which varies.

[Johnny V]

depends on how much $ that leads to the frequentality
If someone could not show another source of income to support his lifestyle then maybe he would have no choice but to file a sked C if he was a winning player.

[therussmeister]

Where did you get that from? I believe Pineda is correct for the casual horseplayer; you may be right as regards the professional gambler who files a Schedule C.

For the casual horseplayer, the $8.80 is reported on Form 1040 as Other Income on Line 21, and is fully taxable unless one itemizes deductions on Schedule A, and takes gambling losses up to but not exceeding the amount on Line 21, USING THE ABOVE DOCUMENTATION that one is required to keep.

Like some OP said, the practice of actually reporting all gambling winnings comes into play for the casual horseplayer only where a record of the winnings is going to be forwarded to the IRS by the venue.


Ocala Mike

I got that from multiple books that come out every year during tax time, but I haven't seen anything for several years now, because I haven't looked. I tried to find something on the internet before I made my post, but there is nothing I saw that goes into that much detail. I am thinking of e-mailing gambling tax expert I Nelson Rose (http://www.gamblingandthelaw.com/)

Again, my contention, according to the books I've seen, is that you report net winnings from each gambling session, not gross winnings, and that the IRS considers each race a separate gambling session.

[ranchwest]

Does anyone know of anyone who actually files a Sked C as a professional gambler, specifically as it pertains to horse racing? I would think you would be audited frequently.To me the value in that would be if you had a losing year but then you can only deduct losses if you have shown a profit in so many years out of the last several years or something to that effect if you are gambling as a business. I am assuming you could also deduct expenses involved such as forms, etc.
I really cannot see the value in that at all as it pertains to a horseplayer (particularly a winning one) although some poker players and others maybe do file as professional gamblers. Just wondering.
As far as I know, there is no requirement to ever make a profit on any business. The requirement is to show that you are actually conducting business (as opposed to conducting a hobby) and are striving to make a profit. Keeping records is a significant factor.

[Dave Schwartz]

Again, my contention, according to the books I've seen, is that you report net winnings from each gambling session, not gross winnings, and that the IRS considers each race a separate gambling session.

I can tell you this is simply not how it works.


Regards,
Dave Schwartz

[Johnny V]

As far as I know, there is no requirement to ever make a profit on any business. The requirement is to show that you are actually conducting business (as opposed to conducting a hobby) and are striving to make a profit. Keeping records is a significant factor.
I think that in order to continue to deduct losses you have to show a profit in 3 of the last 5 years. If you cannot then it is considered a hobby and not for profit and the losses can not be deducted. Now I think there can be exceptions to this but their are certain requirements that must be met and it would seem that a person who declares himself to be a professional gambler is going to have a very hard time proving any of that to the IRS and possibly opening himself for some tax trouble.

[ranchwest]

I think that in order to continue to deduct losses you have to show a profit in 3 of the last 5 years. If you cannot then it is considered a hobby and not for profit and the losses can not be deducted. Now I think there can be exceptions to this but their are certain requirements that must be met and it would seem that a person who declares himself to be a professional gambler is going to have a very hard time proving any of that to the IRS and possibly opening himself for some tax trouble.

Unless there has been a change in recent years, that is not the case. There is no hard rule on showing a profit. You have to conduct a business as a business and that is it. X profit in Y years is a myth.

[Dave Schwartz]

Anyone can deduct losses up to the amount of profit.

In other words, the IRS does not make you pay taxes on anything when you can SHOW that you did not make money for the year.

[Ocala Mike]

Unless there has been a change in recent years, that is not the case. There is no hard rule on showing a profit. You have to conduct a business as a business and that is it. X profit in Y years is a myth.




We have turned this thread into a discussion of taxes. I would say ranchwest is both right and wrong. The "presumption" that you are conducting a business exists if you show a profit in three of five years (two of seven for a horse-related business like breeding or racing, but NOT gambling). You can still try to CLAIM business vs. hobby if you don't meet those criteria, but the burden of proof now shifts to the taxpayer, and you will be subject to a rather intensive audit of your activities.


Ocala Mike

[iceknight]

We have turned this thread into a discussion of taxes. I would say ranchwest is both right and wrong. The "presumption" that you are conducting a business exists if you show a profit in three of five years (two of seven for a horse-related business like breeding or racing, but NOT gambling). You can still try to CLAIM business vs. hobby if you don't meet those criteria, but the burden of proof now shifts to the taxpayer, and you will be subject to a rather intensive audit of your activities.


Ocala Mike
Thanks for the several interesting points. Of course, the blame for turning the thread into a discussion on taxes falls on me, sorry about that. i didn't know other people cared much about taxes ;)

[Horseplayersbet.com]

A box is technically two separate bets (the valid argument is that you wouldn't make the wager if you couldn't reverse it, the same is true if you were to place a $72 Pick 4 as well for example).

You can call out a $2 box or input a $2 box on line, but you could just as well make the bets individually. A 3-6 exactor is different than a 6-3 exactor, the same as if you if you were to call out $10 win on the 3 and 6 in the same race at the same time or if you made the bets on different tickets.
As far as personal accounting goes on individual races, I would lump in all exactor plays versus what is cashed, to figure out your exactor ROI. But if you do that, you should also do that with win bets on multiple horse in a race too.

Just my two cents.

[Cardus]

Yeah, I figured someone would post something like this.

You are correct, I have "never" thought about this before, as I've never played exactas.

The reason I asked the question was because someone asked for help with Excel formulas for exacta box calculations for profit. I wanted to make sure I was thinking correctly, so, I posted the question.

Don't know what you mean with the "And telling" comment.

Sure, "someone would post something like this". And I wasn't the only one to wonder why you didn't know how to calculate an exotics payoff. It's mind-boggling that someone who has followed the sport for over 30 years wasn't sure about one of the basics of wagering.

It's interesting that you have "Excel with Superfectas" beneath your sign-on, yet have never played exactas.

[raybo]

Sure, "someone would post something like this". And I wasn't the only one to wonder why you didn't know how to calculate an exotics payoff. It's mind-boggling that someone who has followed the sport for over 30 years wasn't sure about one of the basics of wagering.

It's interesting that you have "Excel with Superfectas" beneath your sign-on, yet have never played exactas.

That's right, I play only superfectas and I use only my own Excel spreadsheet to handicap.

I don't do too much worrying about $12 to $24 ticket costs when my average payout is over $700. I've just never thought about how the payouts are calculated, in exactas, because I only care what the superfecta pools include and whether or not my minimum expected payout will be $300 or more.

Sorry I didn't play exactas after win bets, like most players do when they start out, but I decided that the smaller payouts in both WPS and exactas didn't offer the value I was looking for. I went from win bets to trifectas and then to superfectas.

If that is upsetting to you, I'm sorry. I asked an honest question and expected an honest answer. But, knowing some of the posters here just have to create controversy, I figured I would get a few "off color" remarks.

No biggie.

[Cardus]

That's right, I play only superfectas and I use only my own Excel spreadsheet to handicap.

I don't do too much worrying about $12 to $24 ticket costs when my average payout is over $700. I've just never thought about how the payouts are calculated, in exactas, because I only care what the superfecta pools include and whether or not my minimum expected payout will be $300 or more.

Sorry I didn't play exactas after win bets, like most players do when they start out, but I decided that the smaller payouts in both WPS and exactas didn't offer the value I was looking for. I went from win bets to trifectas and then to superfectas.

If that is upsetting to you, I'm sorry. I asked an honest question and expected an honest answer. But, knowing some of the posters here just have to create controversy, I figured I would get a few "off color" remarks.

No biggie.

So, you've resorted to the old Internet Land "upsetting to you" line. Good lord, Ray.

If you don't think that it is absurd that you didn't know the answer to your question, then that is your problem, not mine.

This has nothing to do with never playing the bet in question, either.

And if calling someone out on not knowing a basic payout question for someone involved in racing since 1978, as you allege, is your definition of "controversy", then that is on you, too.

[CincyHorseplayer]

So, you've resorted to the old Internet Land "upsetting to you" line. Good lord, Ray.

If you don't think that it is absurd that you didn't know the answer to your question, then that is your problem, not mine.

This has nothing to do with never playing the bet in question, either.

And if calling someone out on not knowing a basic payout question for someone involved in racing since 1978, as you allege, is your definition of "controversy", then that is on you, too.

Jesus H.Who crapped in your Wheaties?Why do you care so much to ride Ray's butt like it's a magic carpet?Lighten up pal.

[Pace Cap'n]

And if calling someone out on not knowing a basic payout question for someone involved in racing since 1978, as you allege, is your definition of "controversy", then that is on you, too.

Why do you feel it necessary to call anyone out on anything?

[ranchwest]

We have turned this thread into a discussion of taxes. I would say ranchwest is both right and wrong. The "presumption" that you are conducting a business exists if you show a profit in three of five years (two of seven for a horse-related business like breeding or racing, but NOT gambling). You can still try to CLAIM business vs. hobby if you don't meet those criteria, but the burden of proof now shifts to the taxpayer, and you will be subject to a rather intensive audit of your activities.


Ocala Mike

You are perpetuating a myth.

For instance, if I have a Kool-Aid stand and sell 5 glasses a week for 5 years and show a profit in 3 of those 5 years, I still don't have a business.

Please stop the myth.

[raybo]

So, you've resorted to the old Internet Land "upsetting to you" line. Good lord, Ray.

If you don't think that it is absurd that you didn't know the answer to your question, then that is your problem, not mine.

This has nothing to do with never playing the bet in question, either.

And if calling someone out on not knowing a basic payout question for someone involved in racing since 1978, as you allege, is your definition of "controversy", then that is on you, too.

So now it all comes out. You don't believe what I post about my involvement with racing.

You know what? I could care less if you believe me or not.

I've posted my account summary here before, have you?

[cj]

You are perpetuating a myth.

For instance, if I have a Kool-Aid stand and sell 5 glasses a week for 5 years and show a profit in 3 of those 5 years, I still don't have a business.

Please stop the myth.

It isn't a myth though. The IRS considers it a benefit to be able to claim that you are a professional gambler. As was pointed out earlier in the thread, there are differences between a casual gambler that wins and a pro in how they report winnings. Therefore, to be one, you actually have to be a winner with some consistency over some reasonable period of time.

[ranchwest]

It isn't a myth though. The IRS considers it a benefit to be able to claim that you are a professional gambler. As was pointed out earlier in the thread, there are differences between a casual gambler that wins and a pro in how they report winnings. Therefore, to be one, you actually have to be a winner with some consistency over some reasonable period of time.

Yes, but there is no rule, such as 3 of 5 years, which is the part that is a myth. You have to conduct your operation as a business with the clear cut objective of turning a profit. It is not necessarily manditory to make a profit -- the IRS determines in each case whether it is a business or a hobby. Many businesses go for extended periods without turning a profit and without being ruled a hobby.

Personally, I wouldn't try to claim a gambling business unless I could show a profit because I've had people tell me that individuals in the IRS have told them there is no such thing as a gambling business. I know that is incorrect, but it shows the firm ground one needs to be on.

[Ocala Mike]

Myth or not? You decide.

"Presumption that Activity is Engaged in for Profit
IRC § 183(d) provides a presumption that an activity is engaged in for profit if the activity is profitable for 3 years of a consecutive 5 year period or 2 years of a consecutive 7 year period for activities that consist of breeding, showing, training, or racing horses.

This presumption rule applies only after an activity incurs a third profitable (or second) profitable year within a 5 year (or 7 year) presumption period that begins with the first profitable year.

Note: Treasury Regulation § 1.183-1(c) has not been updated to reflect the 1986 amendment increasing the number of profit years required from two to three out of five years for activities other than horse racing, breeding or showing)."


Ocala Mike

[raybo]

Myth or not? You decide.

"Presumption that Activity is Engaged in for Profit
IRC § 183(d) provides a presumption that an activity is engaged in for profit if the activity is profitable for 3 years of a consecutive 5 year period or 2 years of a consecutive 7 year period for activities that consist of breeding, showing, training, or racing horses.

This presumption rule applies only after an activity incurs a third profitable (or second) profitable year within a 5 year (or 7 year) presumption period that begins with the first profitable year.

Note: Treasury Regulation § 1.183-1(c) has not been updated to reflect the 1986 amendment increasing the number of profit years required from two to three out of five years for activities other than horse racing, breeding or showing)."


Ocala Mike

This appears to pertain to owners, breeders, or trainers only, not to players.

[Ocala Mike]

No, 183 applies to ANY business. An exception was made long ago for the horse business. I repeat that it is POSSIBLE to assert that you are in business even if you operate at a loss for any number of years, but you lose the PRESUMPTION, and the burden of proof will revert to you, the taxpayer, to prove your claim.

Needless to say, the audit process for hobby vs. business is a bitch to go through. Google IRS 183 if you are so inclined.


Ocala Mike

[punteray]

Ray

Here is a formula I use to calculate the probable payout of an exacta.

((2*odds1)*(odds2+1))*2 I have written a small app in VB6 and if you would like a copy email me at mach3ray@gmail.com.

Ray

[HUSKER55]

hey guys and gals, what is the formula for plugging in your strike rate to tell if an exacta payout is worth the wager.

this is probably a dumb question but I am having a bad day. my mind went blank.

your assistance is appreciated.

thanks

[Cardus]

Why do you feel it necessary to call anyone out on anything?

This is an Internet Land chat room, part of which its existence depends upon debate, and, yes, taking a contrarian opinion, or "calling out" people, when necessary.

And I am sure that Mike (PA) has no problem with people posting disagreeing or questioning posts.

In discussing wagering and payouts, not knowing that the profit is $4.80 in this example -- particularly from someone who asked about exotics payoffs, not merely exacta payoffs, -- is like not knowing that D,E,F follows A,B,C.

And you never call out anyone on anything? That's rich.

[Cardus]

Jesus H.Who crapped in your Wheaties?Why do you care so much to ride Ray's butt like it's a magic carpet?Lighten up pal.


This doesn't rise to the "crapping in Wheaties" level.

Colorful, though.